Breaking Down the News: Approval of Spot Bitcoin ETFs
The SEC Approves First Spot Bitcoin ETFs
The US Securities and Exchange Commission (SEC) has approved the listing of the first spot bitcoin exchange-traded funds (ETFs).
A Bitcoin ETF is an exchange-traded fund that tracks the price of Bitcoin. Investing in a Bitcoin ETF allows investors to gain exposure to the price of Bitcoin without having to invest in the currency directly. It's essentially a type of investment fund that enables you to buy and sell Bitcoin shares on a stock exchange like you would buy and sell an Amazon or Tesla share.
The SEC's approval follows a period of anticipation and legal battles. This development is seen as a significant milestone in the cryptocurrency market, with expectations of attracting new crypto enthusiasts, traders and institutional investors.
Currently, bitcoin is trading at around $46,000, nearly twice its price in January 2023.
Wide Range of Sponsors and Listings
A total of 11 ETFs featuring a diverse group of sponsors have been cleared for listing by the SEC. Established players like Fidelity and Invesco and digital-focused newcomers such as Grayscale and Ark Invest are among the sponsors. These ETFs will be traded on exchanges like stocks and enjoy special tax treatment in the US.
Trading Expected to Commence Soon
Trading for the approved ETFs is expected to start promptly, with BlackRock's iShares Bitcoin Trust ringing the opening bell at Nasdaq. Investors will have the opportunity to gain exposure to Bitcoin through regulated products, bypassing the risks associated with unregulated exchanges or the higher costs associated with futures-based ETFs.
While spot bitcoin ETFs have been available in other markets, the SEC's approval paves the way for US institutional and retail investors to directly access the most popular and liquid cryptocurrency. This represents a milestone for Bitcoin as a recognized traditional investment. The move is expected to open doors for Wall Street and increase Bitcoin's legitimacy.
A Shift in SEC's Stance
The SEC's decision marks a shift in its previous scepticism towards spot bitcoin ETFs. The regulator had previously expressed concerns about the susceptibility of cryptocurrencies to manipulation and fraud. However, Grayscale's successful challenge to the SEC's rejection of a spot Bitcoin application paved the way for this change in stance, influenced by a federal appeals court ruling.
While the SEC approved the listing and trading of certain spot bitcoin ETF shares, SEC Chair Gary Gensler emphasised that this approval does not constitute an endorsement of bitcoin itself. He urged investors to remain cautious about the risks of Bitcoin and cryptocurrency-related products.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.