Sector experts described the US regulator’s move as a turning point for the entire digital currency sector.
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US regulator finally approves Bitcoin ETF in ‘pivotal’ step for crypto industry, experts say
Bitcoin prices jump to $46,500 after the SEC announcement
- The SEC gave its approval on Wednesday for as many as 11 investment companies to offer “spot bitcoin” exchange-traded funds.
SEC Chair Gary Gensler, however, said in a statement on the SEC’s website that the agency remains wary.
“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,” he wrote.
The SEC had a deadline of January 10 to offer a decision for just one of the 11 firms that applied to offer bitcoin ETFs, CNN reported.
On Wednesday it offered approval to all 11 of them. The ETFs will begin trading on Thursday.
The SEC move had an immediate impact on the market, with bitcoin price crossing the $46,000 level within hours after the news.
Sector experts described the US regulator’s move as a turning point for the entire digital currency sector.
“The approval of bitcoin ETFs marks a pivotal moment, ushering in a regulated avenue for institutional participation – from independent broker dealers to bank wealth divisions and RIAs – in the crypto asset class,” Jeff Billingham, Director of Strategic Initiatives at Chainalysis, told Arabian Business.
He said the long-term impact of spot bitcoin ETFs extends beyond immediate price action.
“Their approval is a turning point for a rapidly maturing, institutional crypto market. These regulated avenues provide access for investors of all sizes and will foster a more secure market over the next three, five, and ten years,” Billingham said.
The Chainalysis research shows that already in the UAE, institutional investment accounts for the largest volume of cryptocurrency transactions.
“So this development will only serve to fuel this wave of institutional investment,” Billingham said.
He said the ETFs will introduce a stabilising influence to a historically volatile crypto market and encourage the development of vigorous risk management and trade infrastructure on par with other mature asset classes.
Bitcoin, the leading cryptocurrency with a current market cap of roughly $900 billion, has seen volatile price swings throughout its 15-year history.
Most recently, after hitting an all-time high of nearly $69,000 in November 2021, it fell below $17,000 during the “crypto winter” of 2022 and has mostly been trading north of $45,000 in the run-up to the SEC’s decision.
SEC final approval comes after a false start on Tuesday
The US market regulator’s final nod to the EFT proposals comes after it denied a false message on it on Tuesday, January 9.
After the stock market closed on Tuesday, a post on the SEC’s X account falsely claimed the regulatory agency had approved the listing and trading of spot bitcoin exchange-traded products.
That was quickly debunked by Gensler, and the SEC took down the message.
The SEC also said on Wednesday the FBI was looking into the matter.
Bitcoin prices to zoom
Industry experts said the ETF approval could unleash a significant market demand, driving an upward trend in Bitcoin prices.
“Bitcoin may experience an increase in price to around $48,000 to $50,000 [on a near-term basis] after the approval of a spot ETF,” Ryan Lee, Chief Analyst at Bitget Research, told Arabian Business.
“The market conditions are expected to be influenced by the recognition and investment associated with such ETFs,” he added.
Lee also said the bitcoin market could expect a multi-billion inflow if institutional investors make similar investments as they do in Gold ETFs.
“Comparing it to gold spot ETFs, as of December 2023, the assets under management (AUM) of gold ETFs have reached approximately $209 billion, with half of the AUM in North America. Currently, BTC’s volatility is roughly 3.6 times that of gold. If BTC spot ETFs are approved, assuming these financial giants want to invest in BTC with a risk exposure similar to gold, they would need to invest approximately $30-40 billion,” Lee said.
He also pointed out that the price of gold in the spot market quadrupled to $1,666 per ounce in 8 years from $444.3 per ounce when the first gold-backed ETF debuted on the NYSE on November 18, 2004.
Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange, told Arabian Business: “Bitcoin, currently trading at a $46,500 level, is expected to touch the $100,000 mark as predicted by banking giant Standard Chartered.”
After a decade-long wait, the US SEC finally gave the green signal to 11 Bitcoin ETF applications which include Blackrock, Fidelity, and Invesco among others.
“The race for Bitcoin ETF applications, which picked up pace in October 2023, pushed the Bitcoin price to $47,000 in the first few days of 2024,” Thakral said.
Lee, however, said the future price movement will also be impacted by further capital inflows into Bitcoin ETFs.
“The abundance or scarcity of funds will play a crucial role in market sentiment and price fluctuations, determining whether Bitcoin prices continue to rise or experience a decline,” he said, adding that this could trigger intense market volatility, and investors should closely monitor the market’s reaction post-ETF approval to better formulate their investment strategies.
SEC approval to lead to ETF approvals by regulators in other major markets
Lee also said now that the SEC has approved Bitcoin ETFs, it is expected that financial institutions in other regions will apply for similar businesses in the US.
“To prevent large and medium-sized financial institutions from transferring their funds out of the region, other financial centres such as London, Hong Kong, Singapore, and Tokyo are also expected to introduce policies related to BTC spot ETFs,” he said.
“This will ultimately lead to the widespread globalisation and adoption of cryptocurrency.”
Additionally, the attributes of cryptocurrency are likely to expand beyond BTC to include ETH, stablecoins, and other tokens, allowing more people to understand the significance of cryptocurrency, Lee said.
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