Published : 1 min ago, on 22/10/2024
Bitcoin exchange-traded funds launched in the United States in January 2024. Experts believe in the consequent positive influence on BTC and the entire crypto industry. The main implication is that ETFs should attract traditional investors who avoided investing in crypto so far. Those who already have experience mainly buy Litecoin, Bitcoin or any other cryptocurrency on Paybis that suits their portfolio.
Our guide discusses the steps to BTC ETFs becoming available, their working process, and how they could affect the market.
The Road to BTC ETF Approval
It took about a decade for BTC ETFs to start trading in the United States. We can trace the first Bitcoin ETF application back to 2013. The founders of the Gemini exchange, Tyler and Cameron Winklevoss, tried to get approval from the SEC to launch a Bitcoin ETH.
Here’s what happened in the coming years:
- 2017. Winklevoss’ brothers established a Bitcoin Investment Trust, hoping they could transform it into an ETF. The SEC didn’t think the market was ready, so they rejected the application. The response from Winklevoss was that it’s the regulatory environment that should develop to follow new trends.
- 2018. Another application was rejected by the SEC. The new explanation is that a crypto exchange wouldn’t be capable of stopping manipulation.
- 2020. The Bitcoin Trust becomes an entity that reports to the SEC. That makes this the first Bitcoin fund that investors can trade publicly in the US.
- 2021. Canada has approved a Bitcoin ETF launch on its territory. Later that year, the SEC approved the first BTC future ETF.
- 2023. A company files a lawsuit against the SEC, and the judge rules in its favor, agreeing that the SEC didn’t provide adequate justification for rejecting the BTC ETF application.
- 2024. On January 10th, the SEC officially approved 11 Bitcoin ETF proposals. The list included issuers like VanEck, Fidelity, and BlackRock.
How Do Spot BTC ETFs Work?
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Before you check the most popular crypto ETFs and pick your favorite, it’s important to understand how they work. A spot exchange-traded fund that monitors and aims to mimic the performance of an underlying asset.
A Bitcoin ETF tracks how BTC performs in the crypto market and looks to reflect that value. You’ll find that a spot Bitcoin ETF owns BTC that is stored in a digital vault and handled by a licensed custodian. That means the first step of launching an exchange-traded fund is acquiring BTC via legal channels, so either through exchanges or from other owners. A licensed custodian can manage the funds, and maximum security measures are in place to keep the BTC assets secure.
The ETF manager analyzes the number of Bitcoins held and issues the number of shares on a conventional stock exchange accordingly. Users have the opportunity to purchase stocks. The price per share is adjusted depending on the Bitcoin’s current market worth.
A Bitcoin spot ETF aims to reflect the actual BTC price as closely as possible. That occasionally requires selling or purchasing more tokens. It’s when the licensed custodian acts with adequate moves to rebalance the fund.
How to Acquire Bitcoin ETFs
Interested investors can simply head to a conventional stock exchange and find the desired ETF to acquire its shares. They analyze it like any other share and purchase only if they believe the price is fitting. Once they acquire the shares, they get exposure to Bitcoin without directly interacting with the crypto market.
That’s a much easier approach than acquiring BTC coins. You would need to get a digital wallet, register an exchange account (or visit a decentralized exchange), and execute the purchase. It’s also necessary to deal with private keys to ensure your funds remain safe. Many investors find this complicated, and the regulation may deter institutional investors from the crypto market. Spot Bitcoin ETFs are the ideal alternative for individuals and institutions who don’t want to do business with the crypto industry directly but would still like a way to invest in BTC.
The Ripple Effect of BTC ETFS on the Market
Bitcoin ETFs have made an impact on the crypto industry even before they became available for trading. According to reports, BTC had a 20% price increase in less than two weeks following the announcement that BlackRock plans to apply for a Bitcoin ETF. The company had over 99.5% of its ETFs approved, which didn’t go under the radar of many crypto investors.
ETFs expand and democratize Bitcoin and crypto market access. They create a regulated environment for BTC investments, which is especially critical for institutional investors. Institutions are usually large investors, making them vital players in the crypto space.
Bitcoin and other digital assets also benefit from increased reputation and trustworthiness as a result of approving ETFs. It shows the regulators confirm that BTC is a viable investment and believe that relevant parties can prevent market manipulation and other illicit activities.
ETFs are undoubtedly an innovation for the crypto market. It paves the way for exciting projects in the digital space. The extra capital could lead to expanded ecosystems and exciting blockchain-related projects.
The Impact of ETFs on the Future of the Cryptocurrency Market
It’s not only Bitcoin that got its exchange-traded funds. You can already trade Ethereum ETFs, and there’s a good chance other cryptos will join soon. It could take some time for traders to test these ETFs and make them a part of their portfolios. Eventually, we will see more investors using this trading option. And more traders equal more capital for the crypto industry.
There’s no doubt that ETFs could only help the crypto industry. They offer an investment option that traditional investors are familiar with, making it a safe haven for exploring digital asset market opportunities. Some might even look to test themselves in direct crypto investments, especially as they discover that their knowledge about these currencies is increasing. Ultimately, ETFs have the power to help the crypto market take the next step in its development and keep progressing.