The 11 exchange traded funds for bitcoin approved by the SEC may encourage new investors to the market
The US Securities and Exchange Commission (SEC) has approved the launch of spot bitcoin exchange traded funds (ETFs), in a major moment for the cryptocurrency industry. This long-awaited decision opens the door for 11 ETFs to list in the US, including those from Blackrock, Fidelity and Grayscale.
The SEC approvals, which include certain protections for investors, are expected to encourage institutional and retail investors in the US to engage with bitcoin. Investors can now enter the world of bitcoin without the need for a digital wallet or opening an account on a crypto trading platform like Binance.
Many of the ETF providers slashed and offered waivers on their fees in a bid to attract investors.
Eric Demuth, co-founder and chief executive officer of Bitpanda, a crypto trading platform, emphasised the significance of the development. He said: “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.”
The milestone comes after a brief false start. An announcement was initially made on Tuesday via a post on the X account of the SEC, causing a spike of more than $1,000 in the price of bitcoin, before being taken down as the SEC said that the account had been “compromised”.
An official statement was then made on Wednesday approving the ETFs.
After the approvals, bitcoin was trading at about $45,000. It peaked at almost $70,000 in November 2021, before falling to $16,000 in November 2022 after the collapse of the crypto exchange FTX.
While the SEC approved the listing and trading of certain spot bitcoin ETP shares, it warns investors to be cautious about bitcoin and products whose value is tied to crypto.
Gary Gensler, chair of the SEC, said: “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast, bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”
Between 2018 and March 2023 the Commission rejected more than 20 exchange rule filings for spot bitcoin ETSs, including one from Grayscale.
However, 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 ETF.
“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,” Demuth said. “Courts have overturned SEC rulings, forcing them to make this decision.”
The news is expected to lead to a higher bitcoin price, which could hit the $100,000 mark this year, and help to reduce volatility. Demuth said: “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.”