The US Securities and Exchange Commission has approved 11 spot bitcoins in what has been widely described as a landmark decision for the huge digital assets space across the world.
Bitcoin was trading close to two-year highs at £36,413 after the announcement – well below its all-time peak of just over £48,000.
SEC Chair Gary Gensler said in the statement on 10 January: “I have often said that the Commission acts within the law and how the courts interpret the law. Beginning under Chair Jay Clayton in 2018 and through March 2023, the Commission disapproved more than 20 exchange rule filings for spot bitcoin ETPs. One of those filings, made by Grayscale, contemplated the conversion of the Grayscale Bitcoin Trust into an ETP.
“We are now faced with a new set of filings similar to those we have disapproved in the past. Circumstances, however, have changed. The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order).
“The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares.
“The Commission evaluates any rule filing by a national securities exchange based upon whether it is consistent with the Exchange Act and regulations thereunder, including whether it is designed to protect investors and the public interest.
“The Commission is merit neutral and does not take a view on particular companies, investments, or the assets underlying an ETP. If the issuer of a security and the listing exchange comply with the Securities Act, the Exchange Act, and the Commission’s rules, that issuer must be provided the same access to our regulated markets as anyone else.”
He continued: “Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.
“Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws. As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.”
Gensler concluded: “While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin,” SEC Chair Gary Gensler said in a statement. “Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”
Among the reactions from the industry, Bradley Duke, chief strategy officer at ETC Group, commented: “The approval of the US spot Bitcoin ETFs by the SEC and also the Hong Kong Securities Commission announcement that it too will approve spot Bitcoin ETFs, goes far to legitimise Bitcoin as an investable global asset.
“Here in Europe, we have had secure and efficient spot Bitcoin ETPs for over 3.5 years, and we are spoiled for choice with the range of physically-backed Crypto ETPs available, including many different single-asset Crypto ETPs as well as broad market index products.”
Michael Silberberg, head of investor relations at Alt Tab Capital, commented, “With Blackrock, Fidelity, Franklin, and Galaxy amongst the parties seeking BTC Spot ETF licenses, and further partnerships from JP Morgan and Goldman leaked recently, it is no surprise that the SEC has moved forward with what is industry consensus and granted these long-delayed licenses.
“In the short term, we expect continued frothy price accumulation on this news as capital flows into the market from a new class of institutional buyers to crypto looking to hedge with BTC, make these products part of their treasury management, and invest in the future of money itself. If we look for an analogy, Gold jumped approximately 250% four months after its first ETF approval and launched an 8-year bull run.
“Even as we welcome these vehicles to the market, it's important to remind investors of all classes that these vehicles will come with restrictions such as cash-only creation/redemption and liquidity tied to market hours.”
Nigel Green, CEO of deVere Group said: “This approval by the financial regulator of the world’s largest economy is a landmark moment for Bitcoin and the wider crypto market and boosts prices in the long-term, even if there’s a sell-off in the near-term.
He said there are five main reasons to be bullish for the long-term price trajectory following the SEC approval.
First, institutional validation. “The approval of Bitcoin ETFs represents a resounding institutional validation of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset.
“Institutional investors have long been cautious about entering the crypto space due to concerns about regulatory uncertainties and market integrity.
“The introduction of SEC-regulated Bitcoin ETFs addresses these concerns by providing a transparent and secure investment vehicle, paving the way for institutional capital to flow into the market,” affirms Nigel Green.
Second, likely influx of capital. “One of the primary catalysts for the anticipated surge in Bitcoin prices is the massive influx of capital that is expected to follow the approval of ETFs.
“These investment vehicles provide a convenient and regulated avenue for both retail and institutional investors to gain exposure to Bitcoin without the complexities of managing private keys or navigating unregulated exchanges.
“As traditional investors seek diversification and higher returns, Bitcoin ETFs offer an attractive option, potentially unlocking billions of dollars in new investments,” affirms the deVere Group CEO.
Third, accessibility and liquidity. “Bitcoin ETFs help democratize access to the cryptocurrency market, allowing a broader range of investors to participate.
“Increased accessibility is likely to contribute to higher liquidity in the Bitcoin market, reducing price volatility and enhancing the overall stability of the cryptocurrency.”
Fourth, market integration and regulatory clarity. Nigel Green says: “The approval of Bitcoin ETFs represents another significant step towards the integration of cryptocurrencies into the mainstream global financial system.
“Regulatory clarity surrounding these investment vehicles provides a framework for market participants to operate within established rules, promoting a more secure and transparent environment.
“As regulatory uncertainties dissipate, more and more institutional and individual investors can confidently engage with the crypto market, further reinforcing the legitimacy of Bitcoin.”
Fifth, increased global adoption. “Bitcoin ETFs aren’t limited by geographical boundaries, offering a globally accessible investment vehicle for investors across jurisdictions. This global reach is expected to drive widespread adoption and recognition of Bitcoin as a legitimate asset class.
Samir Kerbage, CIO at Hashdex said “Today is a monumental day in the history of digital assets. The approval of 19b-4s marks the next phase for the industry by allowing U.S. investors to fully participate in the promise of Bitcoin, and we are thrilled to play a leading role in this next wave of growth and innovation.
“As the only U.S. manager with extensive experience running spot Bitcoin ETFs in multiple regions, Hashdex is thrilled to offer the Hashdex Bitcoin ETF, in coordination with Tidal, as one of the first regulated U.S. products that will offer investors exposure to spot bitcoin pricing.”
Jason Hollands, managing director at DIY investing platform Bestinvest, warned that Bitcoin enthusiasts among the UK’s estimated nine million self-directed investors - who use online platforms and apps to manage their own investments through ISA, SIPP and general investment accounts –might be in for a wait to have the same choice as their US counterparts:
“I am personally doubtful that the UK’s Financial Conduct Authority will authorise Bitcoin or other cryptocurrency ETFs to be made accessible to UK retail investors any time soon. The FCA has repeatedly flagged concerns about the extreme volatility of crypto-assets, the high risk of losses and the difficulties retail investors face in valuing them.
“For an ETF to be made directly available by a UK regulated investment platform, under a regulation known as PRIIPs (Packaged Retail and Insurance-based Investment Products Regulation) ETF and other fund providers must comply with UK regulatory requirements in terms of producing a Key Information Document, which a US-listed ETF won’t have.
“Even were Bitcoin or cryptocurrency ETFs to become authorised in the UK in the near future, it is possible that these would be primarily accessible for professional investors such as discretionary fund managers or those certified as sophisticated investors.
“This is because of the introduction of the FCA’s Consumer Duty principle, which was a major regulatory development in the financial services sector last year. It aims to increase consumer protection for retail investors and ensure regulated firms are focused on good client outcomes, and as a result execution-only investing platforms have become more cautious about the access they provide to higher risk or more complex products, rather than relying on the caveat emptor (‘buyer beware’) principle which was widely assumed to have prevailed previously.”
Eric Demuth, co-founder and CEO at Bitpanda: “After a long struggle, the SEC has finally approved a Bitcoin Spot ETF. However, it is important to remember that today’s approval was not brought about by a rethink within the SEC, it was driven by external pressure. Courts have overturned SEC rulings, forcing them to make this decision.
“Whatever the cause, the approval of a Bitcoin Spot ETF is a huge milestone. From now on, long-term capital from institutional investors will flow into the crypto market.
“This decision will fundamentally change the industry. Until now, many institutional investors were unable to operate in the crypto sector within their regulatory framework, as they have to invest in traditional financial products. The ETFs that are now available will be a hugely important tool for institutions and major banks in the US.”
Lukman Otunuga, Senior Market Analyst, FXTM, said: “The approval of a spot Bitcoin ETF marks a historic moment for the digital asset. In the long term, it could greatly support Bitcoin prices due to fresh inflows from retail and institutional investors. However, given how markets were expecting the ETF approval - a “sell the news” type of reaction is a possibility - resulting in Bitcoin falling before investor inflows push prices higher down the road."
"Prices have been fluctuating wildly amid the news (and fake news) cycles, which represents a huge opportunity for traders with a cool head. One thing we can be sure of is price movement, and traders should be conscious that resistance may be around $47000 with the next point of interest at $50,000. Beyond this point is the all-time high just below $69,000. Should prices slip back below $37,000, this may open the doors towards $30,000 and $20,000."
