The US securities regulator Securities and Exchange Commission (SEC) on Wednesday gave a heads up to the first Exchange Traded Funds (ETF) for Bitcoin, marking a landmark for the crypto market.
The SEC issued a statement that noted that it accepted the applications from 11 different financial agencies including BlackRock, Fidelity, VanEck, Ark Investments, and Invesco, despite various warnings from officials that the products contain high risks.
Most of these newly approved crypto products are set to trade on Thursday, commencing a fierce war for market share.
This ETFs approval by the US SEC has been the biggest landmark achieved by Bitcoin, being the largest product in the crypto market, offering direct exposure to investors without having the requirement of holding it. This will reflect in a major boost to the scandal-ridden crypto industry.
Andrew Bond, Managing Director and senior fintech analyst at Rosenblatt Securities said that, “It’s a huge positive for the institutionalization of bitcoin as an asset class.”
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The Power of ETFs
As the US SEC gave heads up to the Bitcoin ETF, marking a landmark for the crypto industry in over a decade. This development is big in a way that it will open various gates for the crypto market and investors who haven’t been able to invest in the product.
Standard Chartered analysts forecasted earlier this week that the ETFs could draw an upwards of $100 billion this year alone, with a confirmed estimate of $50 billion. Meanwhile, other analysts gave a less optimistic number at $55 billion over the next five years.
The market capitalization of Bitcoin stood at $913 billion as of now, according to Coingecko. While, the total net assets of the US ETFs stood at nearly $6.5 trillion, as per Investment Company Institute.
The anticipation of an ETF approval has led to a massive increase in the value of Bitcoin over the past couple of months, with the largest cryptocurrency, gaining more than 70% to reach $47,300 at the highest level since March 2022.
According to the analysts, the success of ETF inflows will depend largely upon the fees charged and liquidity in the market. Following it, some major issuers have slashed their fees in the new filings this week, including Ark/21 Shares, and BlackRock.
The fees normally range from 0.2% to 1.5%, with some firms even offering to waive the entire fee for a certain period of time. Similarly, for short-term buyers and speculators, market liquidity will be a key factor.
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Analysts Views on ETFs
This landmark move is also expected to unleash fierce competition for market share, where companies are expected to advertise heavily on different communication channels. Some issuers have already started working on their marketing campaigns showing Bitcoin as an investment mode.
Steven McClurg, chief investment officer at Valkyrie, sees the whole situation as unprecedented as he noted, “It is pretty unprecedented, so we’ll see how it works. I’ve never been in a situation where 10 of the same ETF was launched on the same day.” He was the one whose ETF was among those approved on Wednesday.
The approvals came just a day after an unauthorized person published a fake post on the social media account of the Securities and Exchange Commission (SEC), saying the agency has approved the products to be listed in the market. However, it was quickly deleted and disowned by the SEC.
It even issued a statement that it has been coordinating with the law enforcement agencies and the SEC’s internal wing to investigate the aforementioned incident. However, this incident and a confused announcement made by the regulator, by formally approving and then removing the notification from the website, couldn’t dampen the celebrations in the crypto industry.
Grayscale CEO Michael Sonnenshein believed that the, “bitcoin could change the world, and we were and remain excited at the prospect of democratizing access to this asset.”
Douglas Yones, head of ETFs at the New York Stock Exchange, where some products will be listed, said the approval was also a “milestone” for the ETF industry. Similarly, Head of digital asset management at Fidelity, said that “new products should provide increased choice for investors who want to engage with crypto.”
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Alternative currencies
Some analysts also are viewing this ETF approval as paving way for other cryptos to follow suit. Like several issuers have already filed for Either, the second-largest crypto coin.
An associate professor at Georgetown’s McDonough School of Business said that, “once the dam has been breached, it’s going to be really hard for the SEC to continue its ‘just say no to the crypto’ approach.”
Cryptocurrencies were created as an alternative to the traditional fiat currencies, established and backed by a centralized authority like a government or a bank, like Euro, dollar, Yen etc. But till date, cryptocurrencies have been largely used as a speculative tool due to its non centralized nature and high volatility.
However, to meet the SEC’s investor protection bar, various exchanges proposed to work with Coinbase, the largest US crypto exchange to police the crypto market. But the issuers threw away that deal in the favor of the Chicago Mercantile Exchange this week.