The U.S. securities regulator on Wednesday approved the first U.S.-listed exchange traded funds (ETFs) to track bitcoin, in a watershed for the world’s largest cryptocurrency and the broader crypto industry.
The Securities and Exchange Commission said it approved 11 applications, including from BlackRock (BLK.N), Ark Investments/21Shares (ABTC.S), Fidelity, Invesco (IVZ.N) and VanEck, despite warnings from some officials and investor advocates that the products carried risks.
Most of the products are expected to begin trading Thursday, issuers said, kicking off a fierce competition for market share.
A decade in the making, the ETFs are a game-changer for bitcoin, offering investors exposure to the world’s largest cryptocurrency without directly holding it. They provide a major boost for a crypto industry beset by scandals.
“It’s a huge positive for the institutionalization of bitcoin as an asset class,” said Andrew Bond, managing director and senior fintech analyst at Rosenblatt Securities.
Standard Chartered analysts this week said the ETFs could draw $50 billion to $100 billion this year alone. Other analysts have said inflows will be closer to $55 billion over five years.
The market capitalization of bitcoin stood at more than $913 billion as of Wednesday, according to CoinGecko. As of December 2022, total net assets of U.S. ETFs stood at $6.5 trillion, according to the Investment Company Institute.
Bitcoin was last up 3% at $47,300. The cryptocurrency has soared more than 70% in recent months in anticipation of an ETF, and hit its highest level since March 2022 this week.
Success in the battle for inflows will mostly depend on fees and liquidity, analysts say. Some issuers slashed their proposed fees in new filings this week, including BlackRock and Ark/21Shares. Those fees range from 0.2% to 1.5%, with many firms offering to waive fees entirely for a certain period of time. For short-term speculators looking to buy in and out of the products, liquidity could be more important.
Companies expect a flurry of online advertising and other marketing. Some issuers, including Bitwise and VanEck, have already released ads touting bitcoin as an investment.
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“It is pretty unprecedented, so we’ll see how it works. I’ve never been in a situation where 10 of the same ETF was launched on the same day,” said Steven McClurg, chief investment officer at Valkyrie, whose ETF was among those approved on Wednesday.
The approvals come a day after an unauthorized person published a fake post on the SEC’s account on social media platform X, saying the agency had approved the products for trading. The agency quickly disavowed and deleted the post.
On Wednesday it said it is coordinating with law enforcement and the SEC’s own internal watchdog to investigate the incident.
That incident, and a confused announcement on Wednesday afternoon in which the SEC appeared to publish the formal regulatory approval and then remove it from its website, did not dampen the crypto industry celebrations.
“We believed that bitcoin could change the world, and we were and remain excited at the prospect of democratizing access to this asset,” said Grayscale CEO Michael Sonnenshein.
