July 22, 2024
Funds

SEC Approves Spot Bitcoin ETFs—First Crypto Funds Of Kind


Updated Jan 10, 2024, 04:46pm EST

Topline

The Securities and Exchange Commission announced Wednesday it greenlit the first spot bitcoin exchange-traded funds (ETF) in the U.S., a historic move for investors looking for exposure to the world’s largest digital asset.

Key Facts

Regulators approved all 11 outstanding applications for spot bitcoin ETFs, from firms including BlackRock, Grayscale and Fidelity, to begin trading as soon as Thursday.

The SEC’s approval was widely expected to come Wednesday, which was the deadline for the ETF application from Cathie Wood-led Ark Invest, the first of the applications set for a decision.

Bitcoin prices were largely flat after the announcement, trading near a two-year high of roughly $46,000 as the institutional funds open the door for easier access to bitcoin investments for many investors, driving up prices.

The decision “marks a significant step towards the institutionalization of cryptocurrency, expanding bitcoin’s accessibility to a wider audience in a more regulated and simpler manner,” Yiannis Giokas, senior director at Moody’s Analytics, explained in emailed comments.

The announcement came after several head fakes, as the SEC’s X social media account erroneously announced a blanket approval Tuesday afternoon following a breach, the Chicago Board Options Exchange jumped the gun early Wednesday afternoon by saying trading would begin this week for the funds and the SEC’s website crashed shortly before 4 p.m., after some users accessed the announcement.

Crucial Quote

“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” SEC Chairman Gary Gensler wrote in a statement Wednesday.

Key Background

Spot bitcoin ETFs allow investors to invest in bitcoin without paying the higher fees associated with directly buying the token on dedicated crypto exchanges like Coinbase (“spot” refers to the funds directly tracking the present price of bitcoin as opposed to prices implied by futures contracts). Gensler, long a skeptic of the crypto industry, warned this week about the “significant risk” associated with investments in digital assets. Bitcoin surged in price as hype built about the increasing likelihood of the ETFs’ approval, jumping nearly 200% since the beginning of last year, though bitcoin remains about 30% below its peak achieved during 2021’s boom. The institutional support of the bitcoin ETFs, and regulators’ subsequent blessing, comes as a vote of confidence for an industry plagued by a series of bankruptcies and arrests of bad actors formerly seen as the face of crypto, including FTX’s Sam Bankman-Fried and Binance’s Changpeng Zhao, the former CEOs of what were the world’s largest crypto exchanges.

Surprising Fact

Publicly traded stocks tied to crypto-focused companies have sank in 2024 as investor access to bitcoin exposure grew. Shares of Coinbase and bitcoin hoarder MicroStrategy are down more than 15% apiece in the new year, while shares of bitcoin miners Marathon Digital and Riot Platforms are each down more than 5%. Each of the four stocks remain up more than 150% over the last 12 months amid the crypto sector’s good vibes.

Big Number

Nearly $900 billion. That’s the total market capitalization of bitcoin, about 10% higher than the valuation of Berkshire Hathaway, the U.S.’ seventh largest public company.

Further Reading

MORE FROM FORBESBitcoin ETF: Fund Managers Reveal Fees Ahead Of Possible Approval

MORE FROM FORBESStart Your ETF Engines
MORE FROM FORBESBanks Bitcoin Futures Bets Jump Into The Billions In Anticipation Of ETF
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