Major milestone: Bitcoin ETF approved by SEC
SEC's Bitcoin ETF long awaited approval trembles markets as digital assets return to prominence
The approval signals a new era for cryptocurrency investments in the financial realm.
Anticipation surrounding the ETFs contributed to a 166% surge in Bitcoin prices in 2023.
11 applications, including those from major firms like BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck, have been greenlit.
The US securities regulator officially grants approval for the first US listed exchange-traded funds (ETFs) to track Bitcoin in a significant milestone for the cryptocurrency market, expected to begin Thursday 11th of January.
The Securities and Exchange Commission has announced its approval of 11 applications, including BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck. This decision comes despite warnings from certain officials who have expressed concerns about potential risks associated with these financial products.
Gary Gensler, the SEC's chairman, urged caution among investors regarding the numerous risks associated with Bitcoin and crypto-related products. However, the general sentiment in the market appeared more optimistic and less concerned.
What does this mean for markets?
The spot ETF will enable well-capitalized institutions to gain Bitcoin exposure. It will also allow sponsors to transact Bitcoins ensuring a direct alignment between the ETF's price and the actual market value of Bitcoin.
With the creation of a spot ETF and approval from the SEC, investment firms can now confidently provide Bitcoin exposure to clients. ETFs, being standard financial instruments, offer more clarity around their management. This enables firms to actively participate in the buying and selling of Bitcoins, ensuring the efficient balancing of funds.
Additionally, accessibility is simplified, with each ETF featuring a unique ticker for seamless trading on the stock market, much like any other equity.
The approval stirred markets as the anticipation has been built up for just a very long time, in Fact Winklevoss Trust originally filed for Bitcoin ETFs in 2013 where it was rejected by the SEC in 2017. With the SEC not ready to work with the unregulated nature of cryptos. There have been several other submissions, all of which were denied by the SEC.
BlackRock, the world's largest asset manager applied to sponsor a Bitcoin ETF back in June with other firms also entering the fray.
Prior to their approval, investors had limited options for gaining exposure to Bitcoin, resorting to indirect means such as futures ETFs or trusts. Such as the Grayscale’s Bitcoin Trust that has been available to investors in 2015 as its traded in the over-the-counter market and didn’t need the SEC’s approval.
However, these alternatives came with certain limitations, for instance Trusts faced challenges as their managers were unable to directly buy or sell actual Bitcoins to rebalance the funds.
Bitcoin's recent performance
Bitcoin prices surged 166% in 2023 in anticipation of the ETF’s. While it has yet to reach its November 2021 peak of nearly $69,000, markets widely expect the cryptocurrency to reach further highs with a target price of $100,000. BTC rose above $47,000 after the approval before toning down to $46,240.
Markets were also roiled by a fake post published on the SEC’s X account after their X account was hacked. The post claimed an approval before the market anticipated deadline, further fueling the cryptos recent volatility.