U.S. Regulators Greenlight Bitcoin. A Historic Move Sparking 8‑13% Boost in cryptocurrency values
With a mandate to protect investors, the SEC permitted trading for fourteen Bitcoin-based funds to commence on Thursday. The funds range from the largest industry firms, like BlackRock, Invesco, and Fidelity to smaller contenders, including Valkyrie. This approval follows more than a decade of resistance by the SEC to such funds, which dates back to Tyler and Cameron Winklevoss' initial proposal for a Bitcoin ETF in 2013.
5:05 PM EST, January 11, 2024
Bitcoin, Ethereum and other cryptocurrencies see significant gain
Cryptocurrency values rose noticeably on Thursday. Bitcoin reached a level of $48.4k, marking an increase of over 8 percent. Ethereum also saw an increase, with its value rising by 12.2 percent to $2.6k.
BlackRock's first approved application in June of the previous year coincided with an August ruling by the U.S. appellate court, where another application rejection regarding the Grayscale Investments fund registration was being reviewed. The court deemed the SEC's registration denial arbitrary as the Commission failed to explain the differentiated treatment of similar products.
Bitcoin futures contract-based ETF funds were approved in 2021. The court's decision was reportedly one of the contributing factors in the SEC's approval of the applications on Wednesday.
Will the market be inundated with new funds?
BlackRock's filing prompted similar moves from its competitors. Currently, more than ten other companies are formally in the process of introducing an ETF to the market. The competitive fight for market leadership may involve various cost indicators and a rigorous marketing campaign. However, there's no guarantee that these applications will result in the funds entering the market.
"Despite today's approval of the listing and trading of some shares of spot Bitcoin-based products, we have neither approved nor endorsed Bitcoin. Investors should remain cautious about the numerous risks associated with Bitcoin and products whose value is derived from cryptocurrencies," wrote SEC Chair Gary Gensler.
In past rulings against ETF funds, the SEC stated that no regulated exchange could monitor Bitcoin trading in a way that would reliably detect fraud and manipulation. This claim was contested by Cathie Wood of Ark Investments and others, who presented data showing a strong correlation between cash turnover and futures contracts traded on the CME Group platform.
Incident did not impact the Commission's decision
The SEC's decision was made a day after a false post on the social platform X (formerly Twitter) claimed the Commission approved Bitcoin-based ETF funds. The regulatory body later clarified that the account had been hacked, leading to significant price fluctuations in Bitcoin.
Last year, the appellate court's ruling triggered a surge in Bitcoin values due to speculation that U.S. regulatory bodies would approve funds based on it. In 2022, Bitcoin's value declined by 64 percent. Analysts suggest this is a significant moment for the digital asset sector, assessed at about $1.7 trillion. It is believed to ease access to the cryptocurrency market, attracting more investors and increasing liquidity.
"We view the SEC's approval as a green light for institutions if we and others receive it. We've spoken to several of them, and they're now significantly more interested as the SEC effectively clears the path," said Cathie Wood, CEO of Ark Investments. Ark Investments has partnered with 21Shares for the Bitcoin fund.
The approval of ETF funds comes after a year marked by substantial legal action against cryptocurrency companies and industry leaders. This includes the conviction of FTX founder Sam Bankman-Fried and various proceedings against Binance and its founder Changpeng Zhao.
