The Bitcoin exchange-traded fund has been widely discussed since it was first announced as a possibility for the crypto environment. The reason is rather straightforward: this type of asset would make the market more accessible, allowing investors to trade digital coins even when they don’t directly own them. In 2023, investors started looking into how to buy Bitcoin once more as the prices began to climb back once more, following a very difficult 2022. With the halving expected sometime in April 2024 will be another positive year for Bitcoin, and it is indeed likely to surpass the achievements of 2023.
The official approval of a Bitcoin ETF would propel prices even further, but it is still uncertain when the announcement will come. Some hoped they would get an answer in December, but this didn’t pass. Some investors believe January is no longer likely either, but that the SEC will come up with an answer sometime during 2024.
Compromised account
Cryptocurrency investors have been waiting for approval on the ETFs for several months now, and the patience of many is wearing thin. There’s no surprise this is the case, considering there have been so many delays. Instead of tempering enthusiasm, the prolonged wait stoked the flames, and many are now more excited than ever. The SEC has earned something of a negative reputation among community members for its repeated postponement of the announcement date.
The regulators have cited concerns regarding the safety and security of cryptocurrencies, in light of the collapse of several exchanges over the past years. These events caused considerable trouble for investors, who lost significant amounts of capital in one fell swoop. On January 9th it was announced that the Twitter/X account belonging to the Securities and Exchange Commission had been compromised. An unauthorized tweet was posted, saying that the agency had approved the Bitcoin ETF for trading.
Although fake, the post managed to cause a momentary spike in the price of BTC, but then it quickly backtracked. As of January 10th, the cost of Bitcoin is situated above $46,000, a considerable increase in light of the struggles of the past couple of years. The SEC said they are investigating the matter to determine the next steps and the actual scale of the misconduct.
The decision
Some investors expect the SEC to make a decision regarding the course of the Bitcoin ETFs until the end of the month. While some believe the answer will be positive, others are not so sure, considering that the Commission has opposed the assets for many years. Numerous asset managers have filed applications, but they are all still waiting for a response.
Throughout all these trials, Bitcoin has remained strong. Not only is it the most robust cryptocurrency, it is one of the best-performing assets overall during the last year. It regained a significant portion of its value, growing its market cap in the process. An ETF approval would allow even more potential users to join the ranks of the investing community. While many are not thrilled by the potential of owning crypto coins, they would most likely respond much more positively to ETFs.
Institutional investors are the most anticipated, as they tend to work with substantial amounts of capital. However, it seems clear that investors must still wait a while to see if these transactions will even become possible.
Competitive fees
The crypto space is already known as a very volatile and constantly changing environment. With the much-anticipated arrival of ETFs, it is expected to become even more so. There are almost a dozen ETFs that are competing at the moment, and the issuers are already showing signs of engaging in a price battle. However, the situation will naturally evolve further in the future. For instance, ARK Invest joined forces with 21Shares, and the initial plan was for transactions to include a free of 0.8%. But on January 8th, they made an announcement saying that there would be no fee for the first six months of use.
Many have taken similar steps, including Invesco and Bitwise, offering 0% costs for the first 180 days. Others, such as Grayscale, will charge 1.5%. Valkyrie Bitcoin Fund has a 0.49% fee following the first three months. For those that only offer fees following six months, Invesco has a rate of 0.39%; Bitwise goes for 0.2%and WisdomTree Bitcoin Trust for 0.3%. iShares has 0.25% following twelve months, and Fidelity 0.25% following July 31st 2024.
BTC and futures
Since ETFs are such a new thing, analysts are still discussing the predictions of what might occur. Their ability to keep track of Bitcoin and its futures has been consistently debated. So far, strategists say that Bitcoin has been tracked well so far, but that the market is not yet mature, which might mean problems. At the other end of the spectrum, the futures market is mature and highly regulated. It can be pretty difficult for these two traditions to reconcile.
Yet, it’s important to remember that only time can tell how the environment will develop. Some are also concerned that the redemption process can result in Bitcoin exchange-traded funds going at a premium. But, as investors begin to get a better feeling of the market and filter the details out, things are expected to level out on their own. Regions that have already launched ETFs have a story to tell as well.
The general consensus is that there is no general impact on trading efficiency. The underlying assets remain liquid, and there will also be a lot of users, so the trading ecosystem will most likely pick up speed fast.
To sum up, everyone in the market has widely anticipated ETFs, but it will still be some time until investors will be able to enjoy them. It is not yet clear how much money the ETFs will manage to attract, but just the applications propelled the price quite significantly. Most notably, BlackRock took the price from $25,000 to $30,000 in just a few days last June. That can serve as quite an indication of what’s to come.
