It's finally here. The long-awaited spot Bitcoin (BTC -1.89%) ETF has been approved by the Securities and Exchange Commission (SEC), with 11 spot exchange-traded products officially getting the nod from regulators, after years of denials and a very hawkish regulatory stance. Since the Winkelvoss twins first proposed a spot Bitcoin exchange-traded fund (ETF) in 2013, investors have effectively been waiting for more than a decade for this product to be launched.
Bitcoin briefly surged to nearly $49,000 per token following this announcement, the highest level it's seen in almost two years. Ethereum (ETH -0.27%) and Dogecoin (DOGE -3.16%) saw similar spikes this morning, but have since given up some of these gains. As of 1 p.m. ET, Bitcoin is currently trading flat (having seen a big boost in its valuation yesterday prior to this announcement), but Ethereum and Dogecoin are 6.2% and 7.7% higher over the past 24 hours.
Let's dive into what this approval means for Bitcoin and other top-tier cryptocurrencies right now.
What does this spot Bitcoin ETF approval mean for the crypto sector?
The potential impacts of this approval on Bitcoin are notable. A range of estimates for how much capital could flow into these ETFs has been put forward, but Standard Charter believes that number could be as high as $100 billion. That's a tremendous amount of money, and certainly could change the investing landscape for institutional funds looking to diversify their portfolios into these asset classes.
The SEC's official approval of a swath of ETFs could pave the way for future spot Ethereum exchange-traded products to be launched. That's a key driver of enthusiasm around the world's second-largest cryptocurrency, with Dogecoin rallying as it usually does in tandem with the sector, in a familiar higher-volatility fashion today.
The 11 spot Bitcoin ETFs approved by regulators include: Grayscale Bitcoin Trust, iShares Bitcoin Trust, Valkyrie Bitcoin Fund, Ark 21Shares Bitcoin Trust, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree Bitcoin Trust, Fidelity Wise Origin Bitcoin Trust, Bitwise Bitcoin ETF, Franklin Bitcoin ETF, and Hashdex Bitcoin ETF. These funds are now trading, and are seeing mixed performance.
Some of this divergence among Bitcoin exchange-traded funds can be linked to the rather wide range of fees offered by providers. Updated pricing provided by a number of funds ahead of today's approvals show many ETFs dropping fees substantially, to as low as 0.2%. Given the similar nature of each of these funds, that could indicate a race to the bottom in terms of management fees, which is great for investors.
Notably, crypto traders betting against Bitcoin have lost a substantial amount of money in the derivatives market. Estimates suggest closed short positions cost bears around $100 million.
Is now the time to buy a Bitcoin ETF?
The value these ETFs provide is notable. Bitcoin, as representative of crypto and digital assets as whole, gains legitimacy in the eyes of many investors. Additionally, investors now don't have to go through the trouble of setting up a wallet, researching how blockchain technology works, and jumping through what can be perceived as too many hoops to invest in crypto.
For institutional investors, these ETFs also provide liquidity, allowing for seamless integration within their portfolios, and allowing for things like model portfolios (which are investment products tailored to specific investors) to include some proportion of crypto. Being able to readily trade Bitcoin on the open markets is a big deal for asset managers, and I think the market is correct to assume this will lead to a tsunami of cash headed into this space.
Ethereum's prospects in terms of getting proposed spot ETFs approved may be more murky. Given the incredibly long lag between proposals and approvals for Bitcoin ETFs, these products could still have a ways to go. That said, these approvals do provide a blueprint for regulators looking at spot Ethereum ETFs, and given the SEC's rather favorable stance toward both Bitcoin and Ethereum, one might certainly surmise that the probability of future approvals has increased over the past 24 hours.
As is the case with many asset classes, investing in ETFs has its pros and cons. For those comfortable with buying Bitcoin directly, saving even 20 basis points each year can add up over the long term. That said, for those seeking simplicity and convenience, these products certainly look more intriguing than involving oneself in the rigmarole around buying and selling Bitcoin on exchanges. Personally, I think a race to the bottom in fees could make Bitcoin ETFs the preferred investing option for most investors, and I think these are certainly worth considering right now.
