2024-1-15 14:23 |
Finally, after a multi-year effort by the Bitcoin community, all eleven much-anticipated Bitcoin Spot ETFs have been approved by the SEC and will begin trading tomorrow.
Bitcoin’s journey has been a strange and wild ride. Exactly 14 years ago today, Hal Finney tweeted that he was “Running bitcoin.” In the years afterward, Bitcoin’s creator Satoshi Nakamoto disappeared, and Bitcoin began its slow journey from a curious collectible for cypherpunks and cryptographers, to a payment mechanism for the dark web, to a speculative bet, to a means of outpacing inflation, and today, to a full embrace from the traditional financial system.
Heavyweight names such as BlackRock, Ark, VanEck, and Fidelity can now offer American investors a simple, non-custodial means to invest in Bitcoin.
Today’s announcement process was underwhelming, after an emotionally draining week of confusing signals. This was reflected in the market, with the Bitcoin price failing to move up on the announcement, suggesting an exhausted market that has priced in the approval.
Instead it was Ethereum that won the day, moving up to US$2500, a 10% jump, while Bitcoin (for today at least) remains steady at US$45,700.
Tellingly, Gary Gensler in his announcement letter today, couldn’t resist a final dig at Bitcoin.
Gensler wrote, “Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.
While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
Whatever happens next, despite the tepid price action, and tepid signal from the SEC, today is a huge win for the global Bitcoin community. Let’s recap the wild week that was.
The ETF Fee War
Earlier this week, U.S. Spot Bitcoin exchange-traded funds (ETFs) issuers finally disclosed their fees. There are now multiple Bitcoin Spot ETFs and the fees they charge are the primary way they compete with each other.
Many of the issuers have continued to update their fees in the days leading up to approval, in a game of cat and mouse that has been described as the “ETF Terrordome”, a reference to the ruthless, take-no-prisoners approach required to succeed at the sharp end of the asset management business.
Charging the least is crypto-savvy fund manager Bitwise, with a fee of just 0.20% after a 6-month waiver period of no fees. Ark21Shares is next with a fee of 0.21%. Franklin is at 0.29%. BlackRock, the world’s largest asset manager, has set its fee at 0.25%. This is much lower than many had predicted, given BlackRock’s brand power and market size.
Source: Bloomberg
Bloomberg ETF analyst James Seyffart wrote on X that, “The Bitcoin ETF fee war has sharp elbows. These fees are sooo low and the ETFs will trade ABSURDLY tight (penny wide bid-ask spreads) and without any commissions on most platforms.”
Grayscale, however, which plans to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, has the highest fee at 1.5%. However, they have included a clause about the ability to waive fees. Plus, Grayscale already has $28 billion of assets under management (AUM) whereas the other applicants are starting from a position of zero.
What’s clear is that the lower-than-expected Bitcoin ETF fees are good news for investors, and they will put pressure on crypto exchange fees. U.S exchanges such as Kraken and Coinbase will now be competing with the ETF providers, and for those wishing to invest in Bitcoin, the ETFs look very attractive indeed.
A Wild Week of Mixed SignalsIt has been a wild week in the lead-up to today’s Bitcoin ETF approval, with mixed signals, false reporting, an SEC hack, and a series of botched announcements by the SEC and the exchanges involved.
Perhaps it is a sign of today’s hyper-connected, extremely online world, and the average person won’t have noticed, but the denizens of crypto twitter have ridden an emotional rollercoaster this week, as official announcements appeared and then disappeared on various websites and exchanges.
The SEC has fought hard to get its ducks in a row, but ultimately it was the wisdom of the market that proved correct. Bitcoin failed to move much on final revelation, showing that the market has indeed priced in the ETF approvals. For now, at least.
In a series of events yesterday that were memorably described as a goat rodeo, the official SEC X Account appeared to announce that Bitcoin Spot ETFs had been approved.
However, 15 minutes later the SEC head Gary Gensler announced, “The @SECGov Twitter account was compromised, and an unauthorized tweet was posted. The SEC has not approved the listing and trading of spot bitcoin exchange-traded products.”
The price of Bitcoin surged quickly to $47,600 after the bogus announcement before dropping to around $45,500 after Gensler said “fake news.”
We’ll leave the final word on this to Edward Snowden.
Gary Gensler Sounds a WarningAlso this week, SEC Head Gary Gensler published a thread on X, stating that “Those offering crypto asset investments/services may not be complying w/ applicable law, including federal securities laws. Investors in crypto asset securities should understand they may be deprived of key info & other important protections in connection w/ their investment.”
Gensler wrote, “Investments in crypto assets also can be exceptionally risky & are often volatile. A number of major platforms & crypto assets have become insolvent and/or lost value. Investments in crypto assets continue to be subject to significant risk.”
Gensler’s thread concluded with “Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams. These investments continue to be replete w/ fraud- bogus coin offerings, Ponzi & pyramid schemes, & outright theft where a project promoter disappears w/ investors’ money.”
Gensler is committed to being seen as the responsible adult in the room when it comes to protecting American investors.
Spot Bitcoin ETFs: Unlocking OpportunitiesThe spot Bitcoin ETFs, which track the actual price of BTC rather than its derivatives like Bitcoin futures, represent a breakthrough for the U.S. market. While such ETFs have gained approval in Europe, Canada, and Brazil, the SEC has previously rejected applications due to concerns about potential market manipulation.
The approval of eleven spot Bitcoin ETFs in the U.S. is a milestone for crypto investors and an opportunity for financial advisors. These ETFs, renowned for their efficiency and popularity, could unlock a $50 trillion market across financial advisors, retail investors, and private banks, fostering market maturity and institutional investor confidence.
While the underwhelming price action today shows that the market has indeed priced in the ETF approvals, what happens next could surprise.
BIoomberg senior ETF analyst Eric Balchunas has reported that BlackRock may break the first-day ETF flow record with a $2 billion asset injection on the first day of trading for its spot Bitcoin ETF. That would be a strong catalyst for the Bitcoin market and suggest momentum is just getting started.
New Year, New Opportunity for Bitcoin InvestorsAs the crypto community celebrates the SEC’s decision to finally approve spot Bitcoin ETFs, the cryptocurrency market is poised for an extended bull run. The approval of Bitcoin spot ETFs coincides with a potential demand shock for Bitcoin with the April 2024 halving, offering investors a unique confluence of factors that historically result in favorable outcomes.
The question is, how will the market respond? As Bitcoin has already experienced a 61% rally since early October, driven in large part by heightened expectations of approval for spot Bitcoin ETFs, some market observers are forecasting a sell-the-news-induced pullback.
Comparisons are drawn to past market events, such as the debut of CME Bitcoin futures in December 2017, Coinbase’s Nasdaq listing in mid-April 2021, and the introduction of various futures ETFs, including BITO. Historical trends indicate that Bitcoin, following rallying periods during these events, experienced subsequent crashes in the weeks that followed.
For instance, the three days leading up to the SEC’s approval of the first futures ETFs saw Bitcoin surge by 15%. However, a month later, the cryptocurrency reached a record high of $69,000 before plummeting into a bear market that endured for over a year. Analysts caution that historical precedents suggest a potential post-ETF approval downturn, emphasizing the importance of monitoring market dynamics in the aftermath of regulatory decisions.
Others are more bullish, however, with the likes of Max Keiser and Samson Mow predicting billions of dollars of new flow into Bitcoin once the ETFs start trading. And of course, the rumored two billion in immediate inflows from BlackRock.
Also very bullish, is a new report from Standard Chartered Bank predicting significant inflows into the spot ETFs.
The bank predicts inflows of $50 billion to $100 billion this year, meaning that between 436,000 and 1.3 million bitcoins will be held in U.S. ETFs by the end of this year.
At that volume of new inflows, Standard Chartered said Bitcoin could reach US$200,000 by the end of 2025.
Now that the ETFs are approved, expect a marketing war to begin, with the various asset managers competing to communicate Bitcoin’s narrative to an army of financial managers.
In the long term, nothing could be more bullish for Bitcoin.
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