SEC Grants Approval for First-Ever Spot Bitcoin ETFs, Paving the Way for Cryptocurrency Investment Funds

TOPLINE

 In a groundbreaking development, the Securities and Exchange Commission (SEC) revealed on Wednesday its green light for the inaugural spot bitcoin exchange-traded funds (ETF) in the United States. This significant move marks a pivotal moment for investors seeking exposure to the leading digital asset globally.

All 11 pending applications for spot bitcoin ETFs received regulatory approval, involving prominent firms such as BlackRock, Grayscale, and Fidelity. These ETFs are poised to commence trading as early as Thursday, ushering in a new era for cryptocurrency investments.

Anticipation had been building around the SEC's decision, with the deadline for the ETF application from Ark Invest, spearheaded by Cathie Wood, marking the first in line for consideration. As expected, the SEC's approval has set the stage for a transformative shift in the investment landscape.

Following the announcement, Bitcoin prices exhibited a relatively stable trend, hovering around a two-year high of approximately $46,000. This development is noteworthy as it opens avenues for institutional funds, providing a more accessible route for a broader range of investors to engage in bitcoin investments. The approval of spot bitcoin ETFs is a testament to the growing acceptance and integration of cryptocurrencies into traditional financial markets.

The recent decision by the Securities and Exchange Commission (SEC) to approve spot bitcoin exchange-traded funds (ETFs) is being hailed as a pivotal move towards legitimizing and institutionalizing the cryptocurrency space. Yiannis Giokas, senior director at Moody's Analytics, emphasized the significance of this decision, stating that it "marks a significant step towards the institutionalization of cryptocurrency, expanding bitcoin's accessibility to a wider audience in a more regulated and simpler manner."

However, the road to this announcement was not without its twists and turns. The SEC's X social media account mistakenly declared a blanket approval on Tuesday afternoon after a security breach, creating confusion. Subsequently, the Chicago Board Options Exchange prematurely announced on Wednesday afternoon that trading for the funds would commence this week. Adding to the chaos, the SEC's website experienced technical difficulties, crashing shortly before 4 p.m., likely due to increased traffic following the leak and subsequent speculation.

Despite these hiccups, the eventual approval of spot bitcoin ETFs by the SEC underscores the growing acceptance of cryptocurrencies within the financial mainstream. This regulatory green light is expected to facilitate a more orderly and regulated entry for a broader spectrum of investors into the world of bitcoin, contributing to the ongoing institutionalization of the digital asset.

CRUCIAL QUOTE

“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” SEC Chairman Gary Gensler wrote in a statement Wednesday.

KEY BACKGROUND

Spot bitcoin ETFs allow investors to invest in bitcoin without paying the higher fees associated with directly buying the token on dedicated crypto exchanges like Coinbase (“spot” refers to the funds directly tracking the present price of bitcoin as opposed to prices implied by futures contracts). Gensler, long a skeptic of the crypto industry, warned this week about the “significant risk” associated with investments in digital assets. Bitcoin surged in price as hype built about the increasing likelihood of the ETFs’ approval, jumping nearly 200% since the beginning of last year, though bitcoin remains about 30% below its peak achieved during 2021’s boom. The institutional support of the bitcoin ETFs, and regulators’ subsequent blessing, comes as a vote of confidence for an industry plagued by a series of bankruptcies and arrests of bad actors formerly seen as the face of crypto, including FTX’s Sam Bankman-Fried and Binance’s Changpeng Zhao, the former CEOs of what were the world’s largest crypto exchanges.

SURPRISING FACT

Publicly traded stocks tied to crypto-focused companies have sunk in 2024 as investor access to bitcoin exposure grew. Shares of Coinbase and bitcoin hoarder MicroStrategy are down more than 15% apiece in the new year, while shares of bitcoin miners Marathon Digital and Riot Platforms are each down more than 5%. Each of the four stocks remain up more than 150% over the last 12 months amid the crypto sector’s good vibes.

BIG NUMBER

Nearly $900 billion. That’s the total market capitalization of bitcoin, about 10% higher than the valuation of Berkshire Hathaway, the U.S.’ seventh largest public company.