The SEC has approved Bitcoin ETFs: it is a turning point for the cryptocurrency sector globally. What does it mean and what changes for digital currencies?
Bitcoin ETFs are now a reality. On the evening of January 10, the SEC, the United States financial regulator, gave the green light to the listing of the first Exchange Traded Fund (ETF) on Bitcoin.
We are facing a watershed not only for the largest cryptocurrency in the world but for the entire virtual currency sector.
The announcement came at the end of an exciting 24 hours for Bitcoin. Yesterday, a tweet posted by the Securities and Exchange Commission (SEC) account incorrectly declared the approval of the long-awaited ETFs, driving the price of Bitcoin upwards. Shortly after, however, the SEC said that his account had been “compromised” and that the tweet was false.
With the official green light for 11 Bitcoin ETFs any doubts have been resolved. The news offers new opportunities for investors attracted by cryptocurrencies, who can expose themselves to Bitcoin without the obligation to buy them. An ETF represents a simple way to invest in assets without having to purchase the assets themselves directly.
The approval pushed Bitcoin higher above $47,300. The cryptocurrency has surged more than 70% in recent months in anticipation of the approval of Bitcoin ETFs, and this week reached its highest level since March 2022.
The cryptocurrency sector can now be said to be revolutionized forever.
“A long-term bull run is about to begin,” Alessandro Frizzoni, founder of the 100% Italian crypto exchange Cryptosmart, told Money.it.
The approval of a Bitcoin ETF brings with it a high potential impact on the market since, thanks to it, both private and institutional investors have the opportunity to expose themselves to the strongest cryptocurrency in the world without necessarily having to own it, generating a new and massive inflow of capital in the sector.
Bitcoin ETF approved. How the crypto sector is changing
The long-awaited turning point for the most famous cryptocurrency in the world has arrived. The majority of approved Bitcoin ETFs are expected to begin trading on Thursday, issuers said.
Specifically, as stated in the official document, the SEC has given the green light to the following 11 ETFs:
- Grayscale Bitcoin Trust;
- Bitwise Bitcoin ETF;
- Hashdex Bitcoin ETF;
- iShares Bitcoin Trust;
- Valkyrie Bitcoin Fund;
- ARK 21Shares Bitcoin ETF;
- Invesco Galaxy Bitcoin ETF;
- VanEck Bitcoin Trust;
- WisdomTree Bitcoin Fund;
- Fidelity Wise Origin Bitcoin Fund;
- Franklin Bitcoin ETF
ETFs represent a revolution for Bitcoin, offering investors the ability to be exposed to the world’s largest cryptocurrency without holding it directly. Since the birth of Bitcoin, anyone who wanted to own it had to use a digital wallet or open an account on a crypto exchange such as Cryptosmart, Coinbase, or Binance. Digital currency advocates say the approval of ETFs represents a major change with the high potential to bring cryptocurrencies into the financial mainstream.
The decision on ETFs is a crucial victory for large fund managers such as BlackRock, Fidelity Investments, and Invesco, among the largest companies to now have, thanks to SEC approval, a Bitcoin ETF to offer to investors. This gives rise to a competition to conquer the relevant market shares.
“This is an unprecedented situation…I have never been in a situation where 10 ETFs of the same type launched on the same day,” said Steven McClurg, chief investment officer at Valkyrie, whose ETF is among those approved Wednesday.
“Through a Bitcoin ETF anyone has the opportunity to easily purchase the cryptocurrency”, underlines one of the founders of the Cryptosmart exchange, “the private individual through his broker or securities account on the one hand, and the institutional ones - to whom it is investment outside regulated markets is prohibited - on the other hand”.
“The significant inflow of capital that will occur on Bitcoin and other major cryptocurrencies, such as Ethereum, will have a bullish impact on prices. And this is certain,”
Frizzoni predicts.
Despite approving new Bitcoin products, the SEC said it is still deeply skeptical of cryptocurrencies and that its decision does not mean it approves or supports the digital currency.
“Investors should remain cautious regarding the myriad of risks associated with Bitcoin and products whose value is tied to cryptocurrencies,” said SEC Chairman Gary Gensler a few days ago.
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The impact of ETFs on the Bitcoin price
Bitcoin comes from almost two years of strong turbulence, during which we saw the price of BTC collapse and then recover with difficulty, also in light of the consequences of the bankruptcy of several cryptocurrency companies. But Wednesday’s announcement, as anticipated, undoubtedly represents good news for many investors in the cryptocurrency market.
For months there was reasonable certainty that the SEC would ultimately approve the instrument. Since October, Bitcoin has risen by around 70%, on the speculation of investors who believe the arrival of Bitcoin ETFs would increase demand for the cryptocurrency, and therefore its price.
As recently as November 2022, the price of Bitcoin had fallen to $16,000, driven by the bankruptcy of cryptocurrency exchange FTX. Today, in the hours following the SEC’s announcement, it trades above $46,000.
According to analysts at Standard Chartered, ETFs could attract $50 billion to $100 billion in new capital in 2024, an inflow that could see the price reach $100,000. Other experts predict that the amount of new inflows will reach $55 billion in five years.
Some analysts are more cautious. Many fear that widespread use of cryptocurrency ETFs could lead to excessive risks and volatility on American pension funds: it is known that the price of Bitcoin moves quickly both upwards and downwards, often without warning or explanation.
Not just Bitcoin ETFs
ETFs make exposure to the price of Bitcoin easier just as hashrate tokens have simplified access to cryptocurrency mining. “There are tokens that allow you to buy - in addition to the token itself - also part of the computing power necessary to mine Bitcoin, allowing the investor not only to benefit from the increase in the price of the token but also from the rewards provided for each Bitcoin that he helped create”, explains Frizzoni.
Among these stands out Bitcoin Hash Power (BHP). Born on the Ethereum blockchain, it stands out from the thousands of its counterparts because it allows its owner to participate in the mining of blocks on the Bitcoin blockchain. Every 1 BHP token corresponds to 1 Terahash of Bitcoin hashrate.
Original article published on Money.it Italy 2024-01-11 09:20:00. Original title: ETF Bitcoin approvati dalla SEC, come cambia il settore crypto?
