Bitcoin ETF approval opens $1.7 trillion crypto door for Wall Street

Bitcoin prices topped the $47,000 mark Thursday following the approval of nearly a dozen investment products that will hold the world’s biggest cryptocurrency in what could be a watershed event for the $1.7 trillion digital asset market.

CBOE Group confirmed the first-ever listings of a host of spot bitcoin exchange traded funds, or ETFs, which are set to begin trading today, marking perhaps the most significant event in the mainstreaming of the world’s biggest cryptocurrency.

The Securities and Exchange Commission, which has mulled the approval of bitcoin-backed exchange traded products for nearly a decade, gave the green light late Wednesday despite noting a host of concerns that challenge its mandate to protect investors.

“Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing,” said SEC Chairman Gary Gensler, who cast the deciding vote in the agency’s 3-2 approval decision.

“While we approved the listing and trading of certain spot bitcoin [exchange-traded product] shares today, we did not approve or endorse bitcoin,” he added. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

What is an ETF?

An ETF is a security that is traded like an ordinary company share, but is ultimately valued by a single asset, or a group of underlying assets, that it holds. In the case of a bitcoin ETF, the listing itself will be backed by the actual cryptocurrency, and not merely a futures contract tied to its value.

Around a dozen companies, including Franklin Templeton, Fidelity, the Ark21 unit of Cathie Wood’s Ark Investment, WisdomTree and Invesco all filed requests with the SEC for approval to list their individual ETFs.

Depending on customer demand, the bitcoin purchases required to match the money invested in each ETF should provide a significant boost to overall bitcoin prices, as well as other digital assets in the global cryptocurrency market.

Nigel Green of London-based deVere Group sees the approval driving bitcoin prices to as high as $60,000 by March, while analysts at Standard Chartered see it reaching $100,000 by year’s end.

Bitcoin prices were marked around 1% higher on the session following the SEC decision and changing hands at $47.127 each, extending a surge of around 70% since mid-October.

Coinbase Global  (COIN) – Get Free Report shares, meanwhile, jumped 5.6% in premarket trading to indicate an opening bell price of $159.82 each while Robinhood Markets  (HOOD) – Get Free Report, rose 4.1% to $12.64 each.

#Bitcoin unch at $46k while Ether jumps 9% to $2,500 after SEC approves first spot bitcoin ETFs in boost to crypto advocates. Funds could start trading as soon as Thursday after months of anticipation and pushback. pic.twitter.com/Vu6oLwuVr6

— Holger Zschaepitz (@Schuldensuehner) January 10, 2024

Concern about Wall Street dominating crypto 

Some bitcoin nativists, however, are concerned that Wall Street may soon dominate both the $913 billion bitcoin market and the broader $1.7 trillion universe of global digital assets. That move, they argue, would erode its original value, and purpose, of providing a decentralized alternative to financial transactions.

“Bitcoin ETF can be celebrated as a huge industry win once approved. However, I believe we also need to recognize that prevalence of bitcoin ETFs may heighten the risk of over-financialization for bitcoin,” said Hong Fan, president of the OKX crypto exchange.

“If bitcoin becomes a mere investment asset, and if most bitcoins end up being held through bitcoin ETFs instead of directly held and used by billions of individuals, bitcoin could become a mere decoration in the legacy finance system, and, ultimately, lose its independence as a global decentralized network,” he added.

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