In a groundbreaking move for the world’s largest cryptocurrency and the broader crypto industry, the U.S. Securities and Exchange Commission (SEC) approved the first U.S.-listed exchange traded funds (ETFs) to track bitcoin, as announced by SEC Chair Gary Gensler on Wednesday.
The regulatory approval encompasses 11 applications, including those from notable entities such as BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck. Some of these ETFs are slated to commence trading as early as Thursday, sparking intense competition for market share among industry players.
The significance of these ETFs, a decade in the making, lies in their potential to transform the landscape for bitcoin investors. They provide institutional and retail investors with exposure to the world’s leading cryptocurrency without the need to directly hold it, marking a pivotal moment for a crypto industry grappling with a series of scandals, Reuters news report said.
Standard Chartered analysts project that the ETFs could attract an influx of $50 billion to $100 billion this year alone, potentially propelling the price of bitcoin to as high as $100,000. However, other analysts forecast more conservative estimates, anticipating inflows of around $55 billion over the next five years.
Andrew Bond, Managing Director and Senior Fintech Analyst at Rosenblatt Securities, hailed the SEC’s approval as “a huge positive for the institutionalization of bitcoin as an asset class,” asserting that it further legitimizes the cryptocurrency.
Bitcoin, responding to the news, surged by 3 percent to $47,300, marking a more than 70 percent increase in recent months, fueled by anticipation of the approved ETFs and reaching its highest level since March 2022 earlier in the week.
Success in the competitive battle for assets in spot bitcoin ETFs is expected to hinge on factors such as fees and liquidity. Several issuers, including BlackRock and Ark/21Shares, have strategically lowered their fees, ranging from 0.2 percent to 1.5 percent, with some even waiving fees for a specific period. For short-term speculators, liquidity is deemed crucial, as more liquid ETFs allow for swift buying and redeeming of shares at prices closely aligned with the actual bitcoin price.
In addition to fee strategies, companies are gearing up for a surge in online advertising and marketing. Bitwise and VanEck are among the issuers already releasing advertisements promoting bitcoin.
The SEC’s approval represents a notable shift, considering the regulator’s decade-long resistance to bitcoin ETFs due to concerns about potential manipulation. SEC Chair Gensler, despite being a crypto skeptic, acknowledged that approving these products was “the most sustainable path forward” in light of a federal appeals court ruling last year that the agency erred in rejecting an application from Grayscale Investments.
The crypto industry has celebrated this milestone, with Grayscale CEO Michael Sonnenshein expressing excitement at the prospect of democratizing access to bitcoin through a U.S. regulated investment vehicle. Douglas Yones, Head of Exchange Traded Products at the New York Stock Exchange, called the approval an important “milestone” for the ETF industry.
However, the SEC’s journey in making this announcement was not without hiccups. On the day prior, an unauthorized person published a fake post on the SEC’s social media account, falsely claiming the approval of the new products. The SEC disavowed and deleted the post, initiating an investigation involving law enforcement and the SEC’s internal watchdog. Further confusion ensued when the SEC briefly posted and then removed a notice on its website about the ETF approvals on Wednesday afternoon.