On January 10, the US Securities and Exchange Commission (SEC) approved the launch of 11 spot Bitcoin ETFs. Trading will begin today, on January 11, on three exchanges: NYSE Arca, Nasdaq, and CBOE.
Despite the approval, the SEC's policy on crypto is not changing. At least that is what Gary Gensler said.
Bitcoin’s (BTC) price has reacted with moderate growth, while Ethereum (ETH) is showing a strong rise. However, as spot Bitcoin ETFs began trading, both showed sharp rises.
What is a spot bitcoin ETF
A spot Bitcoin Exchange-Traded Fund (ETF) is an investment fund that trades on traditional exchanges, similar to stocks. An issuing company buys and stores Bitcoins, selling shares that are backed by them.
Spot Bitcoin ETFs could be useful for both users and companies in traditional markets, who may not want to invest in crypto directly as they do not trust cryptocurrency exchanges, do not know how to safely store Bitcoin, and so on. Now, they can buy Bitcoin on a usual exchange.
The strongest round of interest in such products resumed in the summer of 2023, when one of the largest investment companies, BlackRock, applied for registration of a spot Bitcoin ETF. After that, 12 other companies began to actively cooperate with the SEC to obtain authorization.
The SEC approved all applications for spot Bitcoin ETFs
On January 10, 2024, the SEC approved all 11 applications for spot Bitcoin ETFs from the following investment funds: Grayscale, Bitwise, Hashdex, BlackRock, Valkyrie, VanEck, Wisdom Tree, Fidelity, Franklin Templeton, ARK Invest and 21 Shares (a joint application by two companies), and Invesco and Galaxy (a joint application by two companies).
In addition to transaction fees and the custodians who will store the Bitcoins, ETFs are also distinguished by the exchanges on which they will be traded:
✔️ ETFs from Grayscale (GBTC), Bitwise (BITB), and Hashdex (DEFI) will be on the NYSE Arca exchange.
✔️ BlackRock (IBIT) and Valkyrie (BRRRRR) will be presented on Nasdaq.
✔️ VanEck (HODL), Wisdom Tree (BTCW), Fidelity (FBTC), Franklin Templeton (EZBC), ARK Invest and 21 Shares (ARKB), and Invesco and Galaxy (BTCO) will appear on CBOE.
Trading began on January 11 at 14:30 GMT. Anyone who uses the above-mentioned exchanges can buy these ETFs.
SEC's views on crypto after the approval of the spot Bitcoin ETFs
In the press release, the SEC’s head Gary Gensler notes that the approval was influenced by the decision of the US Court of Appeals for the District of Columbia Circuit in SEC vs. Grayscale case, which found that the regulator did not have sufficient reasons to reject the company's application.
Also, this approval does not signal a softening of SEC policy toward other coins: "the majority of crypto assets are investment contracts and thus subject to the federal securities laws".
Despite the approval, Gensler considers Bitcoin a "speculative, volatile asset" that is used for "money laundering, sanction evasion, and terrorist financing".
Even though this attitude towards cryptocurrencies and Bitcoin seems controversial, it is known that in Commission vote, Gary Gensler supported the launch of spot Bitcoin ETFs. Two of the five SEC Commissioners, particularly Caroline Crenshaw and Jaime Lizárrage from the Democratic Party, were opposed.
The industry's take on spot Bitcoin ETFs launch
Undoubtedly, this is one of the biggest events in the history of cryptocurrencies. It proves the maturity of Bitcoin as a financial instrument and also signals the demand for BTC among major investment companies.
The total capital under management of funds that launched spot Bitcoin ETFs exceeds $17 trillion. Some of these funds will enter the crypto market and technology development. For example, Bitwise intends to donate 10% of the profits from spot Bitcoin ETFs to Bitcoin open-source developers over the next 10 years.
Major companies and market players can now invest in BTC. For instance, Ark Invest CEO Cathie Wood said during Twitter Space that her company is in talks with US public pension funds and state treasuries for them to invest in spot Bitcoin ETFs.
Former BitMEX head Arthur Hayes said that such financial instruments could have an impact on Bitcoin's price growth, while also being harmful to it. Investment companies that now control BTC from ETFs are subordinate to the government. So, their assets will lay dead weight on company balance sheets, which contradicts the idea of decentralised digital money.
It is difficult to say unequivocally what the consequences of spot ETFs for Bitcoin and the crypto market as a whole will be. Much depends on the real demand for the tool, whether it is there or whether it was speculative hype. However, the market is reacting interestingly to this news.
BTC and ETH reaction to the spot ETFs approval
Bitcoin’s price reacted moderately to the news about the adoption of spot ETFs; however, the volatility in the market is elevated. This is clearly visible on the hourly chart below.
A fake tweet on behalf of the SEC, which appeared on January 9, led to a higher local price high at $47,972. Since the real news, the price has been as high as $47,695. But as spot Bitcoin ETFs began trading, the price surpassed $48,000 and reached $48,969.
ETH is showing much stronger growth. It broke the $2,600 level, reaching a high of $2,649. Many other altcoins are growing along with it.
ETH, too, started rising with the start of spot Bitcoin ETFs trading and reached $2,685.
With the approval of spot Bitcoin ETFs, the market has become more likely to bet on the emergence of a similar financial instrument based on ETH. So, perhaps, instead of selling USD, speculators are switching from BTC to ETH while waiting for spot Ethereum ETFs to be approved.
What’s next for the crypto market after spot Bitcoin ETF launch
The main catalyst of Bitcoin's growth since summer has passed; in general, everything happened in accordance with investors' expectations — spot Bitcoin ETFs were approved, which means that there were no reasons for a panic sell-off at the moment. On the other hand, there is a famous phrase: "Buy the rumour, sell the news".
Perhaps, the growth of the market will now support the approval of the spot Ethereum ETFs. Applications for it have been submitted for a while. Bloomberg ETF analyst Eric Balchunas believes the tool will be approved by May.
However, it is important to remember that there is another fundamental event ahead this year: Bitcoin's halving in April. Recall that the halving of miner rewards occurs every 210,000 blocks (roughly 4 years).
So, this year has started off positively for the market. Let’s hope it will be like that until the end!
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