The US Securities and Exchange Commission (SEC) announced that it would approve spot Bitcoin ETFs, with a total of 11 funds to begin trading including BlackRock and Grayscale.
In a press statement, SEC chair Gary Gensler wrote that: “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs [exchange-traded products] have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
For some, this is considered the moment that cryptocurrency gains legitimacy and goes mainstream. In ETF form, bitcoin is now easier to trade and is more closely linked to regulated entities, writes Kathleen Brooks, research director at UK online trading platform XTB, in emailed commentary.
“This marks a new chapter for cryptocurrency, that has been beset by controversies in recent years, most recently the collapse of Sam Bankman Fried’s FTX empire. However, the big question for investors is how will a bitcoin ETF impact the market?
“The initial market moves in the BTC/USD cross after the announcement, saw bitcoin’s price fall back below $45,500, at one point on Wednesday the price had been above $46,500. This could be a “buy the rumour, sell the fact” move from the markets. There had been a huge amount of anticipation in recent weeks that the SEC would grant approval to the Bitcoin ETF, including a bogus tweet on X on Tuesday, that said approval had been granted. Bitcoin has rallied by nearly 70% since October last year, so a lot of the good news about ETF status may have already been priced in.
“The SEC has made it much easier for regular individuals to trade bitcoin, whether they endorse it or not. It is easy to assume that there would be lots of demand for this ETF from individuals, if you type Bitcoin into google it yields 715,000,000 results. Institutions can also consider holding bitcoin now that the SEC has approved an ETF.
“Some argue that the ETF could make bitcoin less volatile in the future. If institutions have a target amount of bitcoin in their portfolios, then they may be forced to sell if the price gets too high, and forced to buy if the price gets too low, in order to maintain their targets. This could reduce the impact of Bitcoin’s wild price swings. However, we would need to understand what the appetite is for crypto from institutional money before we can make these assumptions.
“Overall, this is a big day for Bitcoin, and financial markets in general, as a new asset class is tethered to the forces of financial market regulation. It will be interesting to see how this develops, and if it leads to a buying frenzy.”
Grayscale announced that its approval to uplist Grayscale Bitcoin Trust to NYSE Arca will make it the world’s second largest commodity-based ETF and world’s largest spot Bitcoin ETF, according to a company statement. Grayscale had sued the SEC when its application was denied previously.
“We are grateful to the SEC for its diligent review of our application, and look forward to GBTC’s next chapter,” said Grayscale CEO Michael Sonnenshein.