Bitcoin ETFs are currently making headlines. The recent false report about BlackRock’s ETF being approved by the SEC caused the price of Bitcoin to reach $30,000. But what exactly are ETFs and how would an approved Bitcoin ETF impact the crypto market?
What is an ETF?
An ETF, or Exchange Traded Fund, is a type of investment fund and exchange-traded product with shares that are tradeable on a stock exchange. It is designed to track the performance of a specific index, commodity, bond, or a basket of assets like stocks.
ETFs are traded on stock exchanges, so their prices can change throughout the trading day. This provides investors with the flexibility to buy and sell shares, similar to individual stocks.
ETFs are popular for their transparency, liquidity, and lower fees compared to traditional mutual funds. They offer exposure to various asset classes and investment strategies, making them a versatile tool for investors seeking diversification and targeted market exposure.
Bitcoin ETF Price Spike.
What is a Bitcoin ETF?
Bitcoin ETFs would provide a more convenient way for investors to invest in Bitcoin. Instead of directly buying Bitcoin, they can buy shares of the ETF, which represent a portion of the total Bitcoin owned by the ETF. This allows investors to have exposure to Bitcoin without dealing with the technical aspects of owning the cryptocurrency.
This makes investing in Bitcoin easier and safer for individuals.
Why are Bitcoin ETFs in the news now?
Bitcoin ETFs have been receiving attention due to recent developments involving two Bitcoin ETFs: Grayscale and BlackRock.
On Friday, the US Securities and Exchange Commission (SEC) decided not to contest a court ruling that criticized its rejection of Grayscale Investments’ application to convert its $16.7 billion Bitcoin Trust (GBTC) into an ETF.
The court stated that the SEC’s decision was “arbitrary and capricious” in rejecting direct Bitcoin ETF applications while approving those based on Bitcoin futures contracts.
Then on Monday, the price of Bitcoin surged to nearly $30,000 following a false report from Cointelegraph on Twitter claiming that the SEC had approved BlackRock’s spot Bitcoin ETF.
BlackRock clarified that no decision has been made yet. A spokesperson from BlackRock said, “The iShares Spot Bitcoin ETF application is still being looked at by the SEC.”
Cointelegraph quickly retracted their claim and issued an apology on their website, explaining how the rumor originated.
What would a Bitcoin ETF mean for Bitcoin?
A Bitcoin ETF would enable investors to gain exposure to Bitcoin’s price movements without the need to directly buy and store the cryptocurrency.
This could have various benefits, including making cryptocurrency investing more accessible to mainstream investors, lowering the barrier to entry, and providing regulatory oversight.
Significantly, a Bitcoin ETF would offer a less risky way to invest in cryptocurrency compared to directly buying and holding the coin. Typically, an ETF holds a diversified portfolio of assets, even if the underlying asset is a single cryptocurrency like Bitcoin.
This could potentially provide investors with a more balanced risk profile.
The introduction of Bitcoin ETFs could have significant implications for the broader cryptocurrency market, attracting new investors and potentially increasing demand for Bitcoin.
However, some experts are cautious about the impact of a Bitcoin ETF. Daniel Kuhn, writing for CoinDesk, says, “The idea that ETFs will drive institutional adoption is plausible but likely overhyped – like every other major crypto event known in advance. Interest in bitcoin ETFs stems from this never-ending need to find something to be hopeful about.”
So are Bitcoin ETFs coming?
Applications for Bitcoin ETFs have been rejected since 2014, with a long history of blocked efforts. However, the recent US court ruling questioning the SEC’s rejection of Grayscale’s Bitcoin ETF application indicates progress towards approval.
Several companies, including Grayscale, BlackRock, Fidelity, and VanEckre, are currently seeking approval for Bitcoin ETFs.
Bloomberg analysts are highly optimistic, stating that there is a “90% chance for the Spot Bitcoin ETF to receive approval by January 10, 2024.”
Despite past rejections and the recent false alarm, the prospects for Bitcoin ETFs are looking promising. The long-term impact on the cryptocurrency industry, however, will only become clear with time.