The U.S. Securities and Exchange Commission (SEC) authorized the first U.S.-listed exchange-traded funds (ETFs) to track Bitcoin. This represents a major advancement in the cryptocurrency sector.
Despite some concerns, this approval is pivotal for the cryptocurrency industry. The SEC has approved 11 applications, including major firms such as BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck.
These ETFs, set to begin trading on Thursday, are expected to ignite intense competition in the rapidly evolving market. This achievement results from a decade-long effort, positioning these ETFs as transformative for Bitcoin. They allow investors to invest in the world’s leading cryptocurrency without direct ownership.
This development will likely bolster an industry that has recently faced several significant challenges. Andrew Bond, Managing Director and Senior Fintech Analyst at Rosenblatt Securities commended the move, highlighting its positive impact on Bitcoin’s institutionalization as an asset class.
Analysts from Standard Chartered project that these ETFs could attract between $50 billion and $100 billion in investments this year alone, with others forecasting inflows of around $55 billion over the next five years.
As of Wednesday, Bitcoin’s market capitalization exceeded $913 billion, with U.S. ETFs holding total net assets of $6.5 trillion as of December 2022. Following the announcement, Bitcoin’s value increased by 3%, reaching $47,300. The cryptocurrency has seen a remarkable 70% surge in recent months, reaching its highest level since March 2022, fueled by expectations of an ETF.
Industry experts believe that the success of these ETFs in attracting investments will depend on factors such as fees and liquidity. Some issuers, including BlackRock and Ark/21Shares, have revised their fee structures, ranging from 0.2% to 1.5%, with some firms offering fee waivers for a limited time.
Analysts also stress the importance of liquidity, especially for short-term investors.
Companies are intensifying their online advertising and marketing campaigns to prepare for the ETF launch. Bitwise and VanEck are among those promoting Bitcoin as a viable investment option.
The SEC’s approval follows a recent incident where a fraudulent announcement was mistakenly posted on the SEC’s social media account, falsely stating approval for these products. The SEC quickly disclaimed and removed the post, confirming an ongoing investigation with law enforcement and its internal watchdog.
Despite this incident and initial confusion over the SEC’s announcement, the cryptocurrency industry remains optimistic. Grayscale CEO Michael Sonnenshein expressed enthusiasm about democratizing access to Bitcoin, while NYSE’s Douglas Yones recognized the approval as a significant milestone for the ETF industry.
Cynthia Lo Bessette, Head of Digital Asset Management at Fidelity, told Reuters that the new products offer “increased choice for investors who want to engage with” cryptocurrencies.
Some regulatory experts believe this approval could lead to the development of more innovative crypto-related products, with several issuers already filing for ETFs that track other cryptocurrencies.