Following an initial delay on Tuesday, the Securities and Exchange Commission (SEC) sanctioned the launch of “spot bitcoin” exchange-traded funds (ETFs) by several investment firms on Wednesday.
This long-awaited decision by the SEC is set to simplify the process of bitcoin investment for retail investors, allowing them to invest in bitcoin indirectly without holding the cryptocurrency.
In a cautious tone, SEC Chair Gary Gensler emphasized the SEC’s circumspect stance in a statement on its website. He clarified that the SEC’s approval of certain spot bitcoin ETP (Exchange Traded Product) shares does not equate to an endorsement of bitcoin itself. Gensler advised investors to be mindful of the various risks linked to bitcoin and related crypto-based products.
Initially facing a January 10 deadline to decide on one of the 11 applicant firms seeking to offer bitcoin ETFs, the SEC ended up granting approval to all 11 firms on Wednesday.
Bitcoin, the foremost digital currency, currently boasts a market valuation of around $900 billion. Throughout its 15-year existence, it has experienced significant price fluctuations. Notably, after reaching a peak of nearly $69,000 in November 2021, it dropped below $17,000 in the 2022 “crypto winter.” However, leading up to the SEC’s recent decision, it has generally been trading above $45,000.
Roughly an hour following Wednesday’s announcement, Bitcoin’s value saw a modest increase of 0.3%, reaching close to $46,000, as reported by coinmarketcap.com.
On Tuesday evening, after the stock market closed, a misleading post appeared on the SEC’s X account, wrongly asserting that the agency had authorized the listing and trading of spot bitcoin ETFs.
This false information was promptly refuted by Gary Gensler, and the SEC removed the erroneous post. According to X, the misleading post was due to an “unidentified individual” who managed to hijack a phone number linked to the @SECGov account via a third party. The SEC, on Wednesday, disclosed that the FBI is investigating this incident.
Investing in Bitcoin ETFs Shares Similar Risks with Direct Bitcoin Investment
Prospective investors eyeing the bitcoin trend should be aware that the volatility of bitcoin’s price remains the same, regardless of whether they invest directly in bitcoin or through an ETF.
In a recent X thread, Gensler cautioned investors about the inherent risks in cryptocurrency investments. He highlighted that investing in crypto assets is notably perilous and prone to volatility. Gensler pointed out instances of major platforms and cryptocurrencies becoming insolvent or losing value. He stressed that investments in crypto assets are still exposed to considerable risks, as evident from his post.
The Approval of Bitcoin ETFs by the SEC Draws Mixed Reactions
The SEC’s decision to greenlight bitcoin ETFs has been met with skepticism by numerous financial advisors and the investor advocacy group Better Markets. One of their primary concerns is the history of “wash” trading in the bitcoin market, where trading volumes are artificially inflated.
Following the SEC’s announcement, Better Markets’ President and CEO Dennis Kelleher issued a strongly worded statement. He criticized the decision, highlighting the tumultuous state of the crypto industry marked by arrests, criminal convictions, bankruptcies, scandals, and substantial financial losses affecting millions of investors. Kelleher expressed disbelief at the SEC’s decision to endorse what he views as a problematic, volatile, and fraudulent financial product for mainstream American investors.
Conversely, crypto proponents have welcomed the decision. Sheila Warren, CEO of the Crypto Council for Innovation, praised the move in a statement. She described a spot Bitcoin ETF as a crucial link between conventional finance and the evolving crypto world. Warren emphasized that it enables investors to engage in the bitcoin market without the complexities of direct ownership, marking a significant stride toward inclusivity.
The companies that received SEC’s nod to launch bitcoin ETFs include Ark Invest in partnership with 21 Shares, Bitwise, BlackRock, Fidelity, Franklin Templeton, Grayscale, Hashdex, Invesco, WisdomTree, Valkyrie, and VanEck. Some of these ETFs are set to begin trading as early as tomorrow.
