2024-01-10 22:21:00
A turning point has come for the cryptocurrency industry – the US Securities and Exchange Commission (SEC) has approved the opening of spot investment funds (ETFs) related to Bitcoin. This is a landmark event for the $1.7 trillion industry, which should increase confidence in digital assets as a whole, as well as open up the cryptocurrency market to billions of dollars of ordinary investors.
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To begin with, it is worth explaining that an ETF (exchange traded fund) is an investment fund that forms a portfolio of assets – in the context of this news, this will be a certain number of bitcoins – and then issues its own shares tied to these same assets. By purchasing Bitcoin ETF securities, the investor does not own the cryptocurrency directly, but the price of the shares will directly depend on the value of Bitcoin. Note that the SEC has approved spot ETFs, meaning they hold Bitcoin itself, as opposed to the long-approved Bitcoin futures ETFs, which hold contracts tied to the cryptocurrency.
The US Securities and Exchange Commission on Wednesday accepted applications from 11 funds as valid. Their Bitcoin-linked shares will be traded on the New York Stock Exchange (three funds), the Nasdaq Exchange (two funds), and the Chicago Board Options Exchange (CBOE). Exchanges are allowed to begin trading securities as early as Thursday. Issuer fees will range from 0.2% to 1.5%, and a number of funds will offer zero-fee shares for a limited time.
The SEC’s approval follows years of delays and outright denials of multiple attempts to launch spot Bitcoin ETFs. The first application to open such a fund was submitted back in 2013. Interestingly, the green light was given just a few months after the US Securities and Exchange Commission suffered a resounding defeat in court. In August, the D.C. Circuit Court of Appeals ruled that the SEC “arbitrary and biasedrejected Grayscale’s attempt to convert its roughly $26 billion Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.
Proponents of spot Bitcoin ETFs have long argued that regulated securities pegged to the world’s oldest cryptocurrency would allow institutional and retail investors to follow Bitcoin’s price movements without having to open cryptocurrency wallets or otherwise invest directly in the digital asset. Shares of the ETF will be available to any U.S. investor with a brokerage account.
«ETFs are the first step in bringing time-tested financial products and structures from Wall Street to digital assets that people can understand“Muneeb Ali, CEO of Trust Machines, told TechCrunch.
According to John Wu, president of Ava Labs, the launch of a spot Bitcoin ETF could also add legitimacy to the cryptocurrency space and increase the number of investors who were previously unable to access crypto assets for one reason or another. “With the advent of ETFs, legitimization, protection and distribution are becoming mainstream, and this is a watershed moment for the industry“, the expert noted.
Due to the influx of new investors, the cryptocurrency market will continue to grow, possibly at a very rapid pace. Amid expectations for the launch of a spot ETF and other events, Bitcoin has risen in price 2.5 times over the past year – from about $17 thousand at the beginning of 2023 to more than $45 thousand at the moment. It is assumed that Bitcoin should grow significantly against the backdrop of the approval of spot ETFs, but so far the market has reacted restrainedly – Bitcoin has grown by only 1%.
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