SEC approves Bitcoin ETF
The Securities and Exchange Commission (SEC) in the United States has given its approval for 11 exchange-traded funds (ETFs) that track bitcoin, marking a significant development for the world’s largest cryptocurrency and the broader crypto industry.
The approval followed a tumultuous 24 hours for bitcoin, during which a tweet from the SEC’s account announced the ETF approval, causing bitcoin’s price to spike by over $1,000. The SEC later clarified that the tweet was “unauthorized” and attributed it to a compromised account. However, the subsequent official approval came on Wednesday.
This decision is a major breakthrough for large fund managers like BlackRock, Fidelity Investments, and Invesco, who will manage the funds and have actively advocated for SEC approval. The ETFs are expected to commence trading as early as Thursday, initiating a competitive race for market share.
ETFs provide a more accessible investment avenue for individuals interested in bitcoin without the need to navigate the complexities of owning the cryptocurrency directly. They allow investors to participate in the asset’s performance without the logistical challenges associated with digital wallets or crypto trading platforms.
Despite granting approval, the SEC maintained a cautious stance on cryptocurrencies. Gary Gensler, the agency’s chairman, emphasized that the decision did not imply approval or endorsement of bitcoin. Commissioner Caroline Crenshaw expressed concerns about potential market flooding and the risk to investors.
The announcement had a positive impact on the price of bitcoin, which had experienced significant volatility over the past two years, including a November 2022 dip to $16,000 after the FTX crypto exchange’s bankruptcy. Post-approval, bitcoin’s price surged to $46,500, a notable rebound.
Analysts predict that the ETFs could attract substantial investments, with Standard Chartered estimating potential inflows of $50 billion to $100 billion in the first year alone. Some analysts suggest that ETFs may contribute to stabilizing crypto prices by broadening their adoption and attracting a more extensive audience. However, concerns persist regarding the potential risks and volatility associated with crypto ETFs in Americans’ retirement accounts.
The approval has also led to speculation around the creation of ETFs for other cryptocurrencies, as evidenced by the rise in the price of Ethereum, the second-most popular cryptocurrency. Analysts remain divided on the long-term impact of crypto ETFs, acknowledging both potential benefits and risks for investors in this evolving financial landscape.