In a groundbreaking move for the cryptocurrency market, the US Securities and Exchange Commission (SEC) has granted approval for Bitcoin exchange-traded funds (ETFs). According to analysts from Standard Chartered, these ETFs have the potential to attract anywhere from $50 billion to $100 billion in investments in the current year alone. However, other experts suggest that the inflow of funds may reach approximately $55 billion over the course of five years.
As of Wednesday, the market capitalization of Bitcoin exceeded a staggering $913 billion, as reported by CoinGecko. In contrast, the total net assets of U.S. ETFs amounted to $6.5 trillion in December 2022, as documented by the Investment Company Institute.
The commencement of trading for most of these products is expected to take place on Thursday, sparking a fierce competition among issuers to secure their share of the market.
These ETFs, a decade in the making, mark a significant turning point for Bitcoin. They offer investors an opportunity to gain exposure to the world’s largest cryptocurrency without the need to directly possess it. This development serves as a substantial boost for the crypto industry, which has been plagued by various scandals in recent times.
Andrew Bond, Managing Director and Senior Fintech Analyst at Rosenblatt Securities, expressed, “It’s a monumental step towards institutionalizing Bitcoin as an asset class.” At the time of writing, Bitcoin had surged by 3% to reach a value of $47,300. The cryptocurrency had witnessed a remarkable increase of over 70% in the preceding months in anticipation of the ETF’s approval, reaching its highest value since March 2022 this week.
The success in attracting investments will predominantly hinge on factors such as fees and liquidity, according to industry analysts. In an effort to entice investors, some issuers have recently reduced their proposed fees. Notably, BlackRock and Ark/21Shares are among those offering fees ranging from 0.2% to 1.5%, with several firms even waiving fees entirely for a specific duration. For short-term speculators who aim to enter and exit the products swiftly, liquidity is likely to hold more significance.
In anticipation of increased interest, companies are gearing up for a flurry of online advertising and marketing activities. Certain issuers, including Bitwise and VanEck, have already launched advertisements promoting Bitcoin as a viable investment option.
Steven McClurg, Chief Investment Officer at Valkyrie, whose ETF received approval on Wednesday, remarked, “This is quite unprecedented, so we’ll have to wait and see how it pans out. I’ve never witnessed a scenario where ten identical ETFs were launched on the same day.”
These approvals arrived on the heels of a peculiar incident in which an unauthorized individual posted a false announcement on the SEC’s social media platform, X. The post claimed that the agency had sanctioned the products for trading, a statement that the SEC promptly disavowed and removed.
The SEC has since disclosed its collaboration with law enforcement agencies and its internal watchdog to investigate this incident.
Despite these occurrences, the cryptocurrency industry continues to celebrate the milestone achievement. Grayscale CEO Michael Sonnenshein affirmed, “We always believed that Bitcoin had the potential to reshape the world, and we remain enthusiastic about the prospect of democratizing access to this asset.”