SEC Approves Spot Bitcoin (BTC) ETFs: What's Next For Crypto?

On the 10th of January, 2024, the U.S. Securities and Exchange Commission (SEC) announced approval for the first-ever spot Bitcoin (BTC) ETFs. This caused movements across the banking system and excited the digital currency community.

The latest SEC decision should have a substantial influence on crypto assets, and this creates a few outstanding concerns that require addressing. In this article, we will examine the impact the spot Bitcoin ETFs might have on crypto and the issues it may bring.

A Bitcoin Exchange-traded fund (ETF) is a financial product that allows investors to gain exposure to the price movements of Bitcoin through publicly traded securities.

Investors own shares in the exchange-traded fund (ETF), which generally tracks the performance of Bitcoin or Bitcoin futures contracts, as opposed to holding the actual cryptocurrency. This makes investing in Bitcoin easier for conventional investors without requiring them to handle the cryptocurrency itself.

Before addressing the SEC's approval, it is necessary to look at the two types of Bitcoin ETFs. These are:

Futures Bitcoin ETFs are investments in contracts that relate to the future buying and selling of a certain amount of Bitcoin at a later date. This protects investors by allowing them to follow the performance and price of Bitcoin without necessarily buying Bitcoin for their portfolio.

Before the 10th of January, 2024, only futures Bitcoin ETFs were under SEC's approval and a good instance of these ETFs is ProShares Bitcoin Strategy ETF (BITO).

In their standard brokerage accounts, ordinary investors can effortlessly monitor the price of bitcoin through the use of a spot exchange-traded fund (ETF). A spot bitcoin ETF, as opposed to bitcoin futures ETFs, makes direct investments in bitcoins rather than contracts based on their pricing — this gives regular investors a controlled and convenient option to get into the digital currency market.

The time and exchange costs saved by not directly purchasing and keeping bitcoins offset the remaining expenses, which still include management fees and brokerage commissions.

Eleven spot Bitcoin exchange-traded funds (ETFs) have received approval from the SEC, including the VanEck Bitcoin Trust (HODL), BlackRock's iShares Bitcoin Trust (IBIT), and Grayscale Bitcoin Trust (GBTC).

After this news, the pan-European trading platform Spectrum Markets saw a sharp spike in overnight activity on bitcoin-related items. Five times as many of these instruments were traded on Spectrum as there had been on average every day over the three months prior.

Analysts at Standard Chartered anticipate that these ETFs may draw in $50 billion to $100 billion this year; other estimates place the total amount closer to $55 billion over the course of five years. As of December 2022, the market capitalization of Bitcoin was over $913 billion, and the total net assets of U.S. ETFs were $6.5 trillion.

The expectation of the ETF caused the value of Bitcoin to surge by 3% to $47,300, representing a more than 70% increase in recent months. Analysts stress that costs and liquidity will be key factors in attracting investors. A few issuers, such as Ark/21Shares and BlackRock, modified their projected costs, which ranged from 0.2% to 1.5%.

A few companies also waived fees for a predetermined amount of time. $1.9 billion was invested by investors in nine new exchange-traded funds (ETFs) that track the spot price of bitcoin in the first three days of trading. BlackRock and Fidelity were the top funders.

Predicting the future of crypto, especially after a significant event like the spot Bitcoin ETF approval, is always tricky.

However, here are some possibilities for what's next:

The spot Bitcoin ETF offers a more secure and recognizable entry point into cryptocurrency, which might draw more institutional investors to it. In the long run, this might result in increased stability and possibly greater prices for Bitcoin and other assets.

Investors may now focus on other intriguing cryptocurrency ventures with distinctive use cases and technologies, now that Bitcoin has gained traction. This might result in a more expansive market that pays more attention to DeFi initiatives, Ethereum, and altcoins.

More widespread adoption of cryptocurrencies depends on enhanced infrastructure and regulatory certainty. More ETF approvals, more transparent token offering regulations, and improvements in scalability and security measures are a few possible developments in this field.

Interoperability, anonymity, and efficiency are just a few areas where the underlying blockchain technology is being improved. These developments may open up new features and uses, extending the potential of cryptocurrencies beyond simple investment.

Scams, hacking, and environmental concerns are just a few of the issues that cryptocurrency faces despite its growth potential. Market volatility and setbacks could be brought on by regulatory actions or unfavorable circumstances.

In the end, it will be challenging to make exact forecasts about the future of cryptocurrency due to the intricate interactions between many factors.

The approval of the Bitcoin ETF, however, is a noteworthy development that might signal the start of a new chapter in the industry's history and result in greater adoption, diversification, and technological breakthroughs.