After a decade of waiting, spot Bitcoin exchange-traded funds (ETFs) will see the light of the day in the US following an official approval from its regulatory authority.
On 10 January, the Securities and Exchange Commission (SEC) greenlighted a total of eleven 19b-4 applications for the same from issuers: BlackRock, Ark Invest, Grayscale, VanEck, Bitwise, Fidelity, Hashdex, WisdomTree, Invesco Galaxy, Franklin, and Valkyrie.
Through these ETFs, investors will be able to gain direct exposure to Bitcoin without holding it. $BTC is the underlying asset of a spot Bitcoin ETF, unlike regular Bitcoin ETFs, in which Bitcoin futures contracts are the underlying asset.
As the first regulated product to be traded on the stock exchange in the US, these ETFs would help investors steer clear of the complexities of Bitcoin ownership or self-custody.
Various fund managers had made predictions on these products before. VanEck foresees potential inflows exceeding $2.4 billion into spot Bitcoin ETFs during the first quarter of 2024 on the account that the approval is granted early this year.
Meanwhile, Bitwise anticipates that within a five-year timeframe, spot Bitcoin ETFs in the US could accumulate assets under management totalling $72 billion.
The attempt to bring such a product to the market was first initiated by Cameron and Tyler Winklevoss in 2013 to launch the Winklevoss Bitcoin Trust.
While it had been denied by the SEC due to market manipulation and fraud concerns, the commission officially approved their 19b-4 and S1 filings yesterday.
The recent greenlight from the SEC came after a series of events mingled with confusion and fake news a day before. As per reports, the regulator’s official X account was hacked, from which a false ETF approval announcement was posted.
The lack of two-factor authentication (2FA) on the SEC account was identified to be the key vulnerability that led to the breach.
What to expect next?
Through these new ETFs, investors will be offered a transparent and regulated way to track Bitcoin’s price. “The approval signifies a major step forward in establishing crypto as a tradeable asset class, paving the way for new trading opportunities”, said a spokesperson for Cboe Global Markets.
These highly-anticipated products will soon debut on US markets run by the NYSE, Cboe Global Markets and Nasdaq. These will be aided by major trading firms as well, in order to provide liquidity.
The ETF’s liquidity will be supported by Bitcoin’s spot market, its futures markets, as well as the Bitcoin futures ETFs. Assuring the existence of a number of liquidity programs at NYSE, its Head of Exchange Traded Products, Douglas Yones, said:
“For market makers that are out there – and we’ve got dozens of market makers that provide liquidity for our ETFs that are going to step in – they’ve had natural hedges available to them. We have a very nice price-discovery process that will happen at the New York Stock Exchange overnight all the way into the open, so we expect a pretty dynamic and liquid market tomorrow.”
Fee allocation
Recently, several ETF issuers, including industry giants like BlackRock, Bitwise, and Fidelity, made revisions to their S-1 filings, providing updated fee structures.
According to the newly approved documents, the world’s largest asset manager, BlackRock, intends to implement a fee structure of 0.2% for assets under management (AUM) up to $5 billion.
Bitwise maintains its fee at 0.24%, while Ark 21Shares and VanEck propose fees of 0.25%. Notably, Ark 21Shares plans to waive all fees for the initial six months or until reaching $1 billion in AUM.
The one offering the highest fee structure among Bitcoin ETF products is Grayscale which has imposed a 1.5% commission on prospective investors.
Bitcoin’s reaction to the news
Bitcoin reacted moderately to the ETF approval news, finding much resistance at around the $48K price level. It seems to be stuck in a range above the $45,000 support as it struggled to climb higher than $47,598.
At the time of press, $BTC was changing hands for $46,278, up by a meagre 1.7% daily. Nevertheless, it continued its trade in the green side on its chart with almost an 8% weekly rise.
Technical indicators also showed similar sentiments for the coin as they remained in the bullish zones. Growing green histograms were seen on the Awesome Oscillator (AO) and the Relative Strength Index (RSI) line was getting closer to touch 60.
Ethereum ($ETH), on the other hand, enjoyed a much higher jump in price since the ETF announcement. The altcoin has managed to go beyond the $2,600 price level as it rose by over 10% daily.
With Ethereum holding its position as the second-largest cryptocurrency after Bitcoin, the market seems to be turning their attention to the potential of an Ethereum ETF.
Notably, both BlackRock and Fidelity have previously submitted filings for spot Ether ETFs.
