Watershed moment? What does US SEC approval of bitcoin ETFs mean for the bitcoin and entire crypto market?
The US securities regulator has officially approved the first US-listed exchange traded funds (ETF) to track bitcoin, in what is being labelled a watershed moment for the world’s largest cryptocurrency, as well as the broader crypto industry.
The US Securities and Exchange Commission (SEC) made the announcement on Wednesday, that “today, the Commission approved the listing and trading of a number of spot bitcoin exchange-traded product (ETP) shares.
Earlier this week the SEC had denied that it had approved bitcoin exchange-traded funds (ETF) which had led to the price of bitcoin to rise by more than $1,000.
It came after hackers compromised the official SEC X (aka Twitter) social media account and made the false declaration about an approval that had been eagerly awaited by the crypto industry.
But by Wednesday the SEC signalled its ETF approval, and in statement SEC chairman Gary Gensler noted that since 2018, the agency has “disapproved” more than 20 exchange rule filings for spot bitcoin ETPs.
“We are now faced with a new set of filings similar to those we have disapproved in the past. Circumstances, however, have changed,” wrote Gensler.
“The US Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order),” wrote Gensler.
“The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares.”
However the SEC continued to express reservations, as the “Commission action is cabined to ETPs holding one non-security commodity, bitcoin,” wrote Gensler.
“It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities,” wrote Gensler. “Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.”
ETFs for bitcoin
But what exactly has the SEC approved?
Essentially the US securities regulator have given its blessing to 11 ETFs for bitcoin in the US.
This approval should open cryptocurrencies to new investors who don’t want to take the extra steps involved in buying actual bitcoin.
The Guardian newspaper explained that an ETF is an easy way to invest in assets or a group of assets without having to directly buy the assets themselves. For example, the SPDR Gold Shares ETF allows anyone to invest in gold without having to find a place to store a bar or protect it.
ETFs can also be easily traded on stock exchanges, the newspaper noted.
It should be remembered that since the arrival of bitcoin, people wishing to own one either had to adopt a digital wallet or open an account at a crypto trading platform such as Coinbase or Binance.
The SEC approval has been eagerly awaited by the crypto industry, and advocates say the development is a watershed moment that will help push crypto into the financial mainstream.
But it is clear that many at the SEC still have reservations.
“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin,” Gensler concluded. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
“I am deeply concerned about today’s actions. I am concerned that these products will flood the markets and land squarely in the retirement accounts of US households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets,” Commissioner Caroline Crenshaw said in her dissent of the SEC approval.
A number of crypto experts got in touch with Silicon UK to welcome the development, with some calling it good news for investors.
“The SEC’s approval for BTC ETFs in the U.S. is unambiguously good news for investors and asset managers,” said Michael Walsh, CEO of Ireland and Head of Distribution at crypto trader Zodia Markets.
“Opinion is divided between those who believe that demand for inflows will drive the price to $200,000 within two years due to pent up demand, and those who believe that all the good news is in the price and that inflows will disappoint and deflate the value of BTC,” said Walsh.
“However, that misses the point. A highly regulated BTC ETF market democratises ownership of BTC; buyers of the ETF in any increment have the comfort of knowing that their assets are in the safe hands of household investment managers with simplified access and liquidity.”
“Crucially buyers can proceed in confidence that they are greatly insulated from poor governance and, since an ETF reflects the value of the underlying asset, from hacks or other misappropriation of the physical BTC,” said Walsh. “It is entirely another question whether America’s Moms and Pops should be investing in BTC but there is a strong argument to be made that, at very least as a store of value, BTC has a place in every investment portfolio.”
Meanwhile, Eric Demuth, the co-founder and CEO of European investment platform Bitpanda, noted the SEC reluctance, and highlighted the potential implications for the price of bitcoin.
“After a long struggle, the SEC has finally approved a Bitcoin Spot ETF,” said Eric Demuth at Bitpanda. “However, it is important to remember that today’s approval was not brought about by a rethink within the SEC, it was driven by external pressure. Courts have overturned SEC rulings, forcing them to make this decision.”
“Whatever the cause, the approval of a Bitcoin Spot ETF is a huge milestone,” said Demuth. “From now on, long-term capital from institutional investors will flow into the crypto market. This decision will fundamentally change the industry. Until now, many institutional investors were unable to operate in the crypto sector within their regulatory framework, as they have to invest in traditional financial products. The ETFs that are now available will be a hugely important tool for institutions and major banks in the US.”
“I believe that the approval of a Bitcoin Spot ETF will further encourage the mass adoption of crypto-assets by institutional investors in the US,” said Demuth. “Institutional investors may be more willing to invest in Bitcoin if they have access to it through investment products such as ETFs. This is the next step into mainstream finance. Crypto is here to stay.”
“Although the approval is of course fundamentally very positive for the price of Bitcoin, much of the expectation that the ETF will be approved is already priced in, and it is likely that we will see a “sell the news” event after a brief upswing,” added Demu”th. In the long term, however, the higher liquidity and volume will lead to a higher Bitcoin price and could also help to reduce volatility.”
“The additional liquidity in the system from the US, together with other factors such as the upcoming Bitcoin halving in April or a possible drop in key interest rates, could lead to a Bitcoin price in the six-digit range in the long term,” Demuth predicted. “There is every possibility that we could see Bitcoin break the $100,000 mark as soon as this year.”
There was agreement from Nigel Green of financial and investment advisor deVere Group, that the impact of the SEC approval could skyrocket long-term BTC prices.
“This approval by the financial regulator of the world’s largest economy is a landmark moment for Bitcoin and the wider crypto market and boosts prices in the long-term, even if there’s a sell-off in the near-term,” said Green.
The deVere CEO says there are five main reasons to be bullish for the long-term price trajectory following the SEC approval.
- Institutional validation. “The approval of Bitcoin ETFs represents a resounding institutional validation of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset,” said Green.
- Likely influx of capital. “One of the primary catalysts for the anticipated surge in Bitcoin prices is the massive influx of capital that is expected to follow the approval of ETFs,” said Green.
- Accessibility and liquidity. “Bitcoin ETFs help democratise access to the cryptocurrency market, allowing a broader range of investors to participate,” said Green.
- Market integration and regulatory clarity. Nigel Green says: “The approval of Bitcoin ETFs represents another significant step towards the integration of cryptocurrencies into the mainstream global financial system.”
- Increased global adoption. “Bitcoin ETFs aren’t limited by geographical boundaries, offering a globally accessible investment vehicle for investors across jurisdictions,” said Green. “This global reach is expected to drive widespread adoption and recognition of Bitcoin as a legitimate asset class.”
Green concluded that “the approval of Bitcoin ETFs is a watershed moment for Bitcoin and the entire crypto market. The institutional validation, massive influx of capital, increased accessibility, market integration, and global adoption are powerful catalysts that could send BTC prices to potentially near all-time highs.
“On a tidal wave of investor enthusiasm, we wouldn’t be surprised if Bitcoin hits $60,000 this quarter – and higher moving forward throughout the year,” said Green. ““We expect that history will show that the ETF approval will be a significant price driver in the long-term, even if there’s a very short-term sell-off.”