After a long struggle, the SEC has finally approved a Bitcoin spot ETF. However, it is important to remember that yesterday’s approval was not brought about by a rethink within the SEC, it was driven by external pressure. Courts have overturned SEC rulings, forcing them to make this decision.
Whatever the cause, the approval of a Bitcoin Spot ETF is a huge milestone. From now on, long-term capital from institutional investors will flow into the crypto market. This decision will fundamentally change the industry.
Until now, many institutional investors were unable to operate in the crypto sector within their regulatory framework, as they have to invest in traditional financial products. The Exchange Traded Funds that are now available will be a hugely important tool for institutions and major banks in the US.
“I believe that the approval of a Bitcoin Spot ETF will further encourage the mass adoption of crypto-assets by institutional investors in the US,” said Eric Demuth, CEO of Bitpanda. “Institutional investors may be more willing to invest in Bitcoin if they have access to it through investment products such as ETFs. This is the next step into mainstream finance. Crypto is here to stay.”
SEC chair Gary Gensler was keen to stress that approving a spot Bitcoin ETF is not tantamount to the regulator wrapping its arms around the crypto space in a warm embrace.
“It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities,” Gensler said in an accompanying statement. “Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.”
And he concluded with this: “While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin.”
What’s interesting is not so much that he doesn’t endorse it, but that he took the pains to say so – he wouldn’t need to say this about any normal ETPs…it shows the rather difficult genesis of this product and the standards by which it is being judged. Indeed, the SEC “is merit neutral and does not take a view on particular companies, investments, or the assets underlying an ETP”.
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Watershed moment for Bitcoin
“The term ‘watershed moment’ can be a cliche, but in the case of today’s bitcoin ETF news, it could not be more justified,” said Yoni Assia, CEO and co-founder of CFD broker eToro. “For 15 years, Bitcoin has been growing in prominence as an asset class amongst retail investors, while in a reversal of traditional roles, institutional investors have remained largely on the sidelines waiting for traditional finance rails to be put in place.”
The news provides an answer for institutional demand for Bitcoin. It’s good news for crypto markets and supportive of the belief of many in the trading sector that Bitcoin is an unstoppable technology. “It is digital gold and taking a long term view, I believe that it represents the intersection of finance, economics and technology,” eToro’s Assia said.
Where to now for Bitcoin?
Although the approval is of course fundamentally very positive for the price of Bitcoin, much of the expectation that the ETF will be approved was already priced in, and it is likely that we will see a “sell the news” event after a brief upswing. In the long term, however, the higher liquidity and volume will lead to a higher Bitcoin price and could also help to reduce volatility.
The additional liquidity in the system from the US, together with other factors such as the upcoming Bitcoin halving in April or a possible drop in key interest rates, could lead to a Bitcoin price in the six-digit range in the long term.
“There is every possibility that we could see Bitcoin break the $100,000 mark as soon as this year,” said Bitpanda’s Demuth. “At Bitpanda, we are seeing a growing number of enquiries from established banks regarding our white label solution, custody solutions and other B2B products. The interest of established players to get involved in the crypto space and offer products to their customers is huge. We are ready to support them in this endeavour.”