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On Wednesday, Jan. 10, the Securities and Exchange Commission (SEC) approved the first-ever spot Bitcoin ETFs including those from Fidelity, BlackRock and Invesco. In total, the SEC approved 11 spot Bitcoin ETFs.
They’re expected to start trading as soon as this week, and their upcoming launch has already had an impact on cryptocurrency markets. The price of Bitcoin jumped more than 7% over the course of Monday, Jan. 8, when CNBC reported that sources close to the SEC said that approval was imminent.
But wait — weren’t there already Bitcoin ETFs on the market?
Yes and no. There were already crypto-related ETFs and trusts out there, but there has never been a spot Bitcoin ETF on the market before Wednesday’s approval.
What is a spot Bitcoin ETF?
A spot Bitcoin ETF is an exchange-traded fund — a highly liquid fund that changes price throughout the trading day, just like a stock — that directly tracks the price of Bitcoin, primarily by holding a large amount of the cryptocurrency itself. It’s similar to a spot gold ETF, which holds physical gold bullion on behalf of its shareholders.
These are the first spot Bitcoin ETFs to win SEC approval to trade on a major exchange, although there are other funds on the market that attempt to track the price of Bitcoin by other means.
For example, the Grayscale Bitcoin Trust (GBTC) invests directly in Bitcoin, but as a trust, it lacks the ability to keep its price close to its net asset value (NAV). ETFs can do this by creating and retiring shares in response to investor demand. But since it can’t, GBTC often trades at a discount or premium to its NAV — that is, its returns often diverge from those of Bitcoin.
There are also funds like the ProShares Bitcoin Strategy ETF (BITO) — a proper ETF that trades on a major exchange near its NAV, but invests in Bitcoin futures, not Bitcoin itself. Its returns can also diverge from those of Bitcoin.
As the first spot Bitcoin ETFs, the recently approved ETFs are the first cryptocurrency funds to offer the best of all worlds — they will trade on a major exchange, keep their prices near their NAVs, and hold Bitcoin directly.
How many spot Bitcoin ETFs are coming, and what are the fees?
10 different would-be spot Bitcoin ETF issuers filed forms with the SEC earlier this week, disclosing the fees they intend to charge. Hashdex, which applied to to hold spot Bitcoin in its crypto futures ETF, was also approved, bringing the total to 11. Some funds are looking to launch new Bitcoin ETFs, while others have existing funds that they are looking to convert into ETFs. Below is a list of the approved ETFs and their fees:
Proposed ETF name & symbol |
||
---|---|---|
Ark 21Shares Bitcoin ETF (ARKB) |
Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
|
Bitwise Bitcoin ETF (BITB) |
Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
|
iShares Bitcoin Trust (IBIT) |
Fee reduced to 0.12% for first 12 months of trading or first $5 billion in fund assets, whichever comes first. |
|
VanEck Bitcoin Trust (HODL) |
||
Franklin Templeton Digital Holdings Trust (EZBC) |
||
Invesco Galaxy Bitcoin ETF (BTCO) |
Fee waived for first six months of trading or first $5 billion in fund assets, whichever comes first. |
|
Fidelity Wise Origin Bitcoin Fund (FBTC) |
||
WisdomTree Bitcoin Fund (BTCW) |
||
Valkyrie Bitcoin Fund (BRRR) |
||
Hashdex Bitcoin ETF (DEFI) |
||
Grayscale Bitcoin Trust (GBTC) |
Source: SEC EDGAR system. Data is intended for informational purposes, not for trading purposes.
James Lawrence, the CEO of Florida-based blockchain startup NFTY Labs, said in an email interview that the timeline for approval of the rest of these ETFs is uncertain.
“The scenario is complex, especially with Coinbase (COIN), a preferred custodian for these ETFs, tangled in a legal battle with the SEC. It’s a labyrinth of regulations and court proceedings, yet I’m leaning towards the belief that we will see this unfold within the year and maybe even much, much sooner,” Lawrence said.
What would an approval mean for Bitcoin?
Peter Eberle, the chief investment officer of California-based crypto investment firm Castle Funds, said in an email interview that an approval would have a positive impact on the price of bitcoin.
“Many investors can’t currently get exposure. For example, many people with 401(k)s, IRAs and similar accounts can’t easily access Bitcoin. These investors will be able to allocate funds going forward. This will drive demand in coming years,” Eberle said.
However, Eberle also cautioned that bullish sentiment could be overblown.
“Just because these ETFs get approved in a few days, does not guarantee that there are investors with billions of dollars ready to buy on day one, so expectations might be too bullish for a short-term impact,” he said.
Lawrence was less reserved about his bullishness.
“I think we will see new all-time highs for Bitcoin,” he said, predicting that such highs could even top $100,000.
Bitcoin is trading below $47,000 at the time of writing, and so a price above $100,000 would entail the cryptocurrency rising in value by more than 100%.
What happened with the SEC’s social media on Tuesday?
Earlier this week, investors got a preview of the effect of a spot Bitcoin ETF approval on the price of Bitcoin — in the form of an unauthorized post from the SEC’s official account on X.com (formerly known as Twitter).
Around 4:00 p.m. on Tuesday, Jan. 9, the SEC posted a statement announcing the approval of several Bitcoin ETFs. Multiple news outlets, including CNBC and MarketWatch, reported on the “approval.”
But a few minutes later, SEC Chair Gary Gensler posted that the SEC’s account had been “compromised,” and that the statement had been posted in error. It is unclear at the time of writing whether the account was hacked to post a false statement, or whether the SEC had prematurely posted a genuine statement by mistake.
The price of Bitcoin leapt upwards by roughly $1,000 on the initial SEC post — but then fell by roughly $2,000 on Gensler’s correction post, before recovering slightly.
Source: Finviz. Data is intended for informational purposes only, not for trading purposes.
What would an approval mean for other crypto investments?
“Crypto tokens are highly correlated. If BTC does make a big price move, then other tokens will also participate to some degree. It will also make it likely that we will see an ETH ETF, which could provide significant tailwinds for ETH,” Eberle said, referring to Bitcoin by its ticker symbol “BTC” and Ethereum by its ticker symbol “ETH.”
Eberle said he thinks that ETF approvals will likely be limited to Bitcoin and Ethereum for the time being.
“BTC and ETH ETFs seem the most likely candidates, since BTC and ETH already trade as commodities on the CME,” he said, referring to the Chicago Mercantile Exchange, a futures exchange. “The other tokens have greater hurdles to overcome, as the SEC still considers many to be unregistered securities.”
However, Lawrence is more bullish on these “other tokens,” which are also called altcoins.
“We will see institutions wanting to invest in smaller, more liquid assets outside of BTC and ETH,” Lawrence said. He also said he believes that crypto futures trading will persist — and perhaps grow — even after spot crypto ETFs come online, in part thanks to the launch of Coinbase’s international crypto derivatives exchange in 2023.
In sum, experts are divided about the immediate market impact of a spot Bitcoin ETF approval. They agree that it is likely to have a positive effect on the price of Bitcoin — but just how much of a positive effect, and how many other crypto assets will be affected — remains to be seen.
Investors could start to find out as soon as this week.
Disclosure: The author and editor owned Bitcoin at the time of publication.
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