The SEC’s decision to approve 11 exchange-traded funds (ETFs) for bitcoin marked the culmination of months of rumours and speculation, and in the days since, the industry has been reacting to what is clearly a landmark moment for the entire crypto industry.
A Catalyst for Institutional Interest in Bitcoin
The US securities regulator has finally acknowledged bitcoin’s appeal as a bonafide investment vehicle. ETFs put BTC in the cross-hairs of investors unwilling to physically buy bitcoin yet seeking exposure to the asset itself.
Naturally, the green light has nourished the optimism of bulls anticipating positive movements in bitcoin’s price. Aside from the inevitable price speculation however, the main narrative coming to the fore is that ETFs will serve as a catalyst for wider institutional interest and involvement in bitcoin.
Although the SEC issued a caveat that “investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” the ETF approval has been heralded by many as validation of bitcoin’s unique value proposition. With that validation, optimists expect a significant influx of capital as financial markets embrace and integrate an asset proponents often call ‘digital gold.’
“This landmark decision is set to unlock trillions of dollars previously confined within the rigid structures of traditional finance, injecting unprecedented liquidity and vitality into the crypto ecosystem,” predicts Alexander Casassovici, CEO of Web3 streaming platform Azarus.
“The 'normalization' of crypto marked by the SEC’s decision is just the beginning. I anticipate that this will usher in a new wave of adopters, eager to experience the thrills and potential rewards of this evolving market.”
Casassovici’s hopeful outlook is echoed by Fraser Edwards, CEO of blockchain identity startup cheqd, who cites increased accessibility as the major advantage of new ETFs. “BTC as part of an ETF drastically reduces the technical or financial proficiency required to invest in bitcoin,” he explains.
“A good analogy is how easy it became to invest in stocks when platforms like Charles Schwab came online versus having to employ a broker who you called and who quoted prices to you. The ETFs will massively reduce the barrier to entry and expand the potential investor population, from people and companies with exchange accounts or access to DEXs, to anyone with access to ETFs, a drastically larger cohort.”
A Banner Year for Bitcoin
The January 10 ETF approvals marks the commencement of a massive year for bitcoin, with the fourth Halving event expected in spring. Historically, halvings have bolstered the scarcity narrative at the heart of bitcoin and, with the supply of new BTC decreasing, many expect demand to rise.
With or without the halving, Fraser Edwards thinks BTC ETFs could “increase the correlation between the price of bitcoin and the global financial markets, since flows into and out of ETFs in general, and hence the stock market, will now include those in and out of bitcoin too.”
Perhaps the most significant outcome of regulatory approval is that legitimacy concerns often used to dismiss bitcoin can be easily countered. Although criticism won’t end overnight, arguing that bitcoin is a scam looks faintly ludicrous in light of SEC approvals.
“We’ve seen incredible growth in the industry in recent years, and SEC approval actively demonstrates a commitment to seeing further advancements and moves towards bringing digital assets to even more mainstream markets,” said Trevor Traina, the former US Ambassador to Austria and now CEO of Web3 SuperApp Kresus. “The green light exemplifies the appetite for digital currencies to be actively traded on stock exchanges.”
EOS Network Foundation Founder Yves La Rose, meanwhile, believes the arrival of spot ETFs “marks a pivotal moment in the evolution of cryptocurrency investments in one of the world’s largest financial markets.” The tech entrepreneur points out that Canada’s market share of spot bitcoin ETFs is set to be hit.
“In December 2023, Canada was a prominent figure in the global spot Bitcoin ETF arena, holding about 48% of the global market share for spot crypto ETFs, translating to $2 billion in assets per CoinGecko. Given the scale of the US ETF market, which is roughly 32 times the size of Canada's, we could see a potentially massive inflow of capital into the cryptocurrency sector. US approval could also stimulate further innovation and regulatory evolution in the crypto-financial landscape.”
Although the majority of reactions to ETF approval have focused on global implications, ripple effects will obviously be felt nationally and regionally – even if the SEC’s jurisdiction ends at the US border. Nechama Ben Meir, CFO of Layer-3 infrastructure project Orbs, called the judgment “a significant development for Israel's investment sector.”
She added: “Traditionally, both retail and institutional markets here faced hurdles in investing in basic cryptocurrencies like bitcoin, primarily due to the Israeli regulatory authorities’ unclear stance on crypto investments. This ambiguity led banks to shy away from these funds, limiting access to a small group of specialized investors comfortable with uncertainty. The introduction of bitcoin ETFs represents a notable shift, offering Israeli investors a new avenue for investment in this emerging asset class.”
The extent to which bitcoin ETFs are a game changer for bitcoin, or even the crypto industry as a whole, remains up for debate. No-one, however, can deny the feel-good factor coursing through the Web3 world in the early days of 2024.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice
