A historic moment has dawned in the world of finance. After eleven years of anticipation and uncertainty, the United States Securities and Exchange Commission (SEC) officially approved the first Bitcoin-based Exchange-Traded Funds (ETFs). This groundbreaking event opens the door to a new era in the world of cryptocurrencies, signaling their growing acceptance in mainstream finance.
Until recently, Bitcoin and other cryptocurrencies were seen as marginal, even risky, elements of the financial world. The SEC, being the guardian of the securities market in the United States, consistently rejected applications for Bitcoin-based ETFs over the years. This was due to concerns about financial stability and market integrity.
The breakthrough came after a series of rejections of over 20 similar applications, which lasted until March 2023. A key factor was a court decision, according to which the SEC did not adequately justify the rejection of Grayscale’s application to create an ETP (Exchange-Traded Product). This led to a re-evaluation of similar applications.
Among the approved ETFs were products from companies like Grayscale Bitcoin Trust, Bitwise Bitcoin ETF, and iShares Bitcoin Trust. Their issuance is significant because it allows for easier access to Bitcoin investment for a wider range of investors, without the need for direct purchasing and storing of cryptocurrencies.
SEC Chairman Gary Gensler emphasized that the approval of these products does not equate to general support for Bitcoin or the crypto industry. He noted that both Bitcoin and other cryptocurrencies remain risky and unstable assets. However, this decision is seen as a positive signal for the cryptocurrency market, suggesting greater openness to such financial innovations.
Key to the SEC’s decision was the acceptance that agreements for shared oversight with regulated markets of significant size would be sufficient to address concerns about market manipulation and fraud. All exchanges involved in these ETFs have comprehensive agreements with the Chicago Mercantile Exchange, which strengthens confidence in their ability to monitor and prevent market manipulations.
Analysis of the correlation between the Bitcoin futures market and the Bitcoin spot market consistently showed a high correlation, suggesting that oversight of the futures market effectively covers activities in the spot market. This is a key element in mitigating the risk of fraud and manipulation.
This decision paves the way for broader adoption of financial products related to cryptocurrencies, offering investors new opportunities and diversification options in the evolving digital asset space. Thus, although the road has been long and bumpy, Bitcoin and other cryptocurrencies gradually seem to be gaining a solid position in the world of traditional finance.
Photo by Galina Nelyubova on Unsplash
