BTC ETF Approved – The Future Is Here
BTC ETF Approved – The Future Is Here

After long anticipation and keeping us at the edge of our seats, The Securities and Exchange Commission has finally made their decision official – listing and trading of spot bitcoin exchange-traded funds has been approved. 

Only for a number of them for now, but the whole deed certainly affects the future of crypto trading, including the prices, availability, volatility, traders’ priorities, and many other aspects. The implications of this event are numerous, so let’s discuss how this SEC decision has reframed crypto trading in the long run.

What Was Said and Done

Definitely a landmark moment for the future of investing, the approval of BTC ETFs by the SEC was long awaited by many. The 11 BTC ETFs that received the green light on January 10, 2024, have facilitated crypto investing for all those who do not wish to go through the conundrum of buying Bitcoin. These new arrivals will be listed on Nasdaq, NYSE Arca, and Cboe BZX, and here’s the definite list:

  • Grayscale Bitcoin Trust (GBTC)
  • ARK 21Shares Bitcoin ETF (ARKB)
  • VanEck Bitcoin Trust (HODL)
  • Invesco Galaxy Bitcoin ETF (BTCO)
  • Bitwise Bitcoin ETF (BITB)
  • WisdomTree Bitcoin Fund (BTCW)
  • Franklin Bitcoin ETF (EZBC)
  • iShares Bitcoin Trust (IBIT)
  • Fidelity Wise Origin Bitcoin Trust (FBTC)
  • Valkyrie Bitcoin Fund (BRRR)
  • Hashdex Bitcoin ETF (DEFI)

The Pros

The presence of ETFs makes things far easier, as it allows investors access to an asset or an asset group without forcing market participants to buy the products beforehand. 

Before all that, traders who wished to experience the thrill of price speculating on digital assets either had to have a digital wallet or register with one of the major platforms like Binance, Kraken, or Coinbase. Now, investors can take part in trading these assets through traditional brokerage accounts and integrate these products into their portfolios more easily.

Let’s not forget how magnates like BlackRock have insisted on the approval, considering their fund managing systems. Institutional participants such as pension funds, endowments, and hedge funds used to face strict regulatory constraints before this. Apparently, the event was a major triumph for all market participants and institutions.

SEC Still Doubts Crypto

The fact that they’ve given this stamp of acceptance for some ETFs doesn’t change the SEC being overall still skeptical and not intending to agree to listing and trading of crypto asset securities. 

The regulator claims this approval does not affect the status of other crypto assets in the eyes of the securities laws. There’s also the problem of many crypto market participants not being compliant with the federal law. 

Therefore, the insecurities still persist for reasons such as investor protection, immaturity of the crypto market, and potential manipulation. That’s why the SEC warns that they still do not “endorse or approve bitcoin.” 

The regulator insists on retail traders being especially cautious when it comes to a range of risks associated with trading bitcoin. The same refers to products with prices expressed in, depending on, or otherwise tied to crypto.

Launch Day Price Fluctiations

January 11 saw a steep spike in BTC value, CoinMarketCap reports, with the price of the most popular cryptocurrency momentarily rising to $48.922,38, which is an appreciation of nearly $1,000 compared to the recent average. By the end of the day, however, the price consolidated to the previous average.

Nearly all of the newly launched assets depreciated by the end of the trading day, however. The ones suffering the most were ARKB (ARK 21Shares Bitcoin ETF), which saw a decline of 6%, EZBC (Franklin Bitcoin ETF), and BRRR (Valkyrie Bitcoin Fund), which both saw a depreciation of 5% each.

The most sought-after were the GBTC (Grayscale Bitcoin Trust), which saw a volume of nearly $1.7Bn traded on the first day, and IBIT (iShares Bitcoin Trust), which had a volume of around $880 million.

Analysts remain hopeful that the cryptocurrency-based ETFs are a bright one, citing that the current institutional assets hold trillions of dollars. An allocation of 0.1% to 0.2% of these assets to crypto-based ETFs would significantly move the price. Whether this is just a quick craze or a long-term investment policy remains to be seen.

Fierce Fee Competition

Regulatory filings saw companies disclose their proposed fee structure between January 9th and 10th. The launch of assets sparked a minor fee war, with the companies currently charging fees between 0.2% and 1.5%.

This does not include a waiver, though, which is currently between 0.49% for Valkyrie Bitcoin Trust with a 3-month waiver and 0.25% for Black Rock’s iShares Bitcoin Trust with a 12-month or $5 billion waiver.

Downsides to Consider

ETFs have assured us that there are many advantages to trading them, especially if the investors do not or can’t gain access to actual digital currencies. We have to also consider potential risks and cases when is perhaps safer to own the actual BTC:

  • Risks coming from the counterparty – Investing in ETFs trusting the institution or the fund manager. The ETF provider holds the custody and is responsible for the security – that’s where the counterparty risk comes from and is eliminated if you claim ownership of the asset.
  • Control deficit – Having to rely on the fund manager’s stability, control, and security rids you of direct control over the asset. In that case, you might want to consider buying your own product to trade.
  • Ongoing service fees – Investors who prefer trading BTC ETFs are constantly faced with management fees. They may eat away at your gains in a prolonged time. Holding Bitcoin only involves costs such as transaction fees and wallet administration taxes.
  • Taxes on BTC ETFs investments – these implications may differ from those in the situation when you’re holding your own asset. Taxes can occur as a consequence of buying, selling, and holding ETFs, whereas taxes of just holding BTC differ.  

If you intend on establishing greater control over your investments, prefer to have your assets held long-term, and wish to avoid the above-mentioned risks, holding your own asset is perhaps a better solution.

Future Implications For Investors

First and foremost, we have to appreciate the action that the SEC took, as it has made BTC ETFs more accessible to a wider range of investors. Institutional investors, as well as small-time traders and retail investors, have the chance to gain greater exposure to BTC.

Instead of dealing with crypto exchanges, common investors now have the chance to trade ETFs on traditional stock exchanges, since BTC ETFs have now gained a certain level of regulatory approval and legitimacy. That also means increased transparency in the form of reporting and disclosure requirements.

The introduction of Bitcoin ETFs could lead to increased market liquidity, as the buying and selling of ETFs could increase the overall market activity. With that, we have to mention the volatility in the short term. 

Lastly, affirmation of ETFs could have an effect on the global acceptance of other regulatory bodies to take into consideration some actions similar to what the SEC did. Gaining global recognition would have a great deal of influence on mainstream investors and negate regulatory uncertainties.

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