A significant milestone on Thursday reached in the cryptocurrency industry as several exchange-traded funds (ETFs) linked to the spot price of bitcoin commenced trading in the United States.
This development marks a crucial test for the broader acceptance of digital assets as legitimate investments. The approval from the U.S. Securities and Exchange Commission (SEC) came late on Wednesday, concluding a decade-long struggle between the regulatory body and the crypto industry.
Eleven spot bitcoin ETFs, including prominent ones like BlackRock's iShares Bitcoin Trust, Grayscale Bitcoin Trust, Valkyrie Bitcoin Fund, and ARK 21Shares Bitcoin ETF, began trading on Thursday, initiating a fierce competition for market share. Rajeev Bamra, Senior Vice President of Digital Finance at Moody's Investors Service, noted that the approval could simplify and secure bitcoin investments for a broader investor base, potentially reshaping the dynamics of cryptocurrency investments.
The launch of these ETFs coincided with a surge in the price of bitcoin to its highest level since December 2021, reaching $46,021. Ethereum, the second-largest cryptocurrency, also saw a 2.42% increase in its price. The regulatory approval is anticipated to trigger intense competition among issuers, with some lowering fees below the industry standard even before the official launch.
Fees for the new bitcoin ETFs range from 0.2% to 1.5%, and many issuers are offering fee waivers for a specified period. Grayscale, which was approved to convert its existing bitcoin trust into an ETF, claimed to have the world's largest bitcoin ETF with over $28 billion in assets under management.
Analysts predict a gradual buildup of bitcoin ETF flows, crossing $10 billion in 2024 and potentially reaching $80 billion by the end of the following year. However, there is some caution that the euphoria surrounding the approval may be premature, as the broader investment community still perceives cryptocurrencies as risky.
While cryptocurrency-related stocks initially climbed higher, including companies like Riot Platforms, Marathon Digital, and Microstrategy, some later experienced declines. The ProShares Bitcoin Strategy ETF, tracking bitcoin futures, lost 0.4%. Shares of Robinhood also fell by 3.1%.
In a webinar on Thursday, Sharmin Mossavar-Rahmani, CIO of Wealth Management at Goldman Sachs, expressed scepticism about cryptocurrencies, stating they have no place in an investment portfolio. SEC Chair Gary Gensler emphasized that the approvals did not endorse bitcoin, describing it as a "speculative, volatile asset" used for criminal activities.
On another note, Circle Internet Financial, responsible for stablecoin USDC, announced a confidential filing for a U.S. initial public offering. Circle controls the issuance and governance of USDC, a cryptocurrency pegged to the U.S. dollar.
