The US approval process for crypto funds (Spot Bitcoin ETFs) sparked a major crash in the crypto markets on Wednesday. Recent optimism, which drove the bitcoin price up to 45,000 dollars, vanished suddenly. In just two hours, the market lost over 500 million dollars.
The Securities and Exchange Commission (SEC) in the US will decide by January 10th whether to approve the so-called Spot Bitcoin ETFs. These investment funds, based on crypto, don’t require investors to hold crypto directly.
Fourteen fund managers are competing for this sought-after approval, including major players like BlackRock, Grayscale, and Ark Invest. Their adoption of crypto could tap into a larger market and boost confidence. The past weeks’ optimism stemmed from the SEC’s intensive review of ETF applications. The SEC is updating the so-called S-1 prospectuses as needed.
However, Markus Thielen, an analyst at Matrixport, reported on Tuesday that the SEC would not approve any applications. He argues that Democrats mainly review the applications and that SEC Chairman Gensler opposes crypto. Thielen does acknowledge the possibility of approval in the second quarter.
Despite this, most analysts anticipate approval. Asset manager BlackRock reportedly has already bought 10 million dollars in bitcoin.
What is a Spot Bitcoin ETF ?
A Spot Bitcoin ETF (Exchange-Traded Fund) is a financial product that tracks the price of Bitcoin and is traded on traditional stock exchanges. It allows investors to gain exposure to Bitcoin without actually buying and holding the cryptocurrency themselves.
The key features of Spot Bitcoin ETFs are:
- Price Tracking: They track the spot price of Bitcoin, meaning they reflect the current market price of Bitcoin.
- Stock Exchange Trading: Unlike Bitcoin itself, which is traded on various cryptocurrency exchanges, Spot Bitcoin ETFs are traded on traditional stock exchanges. This makes them accessible to investors who are familiar with stock trading but less comfortable with cryptocurrency exchanges.
- No Direct Bitcoin Ownership: Investors in a Spot Bitcoin ETF do not own Bitcoin directly. Instead, they own shares in the ETF, which represents a portion of the fund’s Bitcoin holdings. This eliminates the need for investors to deal with the security and technical aspects of holding cryptocurrencies.
- Regulatory Oversight: ETFs are subject to regulatory oversight, offering a level of investor protection that might not be present in the direct cryptocurrency market.
Let’s see what the next week and months bring us.