By Elizabeth Howcroft and Alun John
SINGAPORE/LONDON (Reuters) -Bitcoin held near 21-month highs on Thursday after U.S. regulators approved a spot bitcoin exchange traded fund (ETF), while the second-biggest cryptocurrency ether gained on hopes that ETFs tracking it could be the next to win approval.
The Securities and Exchange Commission (SEC) said on Wednesday it approved 11 applications for spot bitcoin ETFs including from BlackRock (NYSE:BLK), Ark Investments/21Shares, Fidelity, Invesco and VanEck.
Most of the ETFs are expected to begin trading on Thursday, and the iShares bitcoin ETF drew strong demand in premarket trading, with volumes surpassing even those of Apple (NASDAQ:AAPL), the world's most valuable company.
Bitcoin was last trading around $47,133 up 2.6% on the day, heading back towards Tuesday's 21-month high just below $48,000, which was hit in anticipation of the approval.
It more than doubled in price last year, partially recovering after a turbulent 2022 for the crypto industry when several major companies collapsed, most notably trading venue FTX.
Meanwhile ether, the token that underpins the Ethereum blockchain network, rose 5% to $2,653.8, its highest since May 2022.
“The market’s now quickly moving on to ETH, saying if bitcoin is done, then it’s now very highly likely that the ETH one will get done as well,” said Geoff Kendrick, head of digital asset research at Standard Chartered (LON:STAN).
Several firms have filed applications for spot Ethereum ETFs, including BlackRock in November 2023.
Industry participants say U.S.-listed spot crypto ETFs drive greater demand for the underlying digital tokens.
Retail and institutional investors "no longer need to rely on futures trading or self custody to have exposure to bitcoin, and can use a traditional brokerage account," said Nick Ruck, COO of ContentFi Labs, a blockchain firm focused on IP licensing.
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Spot bitcoin ETFs were already available in other markets including in Canada and Europe. JPMorgan (NYSE:JPM) analysts said last year that those products had failed to attract large investor interest and that they did not expect the U.S. product to be a gamechanger for crypto.
Marion Laboure, senior strategist at Deutsche Bank (ETR:DBKGn) Research, said that a spot bitcoin ETF "simply provides standardised access to the digital asset as an investment, without altering bitcoin's core proposition."
"Only time will tell if greater adoption will lead to more transformational outcomes for the crypto ecosystem and financial system. For now, the ETF approval opens a new chapter for bitcoin prices, though volatile conditions are likely to persist," she added.
UBS analysts said in a note on Wednesday that they remain "unconvinced of the structural case for the industry" and that they hadn't seen a meaningful increase in inquiries about crypto in recent months.
There are also concerns that more traditional institutional money invested in crypto would leave mainstream finance vulnerable to future crypto collapses.
The head of the International Monetary Fund said in December that high adoption of crypto assets could undermine macro-financial stability.