On the 10th of January, the Securities and Exchange Commission (SEC) granted approval for the inaugural spot Bitcoin ETFs, featuring offerings from prominent entities such as Fidelity, BlackRock, and Invesco[1]. In total, the SEC gave the green light to 11 spot Bitcoin ETFs.
Trading for these ETFs is anticipated to commence within the week, and their impending launch has already left an imprint on cryptocurrency markets. The value of Bitcoin surged by more than 7% on Monday, January 8, as CNBC reported that SEC approval was imminent.
But one might wonder, weren’t there existing Bitcoin ETFs already available?
Yes and no. While there were already crypto-related ETFs and trusts in existence, the approval on Wednesday marked the debut of spot Bitcoin ETFs in the market.
What exactly is a spot Bitcoin ETF?
A spot Bitcoin ETF is an exchange-traded fund, a highly fluid fund subject to price fluctuations throughout the trading day, similar to a stock. Its primary function is to directly mirror the price movements of Bitcoin by predominantly holding a substantial quantity of the cryptocurrency itself. This model bears resemblance to a spot gold ETF, which safeguards physical gold bullion on behalf of its shareholders.
Although other funds in the market endeavor to track Bitcoin’s price through alternative methods, these recently approved ETFs are the inaugural spot Bitcoin ETFs to secure SEC approval for trading on a major exchange.
Previously, the Grayscale Bitcoin Trust (GBTC) directly invested in Bitcoin before conversion; however, being a trust, it lacks the capability to closely align its price with its net asset value (NAV). ETFs possess the flexibility to create and retire shares based on investor demand, enabling them to maintain prices close to their NAVs. Conversely, GBTC often trades at a discount or premium to its NAV, resulting in returns that deviate from those of Bitcoin.
Similarly, funds like the ProShares Bitcoin Strategy ETF (BITO) function as proper ETFs, trading near their NAVs on major exchanges, but they invest in Bitcoin futures rather than Bitcoin itself. Consequently, their returns may also diverge from those of Bitcoin.
As the inaugural spot Bitcoin ETFs, the recently sanctioned ETFs represent cryptocurrency funds that provide an optimal combination – trading on a major exchange, maintaining prices in proximity to their NAVs, and directly holding Bitcoin.
How many spot Bitcoin ETFs received approval, and what are the associated fees?
Earlier this week, ten distinct aspiring spot Bitcoin ETF issuers submitted forms to the SEC, divulging the fees they intend to impose. Hashdex, seeking approval for its crypto futures ETF holding spot Bitcoin, also secured approval, bringing the total to 11.
Some funds aspire to launch new Bitcoin ETFs, while others aim to convert existing funds into ETFs. Below is a list of the approved ETFs and their respective fees.
| ETF name & symbol | Fee | Notes |
|---|---|---|
| Ark 21Shares Bitcoin ETF (ARKB) | 0.21% | Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
| Bitwise Bitcoin ETF (BITB) | 0.24% | Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
| iShares Bitcoin Trust (IBIT) | 0.25% | Fee reduced to 0.12% for first 12 months of trading or first $5 billion in fund assets, whichever comes first. |
| VanEck Bitcoin Trust (HODL) | 0.25% | N/A. |
| Franklin Templeton Digital Holdings Trust (EZBC) | 0.29% | N/A. |
| Invesco Galaxy Bitcoin ETF (BTCO) | 0.39% | Fee waived for first six months of trading or first $5 billion in fund assets, whichever comes first. |
| Fidelity Wise Origin Bitcoin Fund (FBTC) | 0.39% | N/A. |
| WisdomTree Bitcoin Fund (BTCW) | 0.50% | N/A. |
| Valkyrie Bitcoin Fund (BRRR) | 0.80% | N/A. |
| Hashdex Bitcoin ETF (DEFI) | 0.94% | N/A. |
| Grayscale Bitcoin Trust (GBTC) | 1.50% | N/A. |
The implications of the recent endorsements on Bitcoin have sparked contemplation within the financial realm. Peter Eberle, the chief investment officer at Castle Funds, expressed optimism about the potential positive impact on Bitcoin’s value. In an email interview, he highlighted the significance for investors, especially those with 401(k)s, IRAs, and similar accounts, who currently face challenges accessing Bitcoin. Eberle foresees this approval enabling a more straightforward allocation of funds in the future, thus driving demand in the coming years.
However, Eberle cautioned against overly optimistic expectations, emphasizing that the approval of ETFs doesn’t guarantee an immediate influx of billions on the first day of trading. He believes the bullish sentiment might be overstated and may not lead to the anticipated short-term impact.
On a parallel note, James Lawrence, the CEO of blockchain startup NFTY Labs, conveyed a bullish stance on Bitcoin. In an email interview, he expressed confidence in witnessing new all-time highs for Bitcoin, projecting figures potentially exceeding $100,000. Notably, Bitcoin’s current trading value is below $47,000, implying a more than 100% increase for it to reach the projected $100,000.
Shifting focus to recent events involving the SEC’s social media on Tuesday, investors experienced a glimpse of the potential impact of a spot Bitcoin ETF approval. An unauthorized post from the SEC’s official account on X (formerly Twitter) announced the approval of several Bitcoin ETFs around 4 p.m. on Tuesday, Jan. 9.
This led to a surge of approximately $1,000 in Bitcoin’s price. However, SEC Chair Gary Gensler later clarified that the account had been compromised, and the statement was posted in error. Bitcoin’s price subsequently dropped by roughly $2,000 before a partial recovery.
Addressing the broader implications for other crypto investments, Peter Eberle emphasized the high correlation among crypto tokens. He noted that if Bitcoin experiences a significant price move, other tokens are likely to follow to some extent. Additionally, Eberle suggested that the approval might pave the way for an Ethereum ETF, providing substantial support for ETH.
While Eberle predicts that ETF approvals will likely be confined to Bitcoin and Ethereum initially, James Lawrence holds a more bullish perspective on alternative tokens or altcoins. Lawrence anticipates institutions expressing interest in smaller, more liquid assets outside of BTC and ETH. He also believes that crypto futures trading will persist and potentially grow, even with the advent of spot crypto ETFs, citing the launch of Coinbase’s international crypto derivatives exchange in 2023.
In summary, industry experts diverge on the immediate market impact of a spot Bitcoin ETF approval. While they concur on its likely positive effect on Bitcoin’s price, the extent of this impact and its ramifications on other crypto assets remain uncertain.