The Securities and Exchange Commission (SEC) has officially approved the listing and trading of a Bitcoin spot exchange-traded fund (ETF). The ETF, filed by asset manager Valkyrie, will begin trading on Friday on the New York Stock Exchange under the ticker “BTF”.
This marks a hugely significant moment for both the cryptocurrency industry and the SEC, opening the floodgates for further spot Bitcoin ETF approvals after years of rejections and delays. The ETF is expected to see massive trading volumes from both retail and institutional investors.
Lead Up to the Decision
The approval of a Bitcoin spot ETF has long been viewed as the holy grail for crypto investors. Unlike futures-based Bitcoin ETFs which have already been approved, a spot ETF would allow direct ownership of Bitcoin by investors rather than derivatives contracts.
The SEC has rejected over a dozen spot Bitcoin ETF applications since 2013, repeatedly citing concerns over insufficient regulation and the potential for price manipulation. However, a shift in sentiment has occurred under SEC Chairman Gary Gensler over the past year.
In early 2023, Gensler stated the crypto market was “ready for a Bitcoin ETF”, though ongoing reviews delayed any decisions. The approval process was also slowed down by concerns over FTX’s collapse and ensuing contagion.
| Date | Event |
|---|---|
| March 2023 | Gensler states market is “ready” for Bitcoin ETF |
| October 2023 | Several firms including Valkyrie file spot ETF applications after Gensler update |
| November 2023 | FTX files for bankruptcy, concerns over crypto contagion |
| January 2024 | Valkyrie spot Bitcoin ETF approved by 4-1 SEC vote |
The final approval vote was 4-1 in favor of allowing the listing, with the dissenting member citing lingering concerns around trading volumes and investor protection issues.
Market Reaction
The reaction from cryptocurrency markets was immediately positive, with Bitcoin rallying from around $38,000 to over $41,500 within minutes of the announcement. Ethereum also jumped 4% to over $1,550.
Exchanges are preparing for massive trading volumes from both retail and institutional investors when the ETF debuts Friday. Some analysts forecast over $50 billion could flow into the ETF in its first week.
Spencer Bogart, an analyst with Blockchain Capital, said “This changes everything. We expect the listing will drive billions of dollars of inflows in its first few days, and open the floodgates for more institutional engagement with Bitcoin and crypto as a whole.”
Not all reactions were positive however. Long-time crypto skeptic Peter Schiff tweeted “A spot #Bitcoin ETF will end up being a giant rug pull. The quick speculative pile in will be followed by an even quicker rush for the exits. Rather than promote sound money principles, the SEC is catering to unhealthy speculation.”
What This Means
The approval of a Bitcoin spot ETF has critical implications for both cryptocurrency markets and the SEC policy towards digital assets.
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Increased mainstream adoption and awareness – A spot ETF opens crypto investing to the over $11 trillion US ETF industry and users of mainstream brokerage apps like Robinhood. Millions of new investors will now have easy exposure.
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More institutional participation – Custodians like BNY Mellon can now provide custody services for a Bitcoin ETF in registered brokerage accounts, overcoming obstacles for regulated entities.
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Lower volatility ahead – Increased liquidity and institutional flows may dampen Bitcoin’s famous volatility, bringing more stability.
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Further innovation – The door is now open for more crypto ETFs, derivatives, and fund products across both Bitcoin and altcoins.
The SEC also showed that it sees the crypto industry as continuing to mature in terms of market integrity and oversight. This could lead to further regulatory clarity.
What Happens Next?
The approval of Valkyrie’s spot ETF is likely the first of many to come. At least nine other asset managers have similar applications for spot ETFs under review, including major players like Grayscale, Bitwise, and Ark Invest.
It’s expected these will quickly get the green light now that the seal has been broken. These new products will provide further variety in structures, investment mandates, and crypto assets covered.
Sam Doctor, chief strategy officer at BitOoda, said “Now that the ban has lifted, you will soon see ETFs covering additional coins like Ethereum hit the market. This is just the beginning.”
Longer-term, the next goalposts will be for altcoin spot ETFs and more complex strategies like leveraged and inverse funds. But Friday’s announcement was undoubtedly a historic milestone in linking traditional finance with the world of crypto.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
