Bitcoin Spot ETF Approval Attracts More Investors

On January 9, the U.S. Securities and Exchange Commission (SEC) faced a challenging situation as they attempted to rectify a mistakenly published tweet about the approval of a spot Bitcoin exchange-traded fund (ETF).

This incident left the cryptocurrency community in suspense. However, a day later, the SEC confirmed the approval of the first regulated spot Bitcoin ETF in the United States.

This significant development has sparked curiosity about the future implications. The authorization of spot Bitcoin ETFs in the U.S. is expected to further institutionalize Bitcoin, with industry professionals noting additional influencing factors.

Yesha Yadav, a professor at Vanderbilt Law School, emphasized the importance of this development for both the crypto and financial markets. She commented:

“Most immediately, it will provide a way for everyday mom-and-pop investors to safely gain exposure to Bitcoin. ETFs are a well-regulated, retail-friendly product. This should mean that, via a spot Bitcoin ETF, crypto markets are likely to become a lot more accessible to investors who might otherwise have stayed well away from participating in a much less regulated crypto market.”

Indeed, the SEC approved 11 Bitcoin ETFs on January 10, including applications from major institutional players like Grayscale, BlackRock, Fidelity, WisdomTree, Valkyrie, and others.

Leah Wald, CEO of Valkyrie, shared that their spot Bitcoin ETF will be accessible to U.S. investors through brokerage or investment accounts: “Any investor will be able to purchase shares of our ETF, which will be available for trading on the Nasdaq.”

Wald anticipates over $400 million in assets flowing into Valkyrie's ETF in the initial weeks, with the potential for billions in the first month.

Alex Tapscott of Ninepoint Digital Assets Group believes there may be parallels between U.S. and Canadian spot Bitcoin ETFs.

He referenced Ninepoint's successful Canadian ETF launch in May 2021, following Purpose Investments, which attracted over a billion dollars in assets in its first month.

Despite the potential benefits for retail investors, Kevin O’Leary, a Canadian venture capitalist, expressed skepticism about institutional interest due to the fees associated with spot Bitcoin ETFs:

“Personally, I would never use an ETF. Why would I pay those fees? I mean, it’s a ridiculous cost that is not needed, particularly with an asset that is a total commodity in the case of Bitcoin.”

Contrarily, Bloomberg ETF analyst James Seyffart and Perianne Boring, founder of the Chamber of

Digital Commerce, believe institutions might favor the spot Bitcoin ETF as an investment vehicle.

Seyffart suggested it might become their preferred choice for Bitcoin exposure, while Boring noted that regulated investment vehicles are typically preferred by institutional investors like pension funds and asset managers.

Boring anticipates this could lead to increased liquidity and market stability in the cryptocurrency sector.

The conversation also extends to the possibility of a spot Ether ETF. Following the trend in Canada, where spot Ether ETFs were approved shortly after Bitcoin ETFs,

Tapscott speculated that the U.S. might follow suit. He highlighted that the market for Ether is smaller than Bitcoin's, but the approval of a spot Ether ETF could still significantly impact ETH's price.

Vanderbilt’s Yadav believes that if the spot Bitcoin ETF in the U.S. gains popularity, it could solidify the position of Bitcoin and other cryptocurrencies in financial markets.

Beyond market implications, the approval of the Bitcoin ETF is seen as a catalyst for broader blockchain technology acceptance. Tapscott foresees an educational surge about blockchain, driven by the Bitcoin ETF buzz, potentially transforming finance and other sectors.

Kurt Hemecker, CEO of the Mina Foundation, sees opportunities beyond the obvious, such as a boost for zero-knowledge-focused projects.

He suggests that the ETF's approval could increase investment and adoption in projects that prioritize data sovereignty and security.

Despite these optimistic views, challenges remain. Boring points out the increased counterparty risk associated with investing in a spot Bitcoin ETF.

Investors depend on the ETF issuer to accurately track Bitcoin’s performance, and any mismanagement could impact the ETF’s value and returns.

Additionally, the discrepancy between the market price and the net asset value of Bitcoin could lead to arbitrage opportunities and unexpected trading costs for investors.

Sources:

https://cointelegraph.com/news/spot-bitcoin-etf-what-to-expect

https://www.purposeinvest.com/thoughtful/purpose-investments-bitcoin-etf-crosses-1-billion-in-assets-under-management-on-one-month-fund-anniversary

https://twitter.com/EricBalchunas/status/1745471031056208119