Approval of the Bitcoin Spot ETF and its impact for investors

What is an ETF?

Before looking back at this long-awaited event in the crypto sphere, let's remind ourselves what an ETF is. An ETF (Exchange-Traded Fund) is a financial instrument that enables investors to buy and sell underlying assets, such as stocks, bonds or commodities, in the same way as they would with ordinary shares. The Bitcoin Spot ETF is specific to the Bitcoin cryptocurrency, offering investors direct exposure to this cryptoasset without physically holding it.

Historic SEC approval of Bitcoin Spot ETF after a decade of waiting

Approval of the Bitcoin Spot ETF by the Securities and Exchange Commission (SEC) on January 10, 2024, is an important milestone in the adoption and legitimization of the Bitcoin cryptocurrency on traditional financial markets. Until now, the SEC had rejected several Bitcoin ETF applications, but the recent approval marks a turning point in the regulatory attitude towards this asset class.

1. In 2013, as Bitcoin's popularity continued to grow, Cameron and Tyler Winklevoss, co-founders of cryptocurrency exchange Gemini, filed their first application with the SEC for the creation of a Bitcoin spot ETF. This initial application paved the way for a lengthy regulatory process that eventually culminated in the current approval, marking a significant evolution in the recognition of the Bitcoin cryptocurrency as a legitimate financial asset on traditional markets.
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SEC approves first Bitcoin Spot ETF applications for 11 issuers

Issuers of these ETFs include BlackRock's iShares Bitcoin Trust, Grayscale Bitcoin Trust, ARK 21Shares Bitcoin ETF, Bitwise Bitcoin ETP Trust, WisdomTree Bitcoin Fund, Fidelity Wise Origin Bitcoin Trust, VanEck Bitcoin Trust, Invesco Galaxy Bitcoin ETF, Valkyrie Bitcoin Fund, Hashdex Bitcoin ETF and Franklin Bitcoin ETF. Six of these ETFs will be listed on the Chicago Board Options Exchange (CBOE), three on the New York Stock Exchange (NYSE) and two will be traded on Nasdaq. This diversity of trading platforms offers investors a range of options for accessing the Bitcoin Spot ETF, strengthening its presence on traditional financial markets.

What is the impact of this approval for investors?

Investors wishing to invest in Bitcoin via a spot ETF would not need to buy, sell or store Bitcoin themselves. They would simply buy and sell shares in the fund on the exchange, just like any other stock.

Here are some key points to consider:

Easy access: Approval of the Bitcoin Spot ETF gives investors easier access to the Bitcoin cryptocurrency. Rather than purchasing and storing physical Bitcoins, investors can now buy shares in the Bitcoin Spot ETF on traditional stock markets.

Risk reduction: For some investors, buying and holding physical Bitcoins can be complex and risky. Depending on the investor's profile, the Bitcoin Spot ETF offers a simpler and safer alternative, as it is traded on regulated markets, making it more accessible and secure for investors.

Increased liquidity: The Bitcoin Spot ETF could also help increase Bitcoin's liquidity. By enabling investors to buy and sell ETF shares on exchanges, it becomes easier to enter and exit the market, which could boost trading volumes and price stability.

Institutional interest: The approval of the Bitcoin Spot ETF could also attract interest from institutional investors, such as pension funds and investment companies. These financial players often have strict regulatory requirements and prefer to invest in regulated financial products such as ETFs.

Transparency: Investors could consult the fund's price and holdings at any time, as well as the fund's financial statements and audited reports. They could also verify that the fund holds the advertised quantity of Bitcoin, and that the custodian has stored it securely and independently.

Conclusion

The recent shift in the SEC's stance, from anti-cryptocurrency statements by its chairman Gary Gensler to approval of a Bitcoin Spot ETF, has marked a major turning point in the cryptocurrency world. This decision opens up new prospects for investors interested in Bitcoin, offering greater accessibility, reduced risk and enhanced potential for institutional interest. It is likely that this approval will significantly alter the way people invest in cryptocurrencies.

What's more, this decision could also pave the way for the SEC to approve ETFs on other cryptocurrencies, as evidenced by BlackRock CEO Larry Fink's enthusiasm for a potential Ethereum Spot ETF in a recent interview.

However, this evolution, while expected by many investors, raises questions about its alignment with the initial vision of decentralization carried by Bitcoin's creator, Satoshi Nakamoto. This highlights significant concerns about preserving the cryptocurrency's core values.

1. In the end, this decision is perhaps an inevitable step towards wider adoption of cryptocurrencies and their underlying philosophy in the future. It raises important issues while paving the way for new possibilities, marking a pivotal moment in the history of cryptocurrencies.
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1. Sources:
2. https://learn.bybit.com/bitcoin/bitcoin-spot-etf-approval/, consulted on 14.01.24
3. https://www.reuters.com/technology/decade-long-journey-us-spot-bitcoin-etf-2024-01-10/, consulted on 14.01.24
4. https://techcrunch.com/2024/01/10/sec-approves-spot-bitcoin-etf/, consulted on 14.01.24
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