What To Know About The Coming Bitcoin ETFs

The financial world is on the edge of its seat as it awaits the US SEC’s decision on the approval of spot Bitcoin ETF.  While the official green light from regulators is still pending, the mere anticipation of these ETFs has already sent ripples through the market, with Bitcoin’s price soaring above $47,000 amid the swirling rumors.

This article aims to shed light on the state of Bitcoin ETFs, exploring the reasons behind the heightened anticipation, the potential impact on the market, and what this could mean for investors.

Anticipation and Predictions

Bloomberg ETF analysts Eric Balchunas and James Seyffart predicted that on Jan. 10 the SEC would approve all pending spot Bitcoin ETFs, lining up with the SEC’s deadline to either approve or deny ARK Invest’s application. The Bitcoin Community took this as a rallying cry around a coming Bitcoin ETF approval.

There are numerous high profile Bitcoin ETFs pending approval: BlackRock, Grayscale, Bitwise, WisdomTree, Invesco Galaxy ETF, Valkyrie Investments, Ark Invest, VanEck, Fidelity, and more.

Talks between prospective Bitcoin ETF issuers and the SEC have likely centered around
robust surveillance mechanisms, reputable custodians to ensure adequate security measures, as well as issuer commitment to complying with existing regulatory frameworks.

SEC has heretofore taken its time approving a Bitcoin ETF. Prompted by increasing adoption of Bitcoin by the retail public and even some institutional investors, regulators have shown growing interest in exploring the potential of a Bitcoin ETF, signaling a more open-minded approach.

Regulatory Considerations

Market maturity and stability are vital considerations. Regulators want to ensure that Bitcoin markets are sufficiently transparent and resistant to manipulation before approving an ETF. As institutional adoption continues to grow and market infrastructure strengthens, these concerns may diminish over time.

Most sources are indeed expecting approval by Jan. 10 based on public knowledge of a deadline by which the SEC must decide on an application from Ark Invest. Meetings between the regulator and numerous applicants, plus updates to filings, are also producing optimism — especially due to the SEC’s engagement with BlackRock, the most significant of the current ETF applicants.

The bitcoin ETFs might be the biggest Wall Street development in 30 years, possibly triggering a significant bull run for bitcoin in 2024 due to increased demand and a supply shock. The fact that the Bitcoin ETFs could be approved ahead of the fourth Bitcoin halving, in which the Bitcoin block reward awarded to miners will once against be cut in half, would only bolster the case for a price surge in the wake of ETF approval.

There are some products on the market already, of course. Bitcoin futures contracts have been launched on regulated exchanges, including CME Group and Bakkt. Moreover, Canada recently approved its first Bitcoin ETF, which could prompt other countries to do so, as well. But, there are no products out there offered by the world’s largest asset manager, as is BlackRock, nor custodied by JPMorgan or Goldman Sachs, as is likely to be the case in the coming ETF product.

The Impact of Bitcoin ETFs: Market and Investors

An ETF is a financial product that allows investors to gain exposure to an underlying asset, such as Bitcoin, without directly owning it. The significance of a US Bitcoin ETF lies in the institutional and retail investors who may have been hesitant to enter the crypto market due to regulatory concerns or technical barriers. With an ETF approved by the SEC, a significant portion of these investors will feel more comfortable to enter the bitcoin market. A Bitcoin ETF would provide investors with a regulated and accessible avenue to invest in Bitcoin.

While Bitcoiners pride themselves on a “not your keys, not your Bitcoin” philosophy, there are many types of investors who would prefer–and, in fact, legally cannot hold unregulated assets like Bitcoin–to pay yearly fees to not worry about self-custody, hardware wallets, minimally regulated exchanges, passwords, keys, etc. They prefer professionals to take care of such concerns in exchange for a fee.

Hodlers take on numerous risks, having to for example manage a seed and wallet. In that scenario, one enjoys no insurance in the event of being hacked or scammed. With a Bitcoin ETF, institutions provide technical support, security, insurance, and liability, creating a safer and more convenient environment for would-be investors.

This is a guest post by Kadan Stadelmann

Kadan Stadelmann is a blockchain developer, operations security expert and Komodo Platform’s chief technology officer. His experience ranges from working in operations security in the government sector and launching technology startups to application development and cryptography. Kadan started his journey into blockchain technology in 2011 and joined the Komodo team in 2016.