Bitcoin ETFs: A Potential Game-Changer for Crypto Investors

12/01/2024
vertically placed bitcoins
vertically placed bitcoins

The Long-Awaited Arrival of Bitcoin ETFs

After numerous attempts over the years, Bitcoin exchange-traded funds (ETFs) are on the horizon. These ETFs serve as a sort of mutual fund for cryptocurrencies, allowing investors to engage with Bitcoin’s price fluctuations without having to purchase the coins directly. Instead, the ETF would own the coins and issue shares to buyers that mirror the coin’s value.

Bitcoin ETFs could offer a significant advantage for those seeking to diversify their investment portfolios with crypto. This is because ETFs allow investors to have a stake in the currency without the need to engage in day trading or keep a constant eye on the market – a necessity for an asset as volatile as Bitcoin.

Between 2018 and 2023, the U.S. Securities and Exchange Commission (SEC) rejected over 20 exchange rule filings for spot Bitcoin exchange-traded products (ETPs). However, according to SEC chairman Gary Gensler, the circumstances, not the ETP filings, have changed. He cited a U.S. Court of Appeals ruling that the Commission failed to adequately explain its reasoning in rejecting the listing and trading of Grayscale’s proposed ETP.

The potential approval of Bitcoin ETFs in the U.S. could potentially undermine the UK’s aspirations of becoming a global crypto hub, keeping it out of step with other major markets that allow retail access to exchange-traded crypto funds.

A Bitcoin ETF is an exchange-traded fund consisting of securities based on Bitcoin. It is a convenient option for those interested in crypto investment without substantial market knowledge or a desire to day trade. The fund manages your money by buying and selling coins, but the approval process for such a fund can be lengthy and complex.

The consensus among crypto users is that the approval of Bitcoin ETFs could attract significant investments, leading to an increase in overall market capitalisation and demand for the coin. This, in turn, could potentially drive up the asset’s price.

The Tweet That Stirred the Pot

A premature tweet from the SEC announcing the approval of ETFs in cryptocurrency led to a brief surge in Bitcoin’s value before it retracted. The tweet, which was later deleted, was refuted by Gensler, who confirmed that the SEC had not approved the listing and trading of spot Bitcoin exchange-traded products. The SEC confirmed that there was unauthorised access and activity on the account and is now working with law enforcement and partners across government to investigate.

The announcement of a Bitcoin ETF was not entirely unexpected. The market has been anticipating the SEC’s approval or rejection of several spot Bitcoin ETF applications in the U.S. for months.

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