The US Securities and Exchange Commission’s (SEC’s) approval of the country's first spot-trading of Bitcoin exchange-traded funds (ETFs) is expected to increase global adoption of Bitcoin and promote investment in the digital currency.
This is according to local crypto exchanges, commenting on the historic moment that saw spot-trading of Bitcoin ETFs get the green light from the SEC on Wednesday, after a decade-long wait by the crypto industry.
A spot Bitcoin ETF is an investment fund that directly tracks the price of Bitcoin throughout the trading day, just like a stock, according to Investopedia. It allows investors to get exposure to the value of the underlying asset without directly owning it.
According to crypto exchanges, this week’s regulatory approval of spot Bitcoin ETFs will positively impact the price of Bitcoin, reignite Bitcoin interest and lead to more mainstream investors putting money in the digital currency.
Christo de Wit, Luno country manager for South Africa, explains: “Bitcoin ETFs are expected to pave the way for institutional investors to invest in Bitcoin through a recognised traditional financial institution.
“As the US SEC has now approved the first Bitcoin spot-exchange traded fund, it will likely begin an influx of institutional investment. Judging by the popularity of ETFs in traditional markets, more retail investors are also likely to dip their toes in crypto, making it a more easily accessible asset.”
Despite its perceived risks, the approval of Bitcoin ETFs and the resulting potential for greater institutional investment is another clear signal that crypto is maturing, he adds.
“There is a perceived positive shift in how crypto currencies are being viewed by traditional investment institutions.”
Following the approval, eleven spot Bitcoin ETF operators – including Grayscale Bitcoin Trust, BlackRock's iShares Bitcoin Trust, and ARK 21Shares Bitcoin ETF, among others, began trading on Thursday. According to Reuters, US Bitcoin ETF trading volumes sky-rocketed to $4.6 billion on Thursday – its first day of trading, kick-starting the race for market share among US-listed Bitcoin ETFs.
Promoting market integration
Binance CEO Richard Teng, is of the view that Bitcoin ETFs will provide easier access to the crypto market, attracting more investors and liquidity.
“The approval this week illustrates a new level of acceptance, maturity and mainstreaming of the crypto market, providing the industry with more credibility and potential for further innovation,” notes Teng.
“The Bitcoin spot ETF will bring added credibility to the digital asset industry, furthering the foundations of trust in the market for a wider audience. Direct investment in Bitcoin and various regulated instruments will co-exist, enabling diverse investment strategies and catering to various risk profiles and preferences. This signals an exciting new era of adoption and legitimacy, not just for Bitcoin but also for the broader crypto space.”
According to Teng, while it is not easy to anticipate the scale of new entrants and market dynamics, it is useful to note that the introduction of Gold ETFs in 2004 led to seven years of positive price action after that. Coupled with the Bitcoin Halving event expected this year, these events could provide a dynamic market for Bitcoin, he asserts.
Nigel Green, CEO of deVere Group points out the approval of Bitcoin ETFs represents another significant step towards the integration of crypto-currencies into the mainstream global financial system.
It is also anticipated to promote market integration and pave the way for institutional capital to flow into the cryto market globally, he adds.
“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. 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,” notes Green.
As more countries embrace the idea of regulated Bitcoin ETFs, crypto-currency will likely gain further acceptance on the international stage, attracting a broader investor base and propelling prices to potentially new heights, he adds.
“The institutional validation, massive influx of capital, increased accessibility, market integration, and global adoption are powerful catalysts that could send Bitcoin prices to potentially near all-time highs. On a tidal wave of investor enthusiasm, we wouldn’t be surprised if Bitcoin hits $60 000 this quarter – and higher moving forward throughout the year,” concludes Green.