With a spot Bitcoin ETF, trading Bitcoin will be simple and free from the difficulties and hazards of self-custody. Its arrival—likely just around the corner—will signal the point at which cryptocurrency becomes widely accepted.
This month marks the 15th anniversary of the creation of Bitcoin, which has emerged as the center of the blockchain sector. It continues to stoke interest in virtual currencies around the globe and is still the most well-known and well-understood initiative in the larger crypto ecosystem.
The belief in immutable code unites all Bitcoin owners. The network’s miners transform physical energy each day into a rare digital asset that is recorded on an unchangeable public ledger. Traditional finance is one area where this trust hasn’t yet been established, as many major players are reluctant to keep Bitcoin outside of a well-known investment vehicle.
There are numerous explanations for this situation. Although purchasing, storing, maintaining, and transferring Bitcoin has become considerably easier, it is still simple to lose private keys or send Bitcoin to the wrong address, not to mention the ongoing worries over its regulatory future. In the end, this means that traders operating within institutions subject to stringent investment laws have effectively been shut out of a new market that is both promising and potentially quite lucrative.
A Bitcoin-focused exchange-traded fund would be the most obvious answer to this issue. A collection of investments that can be traded on a stock market makes up an ETF. Making Bitcoin tradable on such an exchange is practically the same as creating a spot Bitcoin ETF. Self-custody may be preferred by some, but this would offer other investors a simple method to have exposure to Bitcoin without having to directly manage it themselves.
Investors are restricted to using products like the Grayscale Bitcoin Trust in the absence of an ETF, particularly institutions that aren’t permitted to directly acquire Bitcoin. Although GBTC indirectly provides access to Bitcoin, it does not provide quick redemptions. This indicates that it has occasionally traded with Bitcoin at either significant premiums or substantial discounts, creating very inefficient crypto asset markets. Many more investors would be able to participate directly in Bitcoin thanks to an ETF, including important institutions that will lend credibility to the larger digital asset market.
How near are we to having a Bitcoin ETF in the US? We are lot closer now than we were even a few months ago, is the quick response. Grayscale has won support from the U.S. Court of Appeals in Washington, D.C., in its fight to overturn the Securities and Exchange Commission’s rejection of their earlier request to launch a Bitcoin ETF. A few months prior to that, BlackRock, the largest asset management firm in the world, put out its own proposal for a Bitcoin ETF, and numerous other prestigious organizations soon followed. The launch of Europe’s first Bitcoin ETF and numerous successful approvals of Bitcoin ETFs in Canada over the past two years are notable examples of international initiatives in this approach outside of the United States.
The SEC would either be forced to approve GBTC’s Bitcoin ETFs or would have to suffer the embarrassment of retroactively withdrawing a prior approval of similar ETFs based on futures contracts, according to JPMorgan’s Nikolaos Panigirtzoglou, who recently stated that the SEC would either be forced to approve GBTC’s Bitcoin ETFs or would have to suffer the embarrassment of doing so. Moreover, James Seyffart of Bloomberg anticipated that by 2024, approvals for spot Bitcoin ETFs would be “done deals.”
The destination is inevitable at this point; the question is how long it will take to get there.
When it comes to the “why now” question, two main factors stand out as being very significant. First off, Bitcoin promises a reassuring mathematical certainty in a society characterized by a growing mistrust of authority. A fundamental principle of Bitcoin is that there are only 21 million coins available at any given time, making it one of the few assets whose supply is fully independent of demand. As it is impossible to increase Bitcoin’s supply before its planned emission timetable, the only method to satisfy a rise in demand is to make it more accessible through tools like ETFs.
The fact that more and more individuals are creating on top of the core Bitcoin network is the second factor. The introduction of NFTs and fungible tokens to the Bitcoin blockchain earlier this year spiked demand for network capacity. Although these advancements are undoubtedly in their early stages, they offer a glimpse of a time when Bitcoin will help to regulate complex systems with a unique credibility in its impartiality.
Currently, Bitcoin is making an effort to enter the established financial system, but there is an exciting chance that it will challenge it on a much more fundamental level. For instance, “tokenization” — the creation of limited digital tokens that reflect ownership — could someday be the method by which traditional assets are owned in a decentralized manner as opposed to an ETF serving as a basket through which investors hold Bitcoin. This will decrease the predominance of fee-extracting intermediaries while simultaneously increasing transparency and the amount of available liquidity.
Bitcoin is only the beginning as an asset. The consequences of the second order will be enormous.