SEC Approves Bitcoin ETFs: A Game-Changer for Crypto Investors
SEC approves certain investment companies to offer spot bitcoin ETFs, but investors should be cautious as bitcoin ETFs, like bitcoin itself, come with inherent risks
The Securities and Exchange Commission approved certain investment companies to offer "spot bitcoin" exchange-traded funds after a false start on Tuesday. This anticipated move is expected to make bitcoin investing more accessible to Main Street investors without the need for them to own the digital asset directly.
SEC Chair Gary Gensler stated on the SEC's website that the agency continues to be cautious. "Although we have approved the listing and trading of specific spot bitcoin ETP shares, we have not given our approval or endorsement to bitcoin. Investors should exercise caution due to the numerous risks associated with bitcoin and crypto-linked products," he stated.
The SEC had until January 10 to make a decision on one of the 11 companies that applied to offer bitcoin ETFs. On Wednesday, all 11 applications were approved.
The seal of the U.S. Securities and Exchange Commission at SEC headquarters, June 19, 2015, in Washington was featured in the FILE. The Securities and Exchange Commission said Tuesday, Jan. 9, 2024, that a post on X, formerly known as Twitter, announcing that the securities regulator had approved the trading of exchange-traded funds holding bitcoin was fake, and that the agency's account had been "compromised." (AP Photo/Andrew Harnik, File)
Andrew Harnik/AP
FBI is investigating the SEC hack after its fake bitcoin post
Bitcoin, the top cryptocurrency, currently has a market cap of around $900 billion. It has experienced significant price fluctuations over the course of its 15-year existence. Most recently, it reached an all-time high of nearly $69,000 in November 2021, dropped to below $17,000 during the "crypto winter" of 2022, and has been mostly trading above $45,000 leading up to the SEC's decision.
Approximately one hour after the news on Wednesday, the price of bitcoin had increased by 0.3% to almost $46,000, according to data from coinmarketcap.com.
Following the close of the stock market on Tuesday, a post appeared on the SEC's X account falsely stating that the regulatory agency had authorized the listing and trading of spot bitcoin exchange-traded products.
The post was promptly refuted by Gensler, and the SEC removed the message. According to X, an "unidentified individual gaining control of a phone number linked to the @SECGov account through a third party" was behind the post. On Wednesday, the SEC announced that the FBI was investigating the incident.
Bitcoin ETFs, like bitcoin, carry risks for investors
For individuals contemplating entering the realm of bitcoin investment, it is crucial to understand that the price of a bitcoin will exhibit the same level of volatility whether one chooses to invest directly or through an ETF.
Earlier this week, Gensler posted a thread on X warning investors of the risks of crypto investing generally. "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," his post read.
Representation of Bitcoin and other cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on June 26, 2023.
Jakub Porzycki/NurPhoto/Getty Images
Cryptos 2023 had a dark cloud hanging over it due to fraud and scandal, despite being considered its most successful year. These concerns have been echoed by financial advisers and the investor watchdog group Better Markets, particularly in their strong opposition to the SECs approval of bitcoin ETFs. They cite the history of artificially inflated trading volumes, known as "wash" trading, in the bitcoin markets as a major objection.
The group's president and CEO, Dennis Kelleher, did not hold back in a scathing statement following the SEC's announcement. He expressed disbelief that the SEC would approve a well-known, but worthless, volatile, and fraud-filled financial product for mass marketing to Main Street Americans, given the many failures and victims in the crypto industry.
On the other hand, there are many crypto advocates who are thrilled with the approval, seeing it as a positive step towards inclusivity. Sheila Warren, CEO of the Crypto Council for Innovation, described a spot Bitcoin ETF as a bridge between traditional finance and the growing world of crypto, allowing investors to participate in the bitcoin journey without the technical obstacles of direct ownership.
Approved by the SEC, the following companies are set to launch bitcoin ETFs: Ark Invest and 21 Shares, Bitwise, BlackRock, Fidelity, Franklin Templeton, Grayscale, Hashdex, Invesco, WisdomTree, Valkyrie, and VanEck. Several of these ETFs will become available for trading as early as tomorrow.
