Bitcoin ETF approval in the spotlight: SEC decision sparks Crypto market resurgence

As anticipation builds for potential approval of Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC), the cryptocurrency market is experiencing a resurgence. Triggered by BlackRock's spot Bitcoin ETF application and Grayscale's legal victory, the SEC's resistance seems to be waning. With the deadline approaching, investors eagerly await the SEC's decision, which could open the door for broader participation in the crypto industry. The move from futures-backed to spot Bitcoin ETFs signals a pivotal shift, overcoming regulatory concerns about volatility and manipulation..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Why Crypto and Wall Street Are Longing for Spot Bitcoin ETFs.By Olga Kharif and Vildana Hajric.Anticipation of a new wave of investors has Bitcoin booming once again, ahead of indications that the US is gearing up to approve exchange-traded funds that invest directly in the cryptocurrency. ETFs, as they're known, have become enormously popular among US investors. For years, the US Securities and Exchange Commission routinely rejected these types of crypto-centric products, citing wariness over volatility and potential manipulation. But the SEC's resistance appears to be weakening, and the market has been closely watching as a Jan. 10 deadline approaches for the regulator to act on at least one application..___STEADY_PAYWALL___.1. Where do things stand?.The world's biggest asset manager, BlackRock Inc., filed an application for a spot Bitcoin ETF last June. That led to a major crypto market rally and a flurry of similar ETF applications and resubmissions from issuers including Fidelity Investments, Invesco and WisdomTree. Momentum grew when Grayscale Investments LLC won an Aug. 29 court ruling in its push to turn its Bitcoin trust into an ETF. On Oct. 13, the SEC said it wouldn't fight the ruling, and after a federal appeals court finalized it, Bitcoin surged to $35,000 for the first time since May 2022. Investors, analysts and market-watchers are awaiting the SEC's next move..2. What is a Bitcoin ETF?.ETFs, a $7 trillion industry, are part of a broader family of products known as exchange-traded products, though people frequently use "ETFs" to refer to all of them since they are by far the largest and most popular category. Crypto-native firms and major Wall Street financial institutions alike are trying to launch a kind of ETF that actually holds Bitcoin, as opposed to the products that invest in Bitcoin futures. (Futures are contracts to buy or sell an asset at a specified price at a later date.) Futures-backed Bitcoin ETFs have been available to US customers since 2021, but the SEC hasn't approved any applications for so-called spot Bitcoin ETFs. Issuers and investors are advocating for spot Bitcoin ETFs to be similarly accessible to retail and institutional investors in the US, a development that's perceived as having the potential to greatly broaden participation in the cryptocurrency industry..3. What's been available before now?.The ProShares Bitcoin Strategy ETF became the first Bitcoin futures ETF available in the US, opening on Oct. 19, 2021, to strong demand. The Purpose Bitcoin ETF (ticker BTCC) made its debut in Toronto in early 2021; it invests directly in "physical/digital Bitcoin," according to its issuer, Purpose Investments Inc. In June, issuer Volatility Shares launched a leveraged Bitcoin-futures ETF. Multiple Ether-futures funds debuted in October. Meanwhile, several US investment trusts have been following Bitcoin in a manner that's similar to ETFs but with certain restrictions. The Grayscale Bitcoin Trust (ticker GBTC) is physically backed, meaning that it holds Bitcoin..4. Why did regulators shun a Bitcoin ETF for so long?.In addition to their worries about liquidity and manipulation, regulators have expressed concern that Bitcoin's volatility might be too intense for ordinary investors — Bitcoin's last three full-year returns were gains of 305% in 2020, up another 60% in 2021, followed by a loss of 64% in 2022. The SEC has also questioned whether funds would have the information necessary to adequately value tokens like Bitcoin, including whether they can validate who owns the underlying coins. In 2021, SEC Chairman Gary Gensler testified to the Senate Banking Committee that the lack of regulatory oversight and surveillance in crypto markets led to "concerns about the potential for fraud and manipulation." In an attempt to allay some of the SEC's concerns, BlackRock and other issuers following in its footsteps have proposed so-called surveillance-sharing agreements, a way to mitigate the risk of market manipulation and fraud. Coinbase Inc., the only publicly traded, pure-play spot-crypto exchange in the US, has emerged as ETF issuers' market surveillance partner of choice. .Read also:.Bitcoin rollercoaster as price swings on false SEC approval claim for ETFs🔒 Central Banks across the globe are set to navigate a year of interest rate cuts in 2024Crypto firms leap forward as SEC gives Green Light for spot-Bitcoin ETFs.The Reference Shelf.A Bloomberg story on Bitcoin's unforeseen 2023 resurgence.A beginner's guide to buying Bitcoin.QuickTake explainers on Bitcoin, stablecoins and central bank digital currencies.The Investment Company Institute explains ETF history and basics..© 2024 Bloomberg L.P.

Bitcoin ETF approval in the spotlight: SEC decision sparks Crypto market resurgence

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