In a historic decision, the US Securities and Exchange Commission (SEC) has approved the first US-listed exchange-traded funds (ETFs) to track Bitcoin, the world’s largest cryptocurrency. The approval of 11 spot Bitcoin ETFs will not only enhance accessibility for investors but also contribute to the establishment of a more robust and regulated crypto market, say experts.
An ETF is an easy way to invest in assets or a group of assets without having to directly buy the assets themselves. For example, the SPDR Gold Shares ETF allows anyone to invest in gold without having to find a place to store a bar or protect it. ETFs can also be easily traded on stock exchanges.
Since Bitcoin’s inception, anyone wanting to own one would either have to adopt a digital wallet or open an account at a crypto trading platform like Coinbase or Binance. However, with a spot Bitcoin ETF, sponsors can directly transact Bitcoins, ensuring a direct alignment between the ETF’s price and the actual market value of Bitcoin.
This means that investors can seamlessly benefit from Bitcoin price movements without the complexities of digital wallets or drastic investment strategy overhauls. It also means that Bitcoin exposure becomes more accessible and holds the potential of attracting significant capital from institutional and retail investors.
Some of the biggest fund managers in the world, such as BlackRock, Fidelity Investments and Invesco, will manage the new Bitcoin ETFs, which are expected to begin trading as early as Thursday. Some products will also offer lower fees than existing alternatives, making them more attractive for investors.
The SEC’s approval of Bitcoin ETFs is a major win for the crypto industry, which has long sought regulatory recognition and legitimacy. It is also a sign of the growing acceptance and adoption of Bitcoin as a viable asset class and a store of value.
However, the SEC also warned investors about the risks associated with Bitcoin and crypto products, such as volatility, fraud and manipulation. The agency said it does not approve or endorse Bitcoin and that its decision does not reflect its views on the merits of the underlying technology.
Therefore, investors should remain cautious and do their own research before investing in Bitcoin ETFs or any other crypto-related products. They should also be aware of the tax implications and the legal status of Bitcoin in their respective jurisdictions.