This development is considered significant for the cryptocurrency market and the broader fintech industry, as the SEC granted approval to 11 applications, including those from entities such as BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck. Despite some officials and investor advocates expressing concerns about associated risks, most of these ETFs are expected to commence trading on 11 January 2024, causing intense competition for market share.
A decade in the making, these ETFs represent a pivotal moment for bitcoin, allowing investors indirect exposure to the largest cryptocurrency without holding it directly.
Data from Standard Chartered cited by Reuters projects potential inflows of USD 50 billion to USD 100 billion in the first year alone, while others estimate around USD 55 billion over the next five years. Bitcoin's market capitalisation exceeded USD 913 billion as of 10 January 2024 compared to the total net assets of US ETFs standing at USD 6.5 trillion as of December 2022, as reported by the Investment Company Institute.
Reuters further reports that the battle for investor inflows will depend on factors such as fees and liquidity. Some issuers, including BlackRock and Ark/21Shares, have adjusted their proposed fees, ranging from 0.2% to 1.5%, with some offering fee waivers for specific periods. Analysts emphasised that success will also be influenced by liquidity, especially for short-term speculators.
Anticipating increased interest, companies are gearing up for extensive online advertising and marketing campaigns. Moreover, the SEC's recent incident involving a fake post on social media falsely claiming approval for trading did not hinder industry celebrations.
Some regulatory experts anticipate the approval of Bitcoin ETFs opening the door for other crypto products. The SEC's decision marks a departure from its previous stance, having rejected Bitcoin ETFs over concerns about potential market manipulation.
To address the SEC's investor protection requirements, several exchanges initially proposed collaborating with Coinbase. However, this partnership was abandoned in favour of an existing arrangement with the Chicago Mercantile Exchange. The SEC is currently pursuing legal action against Coinbase for alleged violations of US securities laws. While proponents view the SEC's decision as a positive step, critics consider it a mistake, maintaining that Bitcoin and crypto lack legitimate use and remain vulnerable to fraud.
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