Anyone anticipating a sudden moonshot on bitcoin’s price following the highly anticipated spot-bitcoin exchange-traded fund approval from the US watchdog on Wednesday would have been slightly disappointed.
While bitcoin was sent higher, the 1.2% worth of gains against the US dollar felt like just another day.
Bitcoin has remained relatively unchanged today, trading flat at $46,800 at the time of writing.
Securities and Exchange Commission (SEC) chair Gary Gensler struck a cautious tone after he gave the green light on Wednesday.
“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin,” he stated. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
He reiterated his contention that, unlike ETPs holding tangible commodities like precious metals, bitcoin remains “a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing”.
Nonetheless, spot-bitcoin ETFs are seen as a big deal for bitcoin.
Major asset managers including BlackRock (NYSE:BLK), VanEck, Fidelity and Grayscale will finally be allowed to list their bitcoin investment products on the New York Stock Exchange, opening the spot market up to billions of dollars worth of traditional investment capital.
Bitcoin may have failed to take flight following these landmark approvals given its already elevated spot price.
The cryptocurrency rallied more than 150% in 2023, meaning much of the ETF hype was already baked in.
Bitcoin has enjoyed remarkable strength in the past 12 months – Source: tradingview.com
“The volatility in the aftermath of the announcement was nearly non-existent, likely influenced by the previous false news that was momentarily believed to be true,” said Matteo Greco, research analyst at Fineqia International, referring to a phoney Tweet sent out by a hacked SEC Twitter profile
“This false information, released just 24 hours prior, initially spurred a price increase, followed by a sell-off that brought the price below $45,000 before rebounding and stabilising around $46,000,” noted Greco.
What are the implications?
"The approval of a Bitcoin Spot ETF is a huge milestone,” stated Eric Demuth, co-founder and chief executive at European investment platform Bitpanda. “From now on, long-term capital from institutional investors will flow into the crypto market.
Demuth reckoned that the decision will will fundamentally change the industry.
“Until now, many institutional investors were unable to operate in the crypto sector within their regulatory framework, as they have to invest in traditional financial products. The ETFs that are now available will be a hugely important tool for institutions and major banks in the US.
I believe that the approval of a Bitcoin Spot ETF will further encourage the mass adoption of crypto-assets by institutional investors in the US. Institutional investors may be more willing to invest in bitcoin if they have access to it through investment products such as ETFs.”
So although the near-term price reaction was understated, the predicted inflow of institutional capital could have positive long-term implications for bitcoin as an asset class.
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