As expected by most industry analysts and also after an embarrassing false start (following the official SEC X account being “compromised”) the US Securities and Exchange Commission (SEC) has finally approved 11 spot bitcoin ETF applications – which were submitted by traditional financial and crypto-focused service providers.
The approval of spot ether ETF applications could soon follow, according to an update shared by Coinbase (NASDAQ:COIN).
The digital asset exchange says that not only will these ETFs give investors access to spot crypto in a more “familiar” regulated product – they will also usher in a steady wave of crypto adoption, powered by some of the most prominent asset managers.
Enthusiasm for spot bitcoin ETFs has been building among institutional as well as retail investors in anticipation of approvals. Even before this positive news, crypto’s role as an asset class was still “irrefutable,” Coinbase claims.
Over 5% of the world – about 425 million people – own crypto. In the United States alone 52 million Americans do. The latest approval is the most recent step in a global shift toward digital assets that is “helping drive updates to the financial system itself,” Coinbase claims.
The firm also believes that crypto is here to stay, and spot bitcoin ETFs will expand crypto adoption.
As noted in the update from Coinbase, US households hold more than $154 trillion of wealth, of which “more than one-third, approximately $58 trillion, is managed by financial advisors, banks, and broker-dealers.”
Until now, most of that pool of capital has “lacked a direct path to invest in spot crypto, despite demand by investors including financial advisors.”
The Digital Assets Council of Financial Professionals (DACFP) notes that almost half of US financial advisors own bitcoin personally, yet “only 12% recommend it to their clients – the main reason being lack of an ETF.”
As bitcoin has evolved over its 15 years of existence, traditional financial institutions have gradually embraced crypto-based innovations from blockchain tech to tokenization. Spot ETFs are large asset managers’ “biggest endorsement” of crypto yet, according to Coinbase.
The 11 institutions that were granted approval to provide spot bitcoin ETFs are “entrusted with more than $16 trillion in assets.”
Coinbase explains that they see a variety of ways that crypto can benefit their clients, from “serving as a safe haven when turmoil hits traditional financial markets, to providing portfolio diversification, to countering the effects of expansionary fiscal and monetary policy.”
By offering investors a convenient and familiar way to access spot crypto, ETFs will make crypto available “to millions of new investors and further cement it as a mainstream asset.”
The crypto exchange pointed out that spot ETFs will help catalyze further growth and innovation and “expand the size and breadth of crypto markets.”
The update also mentioned that ETF markets don’t operate in isolation. Every time a spot ETF is “bought or sold, market makers need to transact in the underlying asset, meaning spot bitcoin ETFs will increase trading and liquidity in bitcoin itself. With increased liquidity comes increased attractiveness to investors, which can generate even more liquidity.”
It’s described as a “virtuous circle.”
The prevalence of ETFs in client portfolios should “help inspire innovative new financial products, such as lending and derivatives, that can use regulated ETFs as building blocks.”
In crypto, industry observers often talk about “gradually, then suddenly” moments.
Coinbase claims that it is squarely focused on the “gradually” – knowing that the “suddenly” will come. For 12+ years, they’ve gradually been building what they say are the “most trusted” and easiest-to-use products in crypto.
“Suddenly,” they’re the custodian of choice for many of the approved spot bitcoin ETFs. Coinbase says it is pleased to have been selected by major traditional and crypto-forward financial institutions to support the growth of their spot bitcoin ETFs.
The crypto exchange added that spot bitcoin ETFs represent the culmination of years of effort and the end results will take time to materialize.
The exchange operator predicts that in a few years’ time, January 10, 2024 will come to be viewed as a “pivotal” moment in the evolution of Coinbase and as the start of a “giant leap forward for the cryptoeconomy.”
In addition to Coinbase, many other crypto firms and organizations have commented on this recent development.
According to Talos, the SEC’s nod to spot bitcoin ETFs is just the beginning.
For pension funds, endowments, and other institutional investors, this is “a clarion call to gear up for the next wave of crypto investment opportunities.”
With Talos’s portfolio engineering tools – encompassing back-testing, portfolio optimization, and factor risk models – institutions are well-equipped “to navigate this new terrain.”
These tools, tried and tested in traditional asset classes, are now “at the forefront of digital asset investing, and ready to empower investors to craft sophisticated, systematic investment strategies in the dynamic world of cryptocurrencies.”
Ben Weiss, CEO and Co-Founder of CoinFlip, the bitcoin ATM provider, says that this ETF approval didn’t fundamentally change what those in the space have “already known for years: bitcoin is here to stay.”
Weiss also noted that “whether it’s cross border payments for those left behind by the traditional financial system, or bringing transparency to complex supply chains, crypto and the blockchain will continue to shape our world.”
He further noted that the anticipation of a bitcoin ETF is “pouring rocket fuel into the crypto market because an ETF will attract a whole new wave of investors and is expected to further increase the price, accessibility and demand for bitcoin.”
He added that investors who “would not want to hold bitcoin themselves or navigate a crypto exchange will now be able to have exposure to it, attracting a fresh surge of capital, liquidity, and increased credibility and recognition.”
He stated that an ETF approval “opens the floodgates and empowers a new wave of investors, both seasoned and newcomers, to take the leap into digital assets.”
He predicts:
“Following ETF approval, we will likely see a surge of liquidity, price increases, market expansion, and institutional involvement with high-profile leaders such as Goldman Sachs already potentially eyeing its role as an authorized participant for BlackRock and Grayscale pending an approval.”
In a separate update, Grayscale is confirming that on January 10, 2024, the U.S. Securities and Exchange Commission (SEC) has approved their application “to uplist the shares of Grayscale Bitcoin Trust (BTC) (OTCQX: GBTC) to NYSE Arca as a spot Bitcoin ETF, and is expected to declare GBTC’s registration statement on S-3 effective as of 5:00 p.m. EST today.”
This approval will make it among the first such products “to be brought to market in the U.S., as well as the world’s second largest commodity-based ETF and the world’s largest spot Bitcoin ETF.”
GBTC shares will be “listed on NYSE Arca under Ticker: GBTC.”
Together, Grayscale says we have been working “toward this milestone for over 10 years—the Trust first launched in 2013, became publicly quoted in 2015, and became an SEC reporting company in 2020.”
They are grateful to investors who “have stood alongside us through this journey and supported us through the process of uplisting GBTC to a spot Bitcoin ETF.”
Today, GBTC holds 3.16 percent of Bitcoin in circulation.
Shares of GBTC are expected to “commence trading on NYSE Arca on January 11, 2024.”
Once GBTC shares start trading on NYSE Arca, GBTC shares will “cease trading on the OTC Markets and will have automatically been uplisted to NYSE Arca as a spot Bitcoin ETF. Current GBTC shareholders do not have to take any action prior to GBTC’s expected uplisting to NYSE Arca.”
Once the shares are listed on NYSE Arca, the Trust intends “to issue additional shares on a registered basis under the Securities Act of 1933, and employ simultaneous creations and redemptions. Grayscale believes these changes will enable GBTC to more closely track the value of its underlying Bitcoin holdings, after deduction of expenses.”
CI has also received additional commentary from prominent industry participants:
Sergey Nazarov, the co-founder of Chainlink:
“Bitcoin ETF approval has made it clear that traditional financial institutions have a significant role to play in determining how the crypto markets evolve. This was evident when PayPal launched the ability to buy certain cryptocurrencies, and some banks started offering crypto custody. The approval of the Bitcoin ETF will lead to an influx of traditional large top-tier financial firms like BlackRock and Fidelity, which will likely actively participate in the crypto markets.“
As a company committed to enabling access to crypto, Anchorage Digital says that they are extremely pleased to see the SEC approval of spot BTC ETFs as “a safe, regulated way for both institutions and consumers alike to participate in the asset class.”
Looking ahead, Anchorage Digital will continue “to support the growing wave of institutional demand with our federally regulated bank, and their secure and compliant digital asset infrastructure.”
Hong Fang, the OKX President, says that:
“The approval of a Bitcoin ETF marks a significant milestone towards the mainstream adoption of Bitcoin. The ETF is an easy-to-access financial instrument that helps establish the legitimacy of bitcoin and has the marketing power to bring it to a wider population, potentially in the billions – we’ve already seen a few bitcoin ETF marketing campaigns. Through its reach, the bitcoin ETF will also make it easier for more institutions (and less crypto-native retail customers) to access bitcoin indirectly, and attract more talent to our industry.”