It seems that the bonanza has come early for Bitcoin (BTC) investors in this calendar year. On January 10, 2024, the United States (US) Securities and Exchange Commission (SEC) finally gave official confirmation to the 11 spot BTC exchange-traded fund (ETF) applications. Reportedly, the 11 firms which received authorisation include Hashdex, Ark Invest, BlackRock, WisdomTree, Invesco Galaxy, Fidelity, Bitwise, VanEck, Valkyrie, Grayscale, and Franklin. “I believe the introduction of a BTC ETF marks a milestone, bridging the traditional financial markets with the realm of digital assets. This development not only aims to validate the importance of crypto but should also open avenues for institutional investors to participate in the potential of blockchain technology. With the BTC ETFs, people are expecting a good percentage of BTC ownership to be routed through the ETFs,” Nischal Shetty, co-founder, Shardeum, an Ethereum Virtual Machine (EVM) based layer-1 blockchain, told FE TransformX.
The US route for spot BTC ETFs can be traced back to 2013 when a Winklevoss Capital Management-related platform drafted a SEC application for a spot BTC ETF’s acceptance. Despite the application being turned down, it’s believed that the move had set the stage for a BTC futures ETF, which met with SEC’s approval in 2021. Market experts believe that on account of BTC’s volatility, SEC was hesitant to approve the spot BTC ETFs but things took a turn when Grayscale Investments filed a lawsuit against the SEC in October 2022, after the firm’s spot BTC ETF application was rejected by the regulatory agency. From what it’s understood, the lawsuit asked the SEC to provide more explanation as to why the application was turned down. Post all the developments, as things stand, media reports suggest that authorisation of the 11 spot BTC ETFs could ensure the adoption of digital assets into the mainstream financial landscape. “I think this is a moment for all the digital asset enthusiasts as it should pave the way for the adoption of the world’s largest cryptocurrency through large financial institutions. The optimism brought about by this move should augur well for the global crypto industry, and I believe more Indian investors will make the most of this decision and start including digital assets in their portfolios. I am hopeful that this will also facilitate discussions among the Indian ecosystem and soon India should have its own crypto ETF,” Avinash Shekhar, chief executive officer, Pi42, a crypto-INR perpetual futures exchange, mentioned.
As things stood after the spot BTC ETFs got approved, BTC clocked a three percent increase in value to trade at close to $47,300. On January 8, 2024, BTC achieved the feat of increasing above $47,000 for the first time in almost two years with regards to the BTC ETF situation, as stated by CoinMarketCap, a crypto price-tracking website. At the time of writing on January 11, 2024 (12.51 pm, Indian Standard Time), CoinMarketCap specified BTC price to be nearly $46,150, marking an approximately 0.5% increase in the past day with a roughly $903.8 worth market capitalisation. Another factor which is understood to have also played a role in this approval include the firms reducing their fees, such as Grayscale from two percent to 1.5%, Fidelity from 0.39% to 0.25%, Invesco Galaxy from 0.59% to 0.39%, WisdomTree from 0.5% to 0.3%, Valkyrie from 0.8% to 0.49%, and Bitwise from 0.24% to 0.2%. Other firms such as Ark Invest/21Shares decided to reduce their fee from 0.25% to 0.21% along with zero fees for the beginning half a year or till the limit of one billion dollar worth assets, and BlackRock slashed its sponsor fee from 0.3% to 0.25% and its short-term discount from 0.2% to 0.12% for the first one year comprising first five billion dollar worth assets. “On an industry level, the implications are considered profound, promising long-term benefits that drive adoption. The approval should open doors for retail investors, simplifying their access to BTC transactions through traditional brokerage accounts. From an institutional perspective, this development aims to mark the inception of the first institutional bull market in crypto. The spot BTC ETF is poised to streamline exposure for traditional players, paving the way for the influx of trillions in institutional capital. Leading institutions, including hedge funds, sovereign wealth funds, and registered investment advisors, are expected to play a role in propelling the growth of ETFs,” Sumit Gupta, co-founder, CoinDCX, a crypto investment application, highlighted.
Moreover, expectations laid by analysts of Standard Chartered, a multinational bank, have shown that the ETFs are capable of clocking $50 to $100 billion within this year itself. Other predictions suggest that the ETFs will reach a value worth approximately $55 billion in a five-year timeline. Numbers provided by Bloomberg Intelligence, Bloomberg LP’s research wing, have shown that the spot BTC ETF sector can reach $100 billion. Signs suggest that spot BTC ETFs’ approval will play a crucial role in bringing BTC investments from retail and institutional investors, as there remains a bullish standpoint for BTC to reach $50,000 by this calendar year’s end. “For countries such as India, looking to balance innovation with regulation in the crypto domain, the US approach should offer insights. It aims to demonstrate the importance of integrating digital assets within a regulated framework, ensuring investor protection while fostering technological advancements. This decision could catalyse the acceptance and growth of BTC, potentially driving its value and adoption to levels, and setting a precedent for how traditional financial systems can evolve to embrace the digital future,” Ashish Khandelwal, founder and CEO, ANQ, a crypto-powered card platform, concluded.
