Current trading methods
Here are the public way to trade Bitcoin before Bitcoin ETF spot trading approval.
Bitcoin Trust
Although the Winklevoss Bitcoin Trust originally filed in 2013, it was not officially rejected by the SEC until 2017. In the past 10 years, the US SEC has repeatedly expressed dissatisfaction with the unregulated and potential fraud of cryptocurrencies, but this has not stopped relevant issuers from trying to bring Bitcoin spot ETFs to the market.
Grayscale launched the Grayscale Bitcoin Trust (GBTC) as early as 2013, which was initially only open to qualified investors. After listing in 2015, retail investors could trade. Why can GBTC be launched smoothly? Because it is essentially traded on the over-the-counter market, SEC approval is not required (but FINRA approval is required).
Futures ETFs
The situation began to change at the end of 2017, when CBOE (ticker: BTS) listed the first Bitcoin futures contracts and began trading. Now that these contracts can be successfully launched, investors will look forward to related financial derivatives. In October 2021, the SEC finally approved a Bitcoin futures ETF.
But then, the Bitcoin futures ETF faced its first embarrassing problem: At that time, one ETF, the ProShares Bitcoin Strategy ETF (BITO), was issued three days ahead of the second ETF, the Valkyrie Bitcoin Strategy ETF (BTF).
In the field of ETFs, the first-mover advantage is huge, and BITO attracted the attention of most investors within three days. The current total investment amount in crypto ETFs is 2.3 billion US dollars, of which more than 1.8 billion have chosen BITO (rather than BTF). The time advantage has helped ProShares become a big winner.
The second problem with the Bitcoin futures ETF is that it cannot perfectly track the actual performance of Bitcoin.
Since the bottom layer of the Bitcoin Futures ETF is a futures contract, switching to the next contract after the expiration of the current contract will incur rollover costs, so the return rate of the Bitcoin Futures ETF always lags behind that of Bitcoin itself. Just last year, the price of Bitcoin increased by 171%, while BITO’s income was “only” 151%. The 20% difference is not a small number.
In fact, Bitcoin spot ETFs already exist in Canada and Europe, and there are technically no trading problems. Therefore, it is inevitable for the US SEC to allow them to be listed in the United States, the world’s largest capital market.
SEC Officially approved for listing
Bitcoin Spot ETF
The U.S. Securities and Exchange Commission (SEC) announced on the 10th that it has approved the Bitcoin spot ETF and authorized 11 ETFs to be listed and traded starting from the 11th, becoming an important milestone in the cryptocurrency circle. It is reported that the approval meeting was an expedited motion and was ultimately approved by the committee with a vote of 3:2.
The concept of Bitcoin spot ETFs was born as early as a decade ago, but regulators have been opposed to such products for many years, and several companies have submitted applications and subsequently withdrawn them. Current SEC Chairman Gary Gensler and former SEC Chairman Jay Clayton have both criticized cryptocurrencies, worrying about their violent price fluctuations and the possibility of market manipulation.
The SEC forced to approve
However, last August Grayscale Investments won a lawsuit against the U.S. SEC. The judge of the Washington, D.C. Circuit Court of Appeals ruled that the SEC’s decision to refuse Grayscale’s conversion of the Bitcoin trust product GBTC into a spot Bitcoin ETF was “improper.” Since then, the market has speculated that the SEC will make a compromise and give the green light to the Bitcoin spot ETF.
Why was it approved?
Judging from the SEC’s repeated rejection reasons in the past history, the SEC insists on nothing more than four points, namely that it is difficult to make transaction information transparent, it is easy to manipulate the market, the attributes of Bitcoin are difficult to define, and there is a lack of liquidity. In fact, to this day, the Chairman of the SEC still holds the above view, and therefore continues to mention the risks of crypto investment on the X platform.
But what is interesting is that when the SEC committee composed of five members finally voted, Gary Gensler uncharacteristically cast the key yes vote, thus officially passing the ETF. Thinking deeply about the reasons, apart from the fact that there is no proper reason to refuse, it is not difficult to guess that part of the reason may stem from some kind of political compromise and pressure.
First wave issuers
In the past three years, according to statistics, more than 18 institutions have applied for Bitcoin spot ETFs. After ten years of back-and-forth negotiations, SEC Chairman Gary Gensler issued a statement on the 10th stating that the SEC had approved 11 Bitcoin spot ETF applications, and the list is as follows.
Bitcoin ETF spot trading issuers
| Institution | Product name | ETF ticker | Fee | Maket | Custodian |
| Bitwise | Bitwise Bitcoin ETP Trust | BITB | 0.002 | NYSE | Coinbase |
| ARK | ARK 21Shares Bitcoin ETF | ARKB | 0.0021 | CBOE | Coinbase |
| Fidelity | Fidelity Wise Origin Bitcoin Trust | FBTC | 0.0025 | CBOE | Fidelity |
| WisdomTree | Wisdomtree Bitcoin Trust | BTCW | 0.003 | CBOE | Coinbase |
| Invesco | Invesco Galaxy Bitcoin ETF | BTCO | 0.0039 | CBOE | Coinbase |
| Valkyrie | Valkyrie Bitcoin Fund | BRRR | 0.0049 | Nasdaq | Coinbase |
| Black Rock | iShares Bitcoin Trust | IBIT | 0.0025 | Nasdaq | Coinbase |
| VanEck | VanEck Bitcoin Trust | HODL | 0.0025 | CBOE | Gemini |
| Franklin | Franklin Bitcoin ETF | EZBC | 0.0029 | CBOE | Coinbase |
| Hashdex | Hashdex Bitcoin ETF | DEFI | 0.009 | NYSE | BitGo |
| Grayscale | Grayscale Bitcoin Trust | GBTC | 0.015 | NYSE | Coinbase |
Risks
SEC’s attitude
However, SEC Chairman Gensler also issued a statement on the day of the review, saying that although we have approved the listing and trading of some Bitcoin spot ETFs, we have not approved or recognized Bitcoin. Bitcoin is a speculative, volatile asset. The review of Bitcoin spot ETFs will bring more regulation. “Investors should remain cautious about the risks of Bitcoin and products whose value is pegged to cryptocurrencies.” These regulated exchanges must establish rules designed to prevent fraud and manipulation, and be under supervision to ensure the enforcement of the rules.
There’s still a long way to go
Although more optimistic people in the market predict that the price of Bitcoin will rise in the future, its main challenges include Bitcoin’s price fluctuation range is too large, the supply quantity of Bitcoin is limited, and it is still regarded as an anti-inflation asset. It cannot be equated with stock and bond investment, and the high risk imprinted on it will still deter most investors. Although it has been approved, most non-professional investors or retail investors are still hesitant to hold Bitcoin. I am afraid there is still a long way to go before Bitcoin can be recognized by ordinary investors.
Impact on the market
All profits are gone
The world’s largest cryptocurrency topped $49,000 for the first time since December 2021 as the spot Bitcoin ETF officially launched for trading on Thursday. Before giving up the gains, as of 20:00 on January 11, Bitcoin once rose 6.7% to $49,021, hitting its highest level since December 2021, with an increase of 2.43% in 24 hours. During the same period, Ethereum, which ranked second in market capitalization, was quoted at $2,610.21, an increase of 7.8% in 24 hours.
On the first day of trading, Bitcoin rose above $49,000, hitting a new high since December 2021. It rose about 6.8% during the day, but then turned negative and returned to below $46,000 before rising again. The 11 new Bitcoin ETFs reached $3.66 billion by 2 p.m. ET, with both the Grayscale Bitcoin ETF and BlackRock’s iShares Bitcoin ETF reaching $3.66 billion in trading volume within the first 10 minutes of the trading session. Millions of shares. Nearly half of the trading volume comes from Grayscale ETF, which also ranks as the third-largest ETF by trading volume on record.
The profits were exhausted and some Bitcoin investors began to turn to Bitcoin and no longer purchased Bitcoin directly on the platform of cryptocurrency traders. The day after the SEC announced the opening of ETF trading (1/12/2024), Bitcoin fell Toward $43,000, spot Bitcoin ETFs and blockchain concept stocks generally fell. Cryptocurrency-related stocks were mostly lower. Bitcoin Proxy and MicroStrategy (ticker: MSTR ) were little changed, while Marathon Digital (ticker: MARA ) and Riot Platforms (ticker: RIOT ) both fell. Coinbase Global (ticker: COIN ) fell 1.65%.
Inject living water
The United States is the world’s largest financial market. Bitcoin spot ETFs are listed on mainstream exchanges, which can reach more investors such as retirement funds, investment institutions, and retail investors, inject huge capital into the crypto market, expand trading volume, and accelerate the acceptance of ordinary people. In the past, traditional asset management departments, such as various fund managers, financial advisors, etc., had difficulty incorporating crypto assets into their investment portfolios without a Bitcoin spot ETF. Now this obstacle will no longer exist.
Bitcoin will stand out
And it is foreseeable that the distinction between Bitcoin and other cryptocurrencies will become more obvious. In the future, most cryptocurrency investors will only consider Bitcoin, because only Bitcoin is a legal cryptocurrency that can be openly traded in the market. coins, and most other cryptocurrencies will have a harder time surviving in the long run.
Favorable other digital assets
The approval of the Bitcoin spot ETF also paves the way for the approval of other types of digital assets or related financial products. As the market reacts and performs to Bitcoin ETFs, the SEC may become more open to other digital asset classes or related financial products.
Market size
Analysts at Standard Chartered Bank estimate that Bitcoin spot ETFs are expected to attract US$50 billion to US$100 billion in funds in 2024, which may push the price of Bitcoin to hit US$100,000.
According to a report by Galaxy Digital in October 2023, assuming Bitcoin is adopted by 10% of the total available assets in each wealth pipeline and the average allocation is 1%, it is expected that there will be 14 billion in the year after the launch of the Bitcoin ETF The inflow of US dollar funds will increase to US$27 billion in the second year and is expected to reach US$39 billion in the third year after the release.
Standard Chartered Bank compared the expected launch of Bitcoin spot ETF with gold ETF. Compared with the first U.S. gold ETF “SPDR Gold Shares (GLD)” launched in 2004, it said, “When GLD was launched, the global gold market value was approximately 2.2 trillion U.S. dollars, while the current market value of BTC is 0.86 trillion U.S. dollars. Based on GLD’s subsequent capital inflow of 88 billion U.S. dollars, this means that there will be 34 billion U.S. dollars of funds flowing into Bitcoin ETFs.”
Wall Street trends
Endorsers
Among the first 11 listed issuers, BlackRock (ticker: BLK), Fidelity, Invesco (ticker: IVZ), and Franklin (ticker: BEN) are mainstream investment and wealth management institutions on Wall Street.
Mainstream Wall Street wealth management companies such as Bank of America Merrill Lynch and Wells Fargo have also actively provided Bitcoin ETFs to financial customers to include them in their wealth asset planning portfolios.
Opponents
A Vanguard spokesperson bluntly stated that the Bitcoin spot ETF will not appear on the Vanguard platform, and they do not plan to offer any cryptocurrency-related products. “Cryptocurrency-related products do not comply with Vanguard’s fund management principles.”
Impacts Comes
BlackRock ETF repeatedly broke records
On February 28, 2024, catalyzed by factors that pushed cryptocurrency prices to a two-year high and within easy reach of the all-time high of nearly $69,000, BlackRock spot Bitcoin The daily trading volume of the Bitcoin ETF (ticker: IBIT) exceeded $1.3 billion for the second consecutive day.
On February 27, 2024, the BlackRock Spot Bitcoin ETF recorded its largest single-day inflow, the largest single-day inflow to date among a new group of U.S. exchange-traded funds (ETFs) directly investing in the world’s largest cryptocurrency. It was also the second-largest single-day inflow among U.S. exchange-traded funds (ETFs) across all asset classes, according to data compiled by Bloomberg.
Coinbase becomes the fourth largest exchange
Since the U.S. Securities and Exchange Commission announced in January that it approved the listing of a Bitcoin spot exchange-traded fund (ETF), the market value of Coinbase (ticker: COIN), the world’s second largest cryptocurrency exchange, has risen. The market capitalization exceeded US$50 billion in the week of February 23, 2024, officially surpassing the Hong Kong Stock Exchange’s market capitalization of US$41.01 billion and Deutsche Boerse, becoming the fourth largest listed exchange in the world.
Other countries
IMF stance reversal
On April 23, 2024, the International Monetary Fund (IMF) reversed its stance on Bitcoin, saying that amid global financial instability, Bitcoin has increasingly become a key channel for cross-border capital flows and is Necessary financial instruments.
The IMF pointed out in its report “A Primer on Bitcoin Cross-Border Flows: Measurement and Drivers” that investors in countries with strict financial regulations are turning to Bitcoin to move capital more freely across borders. In countries such as Argentina and Venezuela, Bitcoin has become a necessary financial tool to preserve wealth and access global markets, rather than just a speculative tool.
“In countries with high inflation, Bitcoin provides a way for individuals to protect their savings and participate in global commerce,” the IMF said.
Western countries
In 2021, Canada and Brazil have already approved Bitcoin spot ETF transactions. Bitcoin ETF futures trading has existed in Canada and Europe for many years.
Taiwan
The Financial Supervisory Commission stated that if an industry intends to issue an issuance, it will review the case on a case-by-case basis and evaluate aspects such as investor protection before deciding whether to approve it. The Financial Supervisory Commission stated on the 11th that the investment trust fund management regulations clearly stipulate that the underlying index components tracked by ETFs must be securities. Bitcoin is not a marketable security and therefore cannot be issued according to law. It will take time to evaluate whether it will be opened in the future.
South Korea
South Korea’s attempt to stem a flood of speculative cash that could flood into a U.S. Bitcoin spot ETF has sparked chaos and roiled a range of stocks. South Korea’s securities regulator, the Financial Services Commission (FSC), said on Thursday that brokering such ETFs could violate the government’s existing stance on virtual assets and capital markets laws.
South Korea’s financial regulatory agency said that domestic securities companies may violate the Capital Markets Act by providing brokerage services for Bitcoin spot ETFs listed overseas. The South Korean Financial Commission said in a statement that South Korea will study Bitcoin spot ETF trading matters and regulators are preparing crypto asset rules.
In early trading on Friday, Wizit Co. Shares plummeted 13%, and other cryptocurrency-related stocks also fell sharply.
It was one of the first cautious responses from a major regulator after the U.S. Securities and Exchange Commission (SEC) earlier this week approved eleven spot ETFs that directly hold Bitcoin. South Korea is known for its embrace of crypto-assets, passing a digital assets bill last year to strengthen investor protections. Since the token value created by Do Kwon imploded at over $40 billion, consumers
I am the author of the original text, the essence of this article was originally published in Smart Magzine, issue of Feb 2024
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