By Ryan Prete, Jan 12, 2024
Several exchange-traded funds that track the price of bitcoin are now actively trading following the Securities and Exchange Commission’s (SEC) landmark approval of the funds, which could hold significant implications for the $2 trillion cryptocurrency market and blockchain industries.
The official green-light from the SEC for spot Bitcoin exchange-traded funds–or ETFs–came late on Jan. 10 following over a decade of efforts by fund managers to get the ETFs listed. The SEC had previously rejected pass attempts on the grounds they would be vulnerable to market manipulation.
As a result of the SEC’s approval, at least 10 Bitcoin ETFs–including BlackRock, Invesco, Fidelity, Grayscale, and Ark Invest–began trading on markets on Jan. 11, opening up the pool of investors that can add bitcoin-tracked funds to their portfolios, retirement accounts, and other brokerages.
A Bitcoin ETF, or exchange-traded fund, is an investment vehicle that allows investors to gain exposure to the price of Bitcoin without actually having to buy and hold the cryptocurrency itself. This can be a convenient and less risky way to invest in Bitcoin, as it avoids the need to set up a cryptocurrency wallet and deal with the technical complexities of buying and selling Bitcoin directly.
ETFs trade on traditional stock exchanges, and their value can rise when the underlying asset increases in price, or fall if it decreases.
There are a number of positives surrounding Bitcoin ETFs, including convenience–being able to buy and sell funds that track Bitcoin instead of trading the cryptocurrency directly–and diversification–as Bitcoin ETFs can help investors to diversify their portfolios, potentially reducing overall risk.
However, investors should be aware that Bitcoin ETFs come with their own risks. This includes high volatility in Bitcoin prices and uncertainties in federal regulation surrounding cryptocurrencies. These factors can affect the performance of Bitcoin ETFs.
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With the SEC’s blessing, Bitcoin ETFs can be traded like any other regulated security. Investors looking to trade the spot ETFs will need to purchase the funds through a brokerage or Registered Investment Advisor, such as Fidelity, Robinhood, or Charles Schwab.
Once established with a Brokerage provider, investors can add Bitcoin ETFs to their portfolios. Some of the Bitcoin ETFs that have received SEC approval include:
Like with any investment decision, individuals should conduct their own due diligence (or with the help of a financial advisor) and weigh the potential risks against their personal investment goals.
As we previously mentioned, The SEC had for years rejected Bitcoin ETFs applications, arguing that there was inadequate surveillance for fraud and manipulation in the markets that trade Bitcoin. However a federal appeals court last year said that the SEC acted arbitrarily in denying the conversion of the Grayscale Bitcoin Trust into an ETF, vacating their denial.
In a statement issued on Jan. 10, Gensler said that in light of the court ruling, approving the products was “the most sustainable path forward.” Gensler also said the approval was not an endorsement of the cryptocurrency.
“While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” Gensler said in his statement. Gensler also repeated his long-held position that bitcoin is a commodity not a security.
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The potential effects of Bitcoin ETFs on the cryptocurrency and blockchain industries are multifaceted and complex, with both potential benefits and drawbacks to consider. Here’s a breakdown of some key areas:
Possible Increased Investment and Market Growth
Potential Volatility Effects
Impact on Blockchain Technology
The dust is still settling on this new chapter for the Bitcoin community, with news still developing. As the SEC’s spot Bitcoin ETF approval marks a notable moment for the cryptocurrency and blockchain industries, investors should be aware that these new ETFs are still in their early stages. Given the rapidly evolving nature of these sectors, readers are advised to stay informed with the most current data. Investors should continue to exercise due diligence before making any decisions aligned with their short and long-term goals. Stay updated on the latest surrounding cryptocurrency and blockchain by monitoring Linqto’s blog page.
This material, provided by Linqto, is for informational purposes only and is not intended as investment advice or any form of professional guidance. Before making any investment decision, especially in the dynamic field of private markets, it is recommended that you seek advice from professional advisors. The information contained herein does not imply endorsement of any third parties or investment opportunities mentioned. Our market views and investment insights are subject to change and may not always reflect the most current developments. No assumption should be made regarding the profitability of any securities, sectors, or markets discussed. Past performance is not indicative of future results, and investing in private markets involves unique risks, including the potential for loss. Historical and hypothetical performance figures are provided to illustrate possible market behaviors and should not be relied upon as predictions of future performance.
Ryan is a financial writer for Linqto, known for his original blog content, articles, and other works. He previously worked as a financial writer at PitchBook Data, where he covered private equity, and as a reporter for Bloomberg in Washington D.C.,where he reported on tax policy. Ryan has also reported on cybersecurity policy for Inside Washington Publishers. His work has been featured in The Wall Street Journal, Axios, Yahoo News, and Reuters. He is a graduate of the University of California, Santa Barbara.
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