Investors are eagerly anticipating regulatory approval for a Bitcoin exchange-traded fund (ETF), a development that could potentially attract more participants to the digital asset market. Despite recent legal challenges faced by prominent figures in the cryptocurrency industry, including Sam Bankman-Fried’s fraud conviction, crypto markets have exhibited resilience.
The price of Bitcoin surged to over $35,000 shortly before Bankman-Fried’s verdict on November 2, reaching its highest level since the 2022 industry downturn. Last week, Ether, the second-largest digital currency, experienced a 10% surge to around $2,100, marking its strongest performance in months. This led some investors to speculate that the prolonged “crypto winter” of declining prices and financial scandals may be coming to an end.
The driving force behind this renewed optimism is the potential approval of a new investment vehicle: a spot Bitcoin ETF. Analysts note that crypto investors are growing optimistic about the Securities and Exchange Commission (SEC) greenlighting an ETF that tracks Bitcoin’s price. Such a fund would trade on traditional stock exchanges, offering a convenient way for individuals to invest in cryptocurrencies and potentially injecting a substantial amount of capital into the industry.
This anticipated investment vehicle, known as a spot Bitcoin ETF, is considered by some as crypto’s potential salvation. Unlike purchasing Bitcoin directly through a crypto exchange, investors in a Bitcoin ETF would own shares in a fund holding the cryptocurrency, eliminating the need for direct ownership and storage in a digital wallet. Grayscale Investments, a crypto asset manager, secured a legal victory over the SEC in August, paving the way for a potential Bitcoin ETF. Last week, BlackRock, a major asset manager, filed paperwork for a similar ETF tracking the price of Ether.
While these new funds are viewed by some as a potential turning point for the crypto industry, there are no guarantees of SEC approval, and skepticism exists about whether they would attract significant new investment. The emphasis on these funds also underscores a shift in the crypto industry away from its anti-establishment origins. Bitcoin, created 15 years ago as an alternative to the traditional financial system, is now being celebrated by some enthusiasts as the potential beneficiary of support from giant financial firms like BlackRock.
The pursuit of a Bitcoin ETF has been ongoing for over a decade, with previous rejections by the SEC in 2017. Although the SEC approved ETFs in 2021 that bet on future Bitcoin prices without holding the currency, it rejected Grayscale’s effort to introduce the first ETF directly linked to Bitcoin. After a legal battle, Grayscale emerged victorious, and since then, key SEC offices have been reportedly working with companies seeking to create Bitcoin ETFs. Analysts predict official approval could come as early as January.
Several firms, including Fidelity and BlackRock, are vying to offer crypto ETFs, with hopes that their approval would bring billions of dollars in new investments. However, skeptics argue that an ETF approval would only redistribute existing capital within the industry rather than attracting genuinely new investment. Despite these reservations, enthusiasm in crypto markets remains high, with ongoing speculation and developments suggesting a positive trajectory for the industry.