The US Securities and Exchange Commission authorized Bitcoin exchange-traded funds fifteen years after the genesis block was mined (and following one misleading announcement). The financial system that Bitcoin was designed to disrupt has accepted it entirely. Thanks to this decision, investors can now purchase 11 spot Bitcoin ETFs, including products from Grayscale, Fidelity, BlackRock, and other companies.
“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse Bitcoin,” said SEC chairman Gary Gensler, in a statement. "As a result of the numerous hazards connected to bitcoin and products whose value is dependent on cryptocurrency, investors should exercise caution.
Every attempt to establish a Bitcoin ETF—a collection of assets that functions much like a mutual fund—has been rejected by the SEC for the past ten years. These vehicles, on the other hand, trade on exchanges where stock market participants can easily purchase and sell them, unlike mutual funds. It basically implies you can invest in Bitcoin without having to bother setting up your own wallet, which is important in this case.
For some types of investors who have been hesitant to invest in cryptocurrencies, that might be sufficient. The news that the companies issuing ETFs will need to purchase equivalent amounts of Bitcoin in order to back their funds has cryptocurrency investors salivating.
In response to today's news, the price of Bitcoin barely moved. But in the long run, traditional institutional investors will find it easier to get into cryptocurrency thanks to Bitcoin ETFs. For example, pension funds and insurance funds may be able to speculate on the price of Bitcoin for the first time, which would increase demand for the cryptocurrency.
Currently, investing in cryptocurrency is proxied by purchasing stock in cryptocurrency-focused businesses like Coinbase and MicroStrategy, which as of January held more than $8 billion in Bitcoin. Those companies might lose value if a Bitcoin ETF launches.
The SEC has up to now denied requests for Bitcoin ETFs on the grounds that they aren't sufficiently secure for investors. But last April, a judge decided that the SEC’s refusal of a Grayscale ETF was “arbitrary and capricious,” clearing the path for today’s clearance. After all, there is already an ETF of Bitcoin futures.
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