Blackrock Bitcoin ETF is now approved - how it continues, and what about Spot Ethereum ETF?
A Bitcoin ETF (Exchange-Traded Fund) is a financial product that is designed to track the price of Bitcoin (BTC) and provide investors with an easy and regulated way to gain exposure to Bitcoin without directly owning or managing the cryptocurrency. Here are the key characteristics of a Bitcoin ETF:
Like traditional ETFs, a Bitcoin ETF is traded on a stock exchange, such as the New York Stock Exchange (NYSE) or the Nasdaq. Investors can buy and sell shares of the ETF through their brokerage accounts, just like they would with stocks.
A Bitcoin ETF aims to track the price of Bitcoin. The ETF provider typically holds a reserve of Bitcoin, and the value of the ETF's shares is designed to closely mirror the price movements of Bitcoin itself.
The ETF provider is responsible for securely holding and managing the Bitcoin that backs the ETF shares. They use reputable custodians and security measures to safeguard the cryptocurrency.
Bitcoin ETFs are regulated financial instruments, subject to oversight by the relevant regulatory authorities in the jurisdiction where they are offered. This regulation provides a level of investor protection and transparency.
ETFs are known for their liquidity, as they can be bought and sold throughout the trading day at market prices. This liquidity can make it easier for investors to enter and exit positions.
Bitcoin ETFs make it convenient for investors to gain exposure to Bitcoin without needing to set up and manage cryptocurrency wallets, handle private keys, or navigate unregulated cryptocurrency exchanges.
Depending on the jurisdiction and tax laws, investing in a Bitcoin ETF may offer tax advantages over directly owning and transacting with Bitcoin.
Check also: Step by step guide for understanding crypto taxes
ETF providers typically publish information about the ETF's holdings and performance, allowing investors to monitor the fund's activities and holdings.
It's important to note that Bitcoin ETFs are subject to the regulatory environment of the country in which they are offered. Regulatory approval is required for the creation and operation of Bitcoin ETFs, and the regulatory landscape can vary from one jurisdiction to another.
A "spot ETF" typically refers to an Exchange-Traded Fund that invests in physical assets, such as stocks or commodities, with the goal of closely tracking the performance of those assets in the underlying market. In the context of financial markets, the term "spot" typically refers to the current market price or the immediate delivery of an asset, as opposed to a futures or derivative contract.. The term "spot ETF" is not an official or standardized term but is often used in financial discussions to distinguish ETFs that invest in physical assets from those that use derivatives or other financial instruments to track an index or asset. Spot ETFs are generally considered straightforward investment vehicles for gaining exposure to specific asset classes or markets.
Read also: What is spot trading in crypto?
The SEC approved Bitcoin ETF on Wednesday!
Many crypto proponents are now thrilled. “The introduction of a spot Bitcoin ETF bridges the gap between mainstream finance and the emerging world of crypto, allowing investors to participate in the bitcoin experience without the technical barriers of direct ownership,” Sheila Warren, president and CEO of Crypto Council for Innovation, wrote in an emailed statement.
Here we listed some Bitcoin ETF approval opportunities:
The approval of a Bitcoin ETF makes it much easier for traditional investors, including institutional investors and retail investors, to gain exposure to Bitcoin. They could buy and hold shares of the ETF through their brokerage accounts, just like they do with stocks, without needing to directly purchase and custody Bitcoin.
ETFs are traded on major stock exchanges, which tend to have high liquidity. The presence of a Bitcoin ETF on these exchanges will contribute to increased liquidity and better price discovery for Bitcoin, potentially reducing price volatility.
The approval of a Bitcoin ETF by a well-known financial institution like BlackRock boosts the legitimacy and acceptance of cryptocurrencies in the mainstream financial world. It might encourage other institutional investors to consider allocating funds to Bitcoin and other digital assets.
ETFs are subject to regulatory oversight and reporting requirements by the SEC. This oversight could help address some of the regulatory concerns surrounding the cryptocurrency market, such as market manipulation and investor protection.
Investing in a Bitcoin ETF may have tax advantages compared to owning and transacting with Bitcoin directly. It simplifies tax reporting and potentially offers tax benefits to investors.
ETFs typically have robust custody solutions in place to secure the assets they hold. This could provide a level of security and peace of mind for investors concerned about the safety of their Bitcoin holdings.
The introduction of a Bitcoin ETF could lead to increased demand for Bitcoin, potentially driving up its price. However, the extent of this impact would depend on various factors, including market sentiment and the size of the ETF.
Once Bitcoin ETF is approved as it was on Wednesday, it opens the door for more ETFs based on cryptocurrencies or related assets, fostering competition and innovation in the space.
Recent estimations on Bitcoin value once BlackRock ETF gets approved were around 70% value increase and reach around $5.5k. What’s happening on Wednesday?
After the BTC ETF approval on Wednesday, crypto bulls expect BTC price above $100000.
What's happened during the last few days after the BTC ETF approval?
Bitcoin was about flat over the past 24 hours after rising as high as 6% earlier in the day, but expectations of a spot ETF have been driving prices higher for a while now. Bitcoin has risen over 80% since the SEC first approved its ETF applications last June, and it has gained 174% year-to-date. Ethereum, on the other hand, has risen almost 99%. The difference between the two is largely because the story driving Bitcoin's rally — optimism about spot Bitcoin ETFs — has more to do with Bitcoin than crypto in general. Could ETH see the same kind of huge rally?
Read now: Should I Invest in Ethereum?
On Wednesday, the SEC approved spot Bitcoin ETFs for the first time ever, and now ETH prices are rallying on optimism that the SEC will approve spot Ethereum ETFs as well.
There is a 70% likelihood for the approval of a spot Ethereum ETF, Bloomberg Intelligence analyst Eric Balchunas said.
Mishra, director of ETF research at Zacks Investment Research, sees very low chances of the SEC denying approval for spot Ethereum ETFs.
While some experts expect Spot ETH ETF approval in May 2024, there are still some other questions about whether the spot Ethereum ETF will be approved, as the current chair of the Securities and Exchange Commission (SEC) Gary Gensler has said that all cryptocurrencies except bitcoin are financial securities.
However, Gensler's predecessor Jay Clayton once said that “a small number of tokens may cease to be securities if they become widely decentralized.” William Hinman, former director of corporate finance at the SEC, said in a 2018 speech that “because ether coins are decentralized, they are not financial securities.”
The consensus among the crypto community is that traders are getting ready for an ether-centric product – potentially the first time that U.S.-based professional investors can get spot exposure to a blockchain's token without owning it.
"It's clear that there is a frontrunning trend toward the ether ETF," said Kaminari's CEO Alex Onufychuk in a Telegram chat.
On Wednesday, Lido's LDO went up as high as 17% and RocketPool's RPL rose as high as 10% before pulling back. Both protocols offer ether stakeings on their platforms, with an average yearly staking reward of 4.5%.
On the other end of the spectrum, tokens from layer 2 networks (Mantle's MNT, Optimism's OP) rose as high as 9%. Layer 2 networks are built on top of Ethereum but function as autonomous blockchains, enabling users to transact at a fraction of the cost and much quicker than the mainstream blockchain.
But crypto market watchers still warned that the possibility of an ether ETF remains a "possibility rather than a reality."
Read also: How to invest in crypto under 18?