What Does the Bitcoin ETF Approval Mean for Crypto?
On Wednesday, Jan. 10, the Securities and Exchange Commission (SEC) approved the first-ever spot Bitcoin ETFs, including those from Fidelity, BlackRock and Invesco[1]
. In total, the SEC approved 11 spot Bitcoin ETFs, and they started trading on Thursday, Jan. 11.
The impact of the approval on cryptocurrency markets started to manifest days before the approval announcement itself. For example, the price of Bitcoin jumped more than 7% over the course of Monday, Jan. 8, when CNBC reported that sources close to the SEC said approval was imminent.
But wait — weren’t there already Bitcoin ETFs on the market?
Yes and no. There were already crypto-related ETFs and trusts out there, but there has never been a spot Bitcoin ETF on the market before Wednesday’s approval.
What is a spot Bitcoin ETF?
A spot Bitcoin ETF is an exchange-traded fund — a highly liquid fund that changes price throughout the trading day, just like a stock — that directly tracks the price of Bitcoin, primarily by holding a large amount of the cryptocurrency itself. It’s similar to a spot gold ETF, which holds physical gold bullion on behalf of its shareholders.
These are the first spot Bitcoin ETFs to win SEC approval to trade on a major exchange, although there are other funds on the market that attempt to track the price of Bitcoin by other means.
For example, the ProShares Bitcoin Strategy ETF (BITO) invests in Bitcoin futures, not Bitcoin itself. Its returns can diverge substantially from those of Bitcoin.
As the first spot Bitcoin ETFs, the recently approved ETFs are the first cryptocurrency funds to trade on a major exchange and hold Bitcoin directly.
How many spot Bitcoin ETFs were approved? What are the fees?
Ten different would-be spot Bitcoin ETF issuers filed forms with the SEC earlier this week, disclosing the fees they intend to charge. Hashdex, which applied to hold spot Bitcoin in its crypto futures ETF, was also approved, bringing the total to 11.
The flood of SEC filings — which continued until hours before the SEC's approval announcement, and may continue afterwards — reflected an ongoing price war between issuers. Many Bitcoin ETFs are slashing their fees and offering promotional fee waivers for their first few months of trading.
Some issuers were looking to launch new Bitcoin ETFs, while others had existing funds that they were looking to convert into ETFs.
Quick facts about Bitcoin ETF fees
- The Bitwise Bitcoin ETF (BITB) currently holds the title of least-expensive Bitcoin ETF, with an expense ratio of 0.20% that is waived for the first six months of trading or first $1 billion in assets under management.
- Two other funds — the Ark 21Shares Bitcoin ETF (ARKB) and the WisdomTree Bitcoin Fund (BTCW) — offer the same fee waiver promo.
- The Fidelity Wise Origin Bitcoin Fund (FBTC) is waiving its fee until August 2024.
- The Invesco Galaxy ETF (BTCO) is waiving its fee for its first six months or first $5 billion of assets, while the iShares Bitcoin Trust (IBIT) is temporarily slashing its fee to 0.12% under those same terms.
- The Grayscale Bitcoin Trust (GBTC) is the most expensive, with an expense ratio of 1.50%.
What do the approvals mean for Bitcoin?
Peter Eberle, the chief investment officer of California-based crypto investment firm Castle Funds, said in an email interview that an approval would have a positive impact on the price of bitcoin.
“Many investors can’t currently get exposure. For example, many people with 401(k)s, IRAs and similar accounts can’t easily access Bitcoin. These investors will be able to allocate funds going forward. This will drive demand in coming years,” Eberle said.
However, Eberle also cautioned that bullish sentiment could be overblown, because the ETF approvals do not necessarily guarantee billions of dollars of inflows on the first day of trading.
"Expectations might be too bullish for a short-term impact,” he said.
James Lawrence, the CEO of Florida-based blockchain startup NFTY Labs, said in an email interview that he was bullish on Bitcoin.
“I think we will see new all-time highs for Bitcoin,” he said, predicting that such highs could even top $100,000.
Bitcoin is trading below $47,000 at the time of writing, and so a price above $100,000 would entail the cryptocurrency rising in value by more than 100%.
