The U.S. Securities and Exchange Commission (SEC) has finally met the decade-long anticipation of the crypto world by approving exchange-traded funds (ETFs) that directly track Bitcoin‘s performance. Despite numerous rejections since 2013, the SEC reversed its stance following a court’s decision to reject Grayscale Investments’ spot Bitcoin ETF application in August 2023. Consequently, the U.S. regulator approved a total of 11 applications from major players including ARK Investments, Fidelity, and BlackRock.
The approval of a spot Bitcoin ETF by the SEC is significant beyond financial implications, enhancing the legitimacy of the entire crypto space and bringing Bitcoin closer to mainstream recognition. This development emerges against the backdrop of an ongoing struggle between the crypto industry and the SEC, which has intensified its regulatory scrutiny over the sector. With this approval, the Bitcoin and crypto community has claimed a victory in this regulatory battle.
Although spot Bitcoin ETFs are already available in Canada and Europe, the U.S. approval carries exceptional significance due to the country’s status as the world’s largest capital market, hosting some of the biggest asset management companies and institutional investors. The financial impact of the spot Bitcoin ETF remains uncertain; however, experts suggest it could surpass the initial volume of the country’s first Bitcoin futures ETF, which reached nearly $1 billion on its opening day in 2021.
Despite Bitcoin’s 70% surge since the Grayscale court decision, predicting its future trajectory remains challenging. Analysts emphasize that factors like interest rates will likely play a significant role in determining the extent of Bitcoin’s upward movement.
Spot Bitcoin ETFs will be listed on major platforms such as Nasdaq, NYSE, and CBOE. They will be backed by physical Bitcoin acquired from crypto exchanges and safeguarded through custodians like Coinbase Global. These ETFs will reflect a benchmark linked to Bitcoin, with some tracking an index by CF Benchmarks, which aggregates trading data from various Bitcoin-USD markets operated by leading crypto exchanges. In response to the SEC’s concerns about market manipulation, Nasdaq and CBOE have collaborated with Coinbase to establish a market surveillance mechanism. The issuers of these Bitcoin ETFs plan to charge fees significantly below the average fund management fees observed in the broader ETF market, ranging between 0.20% to 0.80%.