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What is a spot bitcoin ETF and how will its SEC approval impact investors?
The Securities and Exchange Commission on Wednesday granted approval to spot Wall Street-backed Bitcoin exchange-traded funds, or ETFs, a key regulatory step that will make it easier for ordinary investors to put their money into the digital currency.
The agency has given the green light to several financial firms to offer spot bitcoin ETFs, including asset management giants like BlackRock, Fidelity Investments and Franklin Templeton that cater to retail investors.
Until now, only Bitcoin futures ETFs were approved by the SEC. Bitcoin prices have soared following the SEC’s approval of ETFs, more than doubling since last year, according to CoinDesk’s Bitcoin Price Index. watch. Cryptocurrency Price had already increased by 61% since October on expectations that the agency planned to approve spot ETF applications, CoinDesk reported.
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Here’s what you need to know about spot Bitcoin ETFs.
What is an ETF?
ETFs are collective investments, like a mutual fund, but trade on a stock exchange like a stock or bond and track a specific index, sector or asset class like gold. Unlike traditional mutual funds, they can be bought and sold throughout the day.
A spot bitcoin ETF allows investors to gain direct exposure to bitcoin without owning it. Unlike traditional Bitcoin ETFs, in which Bitcoin futures are the underlying asset, bitcoins are the underlying asset of a spot Bitcoin ETF. Each spot Bitcoin ETF is managed by a company that issues shares of its own Bitcoin holdings purchased through other holders or through a permitted cryptocurrency. exchange. The shares are listed on a traditional stock exchange.
Which ETF applications have been approved?
The SEC has approved the following 11 Spot Bitcoin ETFs:
- BlackRock 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
- Franklin Bitcoin ETF
When will spot bitcoin ETFs start trading?
Nearly a dozen new Bitcoin funds have already started trading on US exchanges. Trading began Thursday, with the buying and selling of at least one ETF, the Grayscale Bitcoin Trust, as early as 4 a.m. Eastern Time, according to cryptocurrency trade publication CoinDesk. reported.
Spotting Bitcoin ETFs or Buying Bitcoin: What’s the Difference?
Investing in spot Bitcoin ETFs differs from purchasing Bitcoin directly in several ways.
First, investors who invest in Bitcoin ETFs do not own bitcoin, Cory Klippsten, CEO of Swan Bitcoin, told CBS MoneyWatch. Second, financial companies will charge fees for trading and managing a Bitcoin ETF. In contrast, people who buy Bitcoin pay transaction fees directly, but there are no fees for managing the investment.
There are some advantages to owning Bitcoin through an ETF. For example, investors can hold and track their Bitcoin ETF in the same brokerage account as their other investments.
What Could Be the Impact of SEC Approval of Bitcoin ETFs?
Investors are betting that the emergence of spot Bitcoin ETFs will pump billions of dollars into the digital currency by making investing easier and less intimidating.
Companies like BlackRock and Fidelity are well-known names in the financial services space, and their decision to enter the sector is boosting bitcoin. further into the mainstream as an investment class while conferring legitimacy in the shade and a very volatile crypto industry.
“A spot Bitcoin ETF marks the end of crypto as a ‘new’ asset class and the beginning of a world where it can be part of every portfolio,” said Nathan McCauley, CEO of Anchorage Digital, a crypto platform provider for financial companies.
And as demand for Bitcoin increases, its price too, likely spurring even more investment and interest in crypto, experts say. Boosting investment in bitcoin, coupled with the introduction of new products from reputable financial players, could also accelerate the adoption of sensible regulations. aimed at eliminating fraud and normalize crypto as a way to invest, make payments, and generally do business.
Strengthening crypto’s regulatory framework is vital, according to Rajeev Bamra, senior vice president of digital finance at Moody’s Investors Service.
“The persistence of this trend depends on the trajectory of global monetary policy as well as the availability of cryptocurrencies to institutional investors through products that meet regulatory standards, guaranteeing their safety and security,” he said. he declares.