What has all the noise been about among crypto enthusiasts since yesterday? Why is the internet suddenly divided about some Bitcoin ETFs getting approved? If you are curious about this new loud development in the crypto market and don’t know how it will affect you as a retail investor, this article is a perfect place to understand the recent US SEC’s (Securities and Exchange Commission) decision and its impact on the everyday investor. Let’s begin with the basics.
What was the US SEC’s decision?
On January 10, 2024, over a decade after the first filed application for the BTC ETF, the US Securities Exchange Commission approved the Bitcoin Spot ETF of 11 applicants.
The approval of the Bitcoin Spot ETF means retail investors can now put their money in the instrument, just like any other traditional financial instrument, through a stock exchange.
This comes as a game changer for Bitcoin, allowing it to be held by retail investors through a stock exchange without directly owning the asset.
How does the Bitcoin Spot ETF affect the money market?
According to a note by Standard Chartered, there are expectations that Bitcoin ETFs in 2024 will attract anywhere between $50 and $100 billion in investments. Another report by Reuters, one of the largest news agencies in the world, states that SEC approval of spot ETF could bring an influx of $3 billion in just one day and as much as $55 billion in the next five years.
Here’s The ripple effect of Bitcoin Spot ETF approval on retail investor
A diversified portfolio, User-friendly, and Accessible – Bitcoin Spot ETF approval means a retail investor with little or no expertise in buying, selling, and holding Bitcoin and adding the digital asset to their portfolio.
The introduction of ETFs makes the investment process accessible, user-friendly, and comparatively safer than holding Bitcoin by oneself.
This opens doors to potentially enhancing their overall investment portfolio and spreading the risk by diversifying their portfolio into multiple assets.
The investor now gets to enjoy the appreciating benefits of the asset without navigating through complexities like storing and managing the digital asset.
Convenient Ownership and Custody – Buying a Bitcoin ETF means that the investors who put money into Bitcoin will not hold the Bitcoin by themselves. A financial organization or firm will buy, hold and manage Bitcoin, on behalf of the investor for a transaction fee.
This adds to the convenience of ownership and safe custody in owning and holding Bitcoin as an asset. Investors can hold and track their Bitcoin ETF in their brokerage accounts like any of their other investments.
Ease in Taxation and Compliance – The inclusion of a third party (the ETF issuing financial firm) shifts the burden of legal and taxation compliance off the shoulders of the investor. The investor will now be responsible only for personal income taxes. Additionally, the legal compliance met by the ETF issuer builds confidence in the ownership of Bitcoin on the investor’s end.
Rising Mass Adoption – The green light for Bitcoin Spot ETFs is expected to accelerate the mass adoption of Bitcoin.
This can be expected from the trend set by the launch of gold ETFs.
The first Gold ETF was launched in March 2003 on the Australian Securities Exchange, after which Gold prices spiked from around $330 to $1800.
Drawing inferences from the Gold ETF, crypto market experts believe the same kind of spike can be seen in the price of Bitcoin after its Spot ETF approval.
Just the news of Black Rock filing for the Bitcoin ETF in June 2023 pushed the price of Bitcoin from $25,500 to $ 46,000 in the second week of January.
Naturally, with Bitcoin’s swelling and the legitimacy of the ETF issuer, more and more ambitious investors will flock to get a share of the Bitcoin Spot ETF pie.
