SEC unlocks floodgates: Bitcoin ETFs greenlit, crypto rockets

11 Jan 2024 , 11:58 AM

According to its Chair Gary Gensler, the U.S. securities regulator approved the first exchange traded funds (ETFs) to track bitcoin on Wednesday, marking a turning point for both the world’s biggest cryptocurrency and the larger crypto sector.

According to a notification on its website, the U.S. Securities and Exchange Commission approved 11 applications, including those from BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck, among others. A vigorous struggle for market dominance is anticipated to start as early as Thursday when some items are expected to start trading.

A decade in the making, the products are a game-changer for bitcoin, providing institutional and ordinary investors with exposure to the largest cryptocurrency in the world without requiring them to own it directly. They also represent a significant advance for an industry plagued by a number of scandals.

This week, economists at Standard Chartered predicted that the ETFs may attract $50 billion to $100 billion just this year, which might push the price of bitcoin above $100,000. According to other forecasts, during a five-year period, inflows will be closer to $55 billion.

At $47,300, Bitcoin was up 3% as of late. In anticipation of an ETF, the cryptocurrency has increased by more than 70% in recent months. Earlier this week, it reached its highest level since March 2022.

Fees and liquidity will probably be key factors in determining the outcome of what is predicted to be a fierce competition to buy assets for spot bitcoin ETFs, according to analysts.

This week, a few issuers, including as BlackRock and Ark/21Shares, undercut their own fees in fresh filings, highlighting the haste with which they are trying to seize a piece of the anticipated capital influx. These fees can range from 0.2% to 1.5%, and many companies give fee waivers in full for a predetermined amount of time.

However, liquidity may matter more to short-term speculators than fees. Investors can more easily purchase and redeem shares of an exchange-traded fund (ETF) at prices that closely resemble the real price of bitcoin when the ETF is more liquid.

Businesses also anticipate a surge in online marketing and advertising. A few issuers have already published commercials promoting bitcoin, such as Bitwise and VanEck.

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