The price of Bitcoin (^BTCUSD) soared to a 1-year high today after U.S. regulators late Wednesday approved exchange-traded funds (ETFs) that invest directly in Bitcoin. The price of Bitcoin has already risen more than +160% over the past twelve months in anticipation of Wednesday’s approval by the Securities and Exchange Commission (SEC). Other cryptocurrencies also rallied on the news. Ether (^ETHUSD), the second biggest token, has surged more than +14% since Wednesday to a 20-month high today on speculation it will be the focus of the next wave of spot crypto ETF products in the U.S.
The SEC on Wednesday authorized 11 exchange-traded funds that invest directly in Bitcoin to begin trading as soon as today. The SEC approval is a landmark event for the roughly $1.7 trillion digital-asset sector that will broaden access to Bitcoin. Over the past ten years, several brokerage firms and asset managers have attempted to start a Bitcoin ETF since Tyler and Cameron Winklevoss first proposed a Bitcoin ETF in 2013.
Proponents of cryptocurrencies have argued that a spot fund that invests directly in Bitcoin would help bring the industry closer to the more highly regulated world of traditional finance. The approval of a Bitcoin ETF now allows investors to get exposure to Bitcoin in their brokerage accounts instead of one of the crypto startups that have come under increasing government scrutiny following a series of sector scandals and bankruptcies.
U.S. regulators had been reluctant to approve a Bitcoin ETF due to concern that Bitcoin’s volatility could be too much for ordinary investors. Bitcoin prices gained +60% in 2021, lost -64% in 2022, and then more than doubled in 2023. Earlier this month, SEC Chairman Gensler warned that crypto assets pose “serious risks” and that a lack of regulatory oversight and surveillance in crypto markets could lead to fraud and manipulation. However, BlackRock and other ETF issuers proposed a surveillance-sharing agreement as a way to mitigate the risk of market manipulation and allay SEC concerns. Coinbase Inc., the only spot-crypto exchange in the U.S., has emerged as the choice of ETF issuers to monitor crypto markets.
In its statement approving a spot-Bitcoin ETF, the SEC said it examined the correlation between spot and futures trading at a variety of time intervals and concluded prices moved in such a way that irregularities on exchanges such as Kraken and Coinbase were likely to show up in the Bitcoin futures market. SEC Gensler said, “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 ETF shares.” Deutsche Bank said the approval of a spot-Bitcoin ETF “marks a significant milestone” but warned investors “not to conflate price gains with broader predictions of cryptocurrency overtaking traditional finance.”
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
