Spot bitcoin ETFs to start trading in big boost to crypto industry

Several exchange-traded funds (ETFs) tied to the spot price of bitcoinwill start trading in the U.S. on Thursday before the bell in a landmark moment for the cryptocurrency industry that has been demanding regulatory approval for more than a decade.

The green light from the U.S. Securities and Exchange Commission finally came late on Wednesday as it approved 11 such ETFs, ending months of negotiations with top asset managerssuch as BlackRock BLK.N, Ark Investments/21Shares, Fidelity, Invesco IVZ.N and VanEck.

“The approval has the potential to simplify and secure Bitcoin investments for a broader investor base, which may reshape the dynamics of cryptocurrency investments,” said Rajeev Bamra, senior vice-president of digital finance at Moody’s Investors Service.

BlackRock’s iShares Bitcoin Trust IBIT.O and Grayscale Bitcoin Trust began trading in early premarket hours. VanEck Bitcoin Trust, Invesco Galaxy Bitcoin ETF, and ARK 21Shares Bitcoin ETF are expected to start soon.

RACE FOR MARKET SHARE

The regulatory nod is expected to start an intense competition for market share among the issuers who have already lowered the fees for the products well below the U.S. ETF industry’s standard.

Analysts at Bernstein estimated that bitcoin ETF flows will build up gradually to cross $10 billion in 2024 in its race to $80 billionby the end of next year.

“Bitcoin ETFs are expected to be an intensely competitive asset accumulation game, with 11 leading asset managers launching together,” the brokerage said in a note.

Since all the ETFs tracking an asset’s price are designed to deliver the same return to investors, fees tendto dictate market share.

The issuers have disclosed fees as low as 0.20% and some have offered to waive it off for a particular period or until it accumulates a set amount in assets.

Many ETFs issuers, including Bitwise and VanEck, have already begun marketing their products by releasing ads that tout bitcoin as an investment.

In the run up to the SEC decision, bitcoin BTC=BTSP, the world’s biggest and best-knowncryptocurrency, had surged more than 150% in 2023. The market capitalization of bitcoin wasmore than $900 billion as of Jan. 10, according to CoinGecko.

“It (the approval) could lead to substantial inflows from institutions interested in entering the cryptocurrency market,” Bamra of Moody’ssaid.

The SEC had earlier rejected all spot bitcoin ETFs on investor protection concerns. Hopes of a change in its stance gained ground last year after a federal appeals court ruled that the agency was wrong to reject Grayscale’s application to convert its existing Bitcoin Trust into a spot bitcoin ETF.

CRYPTO STOCKS GAIN

Cryptocurrency-related stocks climbed with bitcoin miners such as Riot Platforms RIOT.O and Marathon Digital MARA.O rising 4.2% and 5%, respectively, in premarket trading.

Bitcoin investor Microstrategy MSTR.O gained 2.5% and crypto exchange Coinbase COIN.O 4.4%, while the ProShares Bitcoin Strategy ETF BITO.N, which tracks bitcoin futures, added just 0.4%.

Shares of retail trader-focused brokerage Robinhood HOOD.O rose 3%.
Source: Reuters (Reporting by Manya Saini and Niket Nishant in Bengaluru; Additional reporting by Medha Singh; Editing by Arun Koyyur)