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11 Years in the Making – A U.S. Based Spot Bitcoin (BTC) ETF is Finally Here

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It is official: the SEC has finally approved a spot Bitcoin ETF.  In doing so, the floodgates for institutional capital to pour into the digital asset ecosystem have officially been opened.

News of the decision comes after an unauthorized communication was disseminated through the official X.com account of the Securities and Exchange Commission on Tuesday evening.

Source: X @SECGov

The event raised ire in many as, in the past, the SEC has warned people to be “careful what you read on the internet. The best source of information about the SEC is the SEC”.  In allowing this to happen, many question the efficacy of the agency's task of protecting investors when it did not have the foresight to enable two-factor authentication (2FA) on its accounts.

With that being said, this event was simply a hiccup, with the decision to approve spot Bitcoin ETFs now officially made public.

ETF Begrudgingly Approved

Despite the approval, SEC Chairman Gary Gensler still took the time in his official statement to announce the decision to condemn Bitcoin – mere sentences after stating that the agency is merit neutral.

“Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. 

While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin” – SEC Chairman, Gary Gensler

Needless to say, this statement sums up the approach taken by the SEC under Chairman Gensler since he attained his position.

Celebration in the Face of Obstruction

Unsurprisingly, Commissioner Hester Peirce had a different take on the situation, going as far as stating that the SEC's actions towards the digital asset industry over the past decade has “driven retail investors to less efficient means of attaining bitcoin exposure in the securities markets”.  She continues, stating that rather than admitting error, the Commission “…offers a weak explanation for its change of heart”.

The following are a few of the ramifications Commissioner Peirce listed resulting from the SEC's treatment of the industry.

  • a decade of lost job opportunities
  • a tarnished reputation for the SEC
  • waste staff resources and millions of dollars attempting to block ETPs
  • confused the public about the SEC's actual role
  • manifested a ‘frenzy' around the asset
  • alienated a generation of product innovators

Rather than closing out her statement further condemning the industry, Commissioner Peirce had the following to say.

“Although this is a time for reflection, it is also a time for celebration. I am not celebrating bitcoin or bitcoin-related products; what one regulator thinks about bitcoin is irrelevant. I am celebrating the right of American investors to express their thoughts on bitcoin by buying and selling spot bitcoin ETPs. And I am celebrating the perseverance of market participants in trying to bring to market a product they think investors want.

I commend applicants’ decade-long persistence in the face of the Commission’s obstruction.” – Commissioner, Hester Peirce

This take is also unsurprising, as Commissioner Peirce has, on multiple occasions over the years, issued statements of dissent stemming from the SEC's treatment of digital assets.

The ETF Chosen Few Race to the Bottom

Now that the ETF is here, you can find those with active applications below, with the fee schedule and entry waivers on offer by each below.

IssuerFeesEntry Waivers
Ark 21Shares Bitcoin ETF0.21%0% fees for first 6 months or $1B AUM
BitWise Bitcoin ETF0.20%0% fees for first 6 months or $1B AUM
iShares Bitcoin Trust (Blackrock)0.25%0.12% fees for first $5B AUM
Fidelity Wise Origin Bitcoin Fund0.25%0% Fees until July 31st, 2024
Franklin Templeton Digital Holdings Trust0.29%N/A
Grayscale Bitcoin Trust1.50%N/A
Hashdex0.90%N/A
Invesco Galaxy Bitcoin ETF0.39%0% fees for first 6 months or $5B AUM
Valkyrie Bitcoin Fund0.49%0% fees for first 3 months
VanEck Bitcoin Trust0.25%N/A
WisdomTree Bitcoin Fund0.30%0% fees for first 6 months or $1B AUM

While there was a clear race to the bottom leading up to the ETF approval, with regard to fees, it is interesting to note that Grayscale has decided to not take part.  Instead, the Grayscale ETF is up to 1.26% higher than various others.  This should be interesting to monitor moving forward to see if there is an exodus of pre-existing clients of its BTC Trust to cheaper options or if existing liquidity draws in more.

Setting Its ETF Apart

Interestingly, while various applicants are in a clear race to accrue as many clients as possible out of the gate by reducing fees to nearly nil, one company has taken a novel approach that should help it gain sway with Bitcoin enthusiasts – VanEck.

Leading up to the approval, VanEck let it be known that for the first 10+ years, it would be donating 5% of profits generated through its ETF to Bitcoin core developers, reinjecting capital into the very system many are set to profit from.  While time will tell if this amounts to anything noteworthy, it is definitely an interesting approach that should set its ETF apart from others that do not necessarily have the best interest in the network at heart.

What to Expect in the Short-Term?

As mentioned, this approval is a significant event for Bitcoin.  While the entrance of institutional investors into the Bitcoin ecosystem may not line up with the original ethos of the network, it is a clear and notable step towards mainstream adoption. If Bitcoin will ever provide the masses with access to a global, decentralized, and finite asset that can be used as a store of value and as a payment mechanism, such steps are necessary.  With that in mind, what can we expect moving forward now that the approval is here?

Sell the News?

With the ETF approval finally granted by the SEC, the vast majority of the market expects some price volatility.  The question is whether this volatility swings to the upside, or the down.

If rumors are true, Blackrock alone may already have upwards of $2B in investments waiting in the wings, ready to click ‘buy' when trading goes live.  This alone is enough to move the market, not taking into account demand through the various others and an overall fear of missing out (FOMO) among market participants.  The SEC itself has recognized the potential for this scenario to occur, sharing its own warnings to avoid succumbing to FOMO.

On the other hand, the ETF could fall flat and be nothing more than a ‘buy the rumor, sell the news' event.  If this turns out to be the case, BTC and the broader digital asset market may experience significant short-term downside as speculators capitalize on profits made during the run-up in the price of BTC before approval.

ETF Marketing Mania

The early bird gets the worm – meaning that the first to establish itself among its competitors will eat well.  The aforementioned ‘race to the bottom' with regard to fees is an example of this.

Fees are not the only way of achieving dominance within a competitive market.  In the coming days and months, there will be a concerted effort on behalf of the marketing departments behind each of the ETF issuers to attract clients to its own offering.  In fact, this marketing push already began weeks ago with the release of various commercials from ETF filers like Bitwise, touting BTC as the asset of the future.

This is particularly notable as Bitcoin is not run by a company or any one entity.  This means that it does not have a marketing department – making its resistance and growth since inception even more impressive, as the asset has managed to get where it is today on, essentially, nothing more than organic growth.  With a sudden interest being paid to Bitcoin by large asset managers, many expect this growth to find another gear.

What to Expect in the Mid-Term?

Part of the hype behind the now-approved ETF is the fact that it is not the only potential watershed moment set to occur in 2024 but just a kicking-off point.  As such, there may be significant demand for such products as investors look to establish a position before the next events are set to occur.

The following are a pair of examples of these events, each set to occur in 2024, that look perfectly timed to build upon one another.

Halving

With modern governments continually devaluing FIAT, eroding one's purchasing power by the day, it is unsurprising that one of the main draws toward Bitcoin is its finite nature; there will only be 21 million BTC – no more, no less.  Of further note is Bitcoin's scheduled emissions – meaning the amount of BTC released into the world each day is a known quantity and does not fluctuate based on the whims of a government entity.

These emissions are of particular note in 2024, as the next halving set to take place – an event that occurs every ~4yrs, and sees block rewards cut in half – will bring Bitcoin's daily emissions lower than Gold.  While past halving events have all been followed by marked price jumps, this particular occurrence is expected to be more significant as it will further cement Bitcoin's status as a store of value like Gold, albeit with significantly more utility and less manipulation.

Financial Accounting Standards Board (FASB)

Aside from a select few companies like MicroStrategy and, to a minor extent, Tesla, Bitcoin has not yet seen major adoption among company treasuries.  Part of the reason for this is how the asset must currently be reported among holdings.  However, this is set to change as the FASB has announced that it will soon adopt a ‘Fair Value' accounting system for the asset that will allow companies to accurately report the value of their holdings with up-to-date metrics.

While this may seem trivial to the average person, it is anything but.  The change will allow companies to avoid taking impairment charges on BTC holdings and not be required to sell to benefit.  Essentially, the asset becomes significantly more palatable for a company to hold on its balance sheet by facilitating the reporting of unrealized profits/losses, making the best-performing asset of the past decade even more appealing.

This shift in rules is set to occur in early 2025

Final Thoughts on the ETF

There you have it; a U.S.-based spot Bitcoin ETF is finally here.  It took 11 years, scores of denials, and a high-profile court case to get here, but it has arrived.

While there will most likely be short-term market turbulence as the playing field recalibrates, the event is only one of multiple set to occur this coming year that could reshape how the world views digital assets like Bitcoin.  Although the asset would be just fine without an ETF, continuing to march along like it always has, the entrance of names like Fidelity and Blackrock gives BTC an air of legitimacy – and acknowledgment of its efficacy as both a store of value and payment system – in the eyes of older generations that have yet to be swayed.

Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology.