InvestorsHub Logo


01/10/24 9:34 PM

#173 RE: gfp927z #164

>>> SEC ends crypto drama by giving the green light to 11 bitcoin ETFs

Yahoo Finance

by David Hollerith and Jennifer Schonberger

January 10, 2024

The moment the crypto world wanted finally happened Wednesday. And this time it was for real.

Regulators on Wednesday gave money managers the green light to launch 11 spot bitcoin exchange-traded funds, allowing everyday investors to get exposure to the world’s largest cryptocurrency without having to own it.

The ETFs, which begin trading Thursday, could make bitcoin a potential staple in 401(k)s, IRAs, and pension plans and give it mainstream acceptance.

The Securities and Exchange Commission made the announcement roughly 24 hours after a fake social media post claimed those approvals had already been granted.

The chaos triggered by that unauthorized post on X reverberated from Wall Street to Washington while attracting new scrutiny to the SEC, a longtime foe of the industry that is still in the middle of a widespread crackdown on some of crypto’s major players.

The price of bitcoin seesawed Tuesday and Wednesday as investors tried to make sense of the mishap, which erased tens of billions in market value in just minutes.

SEC Chair Gary Gensler made it clear in a statement Wednesday that his agency "did not approve or endorse bitcoin" when it signed off on the new products and called Wednesday's announcement "the most sustainable path forward" following a key court defeat on this issue last summer.

"Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto," he said in his statement.

One SEC commissioner, Caroline Crenshaw, published a dissenting opinion that called the agency's actions "unsound and ahistorical."

"I am concerned that these products will flood the markets and land squarely in the retirement accounts of US households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets," she said in her statement.

The SEC has rejected such applications in the past, arguing the products were vulnerable to market manipulation.

The list of applicants approved by the SEC Wednesday included some of the biggest names on Wall Street, from BlackRock (BLK) to Franklin Templeton (BEN), as well as a number of firms better known in the crypto world.

These issuers competed with one another in the run-up to their launches to offer the lowest fees, hoping to attract as many investors as possible once ETFs begin trading.

Other big Wall Street players plan to be part of the action, as well. JPMorgan Chase (JPM) and Goldman Sachs (GS) are among the giant banks that have offered to help some of these money managers create and redeem shares of their new funds.

Optimism about these approvals helped bitcoin surge 164% in 2023 and start 2024 by rising above $47,000, its highest level in nearly two years.

A decade in the making

The crypto industry has been waiting more than a decade for this moment.

The first application to create a spot bitcoin ETF came in 2013 from crypto entrepreneurs and twins Tyler and Cameron Winklevoss, famous for their early role in the creation of Facebook.

Since then, the SEC has denied more than 30 similar applications.

A key turnaround moment came last year in June when the world’s biggest money manager, BlackRock, filed for a spot bitcoin ETF. The interest from one of Wall Street’s biggest names sparked other asset managers to follow suit.

Another important development came last August when one of the ETF applicants, Grayscale Investments, won a key legal victory over the SEC. Grayscale had sued the SEC in 2022 after it wasn't allowed to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin offering.

Its core argument was that the agency had already approved exchange-traded products that held bitcoin futures contracts and thus had "acted arbitrarily and capriciously."

A three-judge panel of the District of Columbia Court of Appeals in Washington sided with Grayscale, saying the firm had "advanced substantial evidence" its product was similar to bitcoin futures ETFs previously approved by the SEC.

That forced the SEC to reconsider Grayscale’s spot bitcoin ETF application, along with others filed by rival money managers.

"We are now faced with a new set of filings similar to those we have disapproved in the past," Gensler said in his statement Wednesday. "Circumstances, however, have changed."

One of the applicants, Ark Investment Management CEO Cathie Wood, told Yahoo Finance that the dominant providers of spot bitcoin ETFs will be those that take in the most money from investors right out of the gate.

The winners "will be a few and it will be the most liquid," she said.

Historically, launches for other bitcoin products have sent bitcoin’s price on a wild ride.

It happened in 2017 with the launch of the country’s first bitcoin futures contracts and then in 2021 with the SEC’s approval of the first bitcoin futures ETFs. Prices soared and then fell by large amounts in the year following the launches.

In recent weeks, much debate has raged over whether bitcoin will rise or fall once the lauded moment of approval comes to pass.

Gautam Chhugani, managing director of the research arm for Bernstein, said his team estimates such financial products will garner $10 billion or more in investment flows through the end of 2024 and "hundreds of billions of dollars" over a two-year period.

That, he added, will help push bitcoin’s price even higher.

"We do think that bitcoin goes to $150,000 by 2025," Chhugani added.