Bitcoin ETFs listed on U.S. exchanges witnessed a trading volume of more than $4.5 billion on Jan. 10, 2024, a day after the U.S. Securities and Exchange Commission (SEC) approved several Bitcoin spot ETFs, according to data from LSEG. The new products signify a crucial moment for the crypto industry, challenging the prevailing perception of digital assets as risky and exploring their potential as mainstream investments.
The long-awaited approval from the SEC arrived last week, concluding a long battle with the crypto sector. The commission had consistently rejected all Bitcoin spot ETFs on claims of investor safety. SEC chair Gary Gensler stated that the approvals did not amount to Bitcoin endorsement, characterizing it as a volatile and speculative asset.
Several company leaders expressed reservations about Bitcoin’s high-risk nature, with major players such as Vanguard, the largest mutual fund provider, stating they did not intend to offer the new Bitcoin spot ETFs to their clients.
The debut of the spot ETF caused Bitcoin’s price to rise to its highest point —$46,303— since 2021. Ether was trading at $2,598.
The regulatory approval sparked a furious battle among issuers for dominance of the market, leading some companies to significantly lower the costs associated with the Bitcoin ETFs even prior to their launch. Currently, fees range between 0.2% and 1.5%, with most even willing to waive the charges for a predetermined period or asset volume. Following the ETF’s launch, Valkyrie waived its fees for three months and also reduced those fees to 0.25%.
Grayscale was granted permission to convert its existing BTC trust into an ETF, making the company’s Bitcoin ETF the biggest in the world with assets valued at more than $28 billion.
Opinions regarding the potential earnings of the new products vary. Analysts at Standard Chartered believe they might get as much as $100 billion in revenue in 2024, although Bernstein predicts flows will progressively rise to $10 billion this year. Others estimate that inflows might reach $55 billion over a five-year period.
A few analysts cautioned that it might be premature to rejoice over the decision. The wider financial community still views cryptocurrencies as dangerous investments, and recent events such as the demise of the cryptocurrency exchange FTX have further increased investor caution. Others, on the other hand, think that the products might pave the way for even more innovative exchange-traded funds for cryptocurrencies, including spot ether products.
If the gold ETFs perform well over the medium- and long-term, they are likely to lift the general crypto industry as well, helping stocks of entities such as HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE) to rise higher as the sentiment toward crypto improves in the wake of the recent shocks the industry suffered.
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