Regulators on the Verge of Approving First US Spot Bitcoin ETF, Anticipated to Have a Significant Impact
The crypto community is eagerly awaiting the approval of the first U.S. spot bitcoin exchange-traded fund (ETF) by regulators, as it could have a profound effect on cryptocurrency investors. According to experts, the potential approval of a spot bitcoin ETF in the United States is seen as a major milestone.
Last week, bitcoin soared to an 18-month high, reaching $37,970, following the footsteps of Blackrock, which took initial steps toward an ether ETF. Although the price of bitcoin has more than doubled since the beginning of 2023, it has yet to reach its peak from November 2021.
Several asset management firms, including Blackrock, WisdomTree, and Valkyrie, among others, are eagerly waiting for approval from the Securities and Exchange Commission (SEC) to issue a spot bitcoin ETF. Experts predict that the first approval could happen as early as 2024.
According to Bryan Armour, the director of passive strategies research for North America at Morningstar, a spot bitcoin ETF would be the ideal product for ETF investors. He emphasized that the current options available have inherent flaws to varying extents. Currently, U.S. investors can only purchase bitcoin futures ETFs, which possess futures contracts or agreements to buy or sell the digital asset at a predetermined price in the future. The long-awaited spot bitcoin ETF would directly invest in the digital asset itself.
Armour anticipates a batch approval from the SEC, with multiple ETF listings granted on the same day if a spot bitcoin ETF is approved. He believes that the SEC will likely rule on spot ETFs holistically since most issuers have adopted similar approaches in their applications. Armour expressed optimism regarding the approval, stating that the SEC seems to be taking the recent batch of filings more seriously.
While some crypto investors expect a rally in bitcoin’s price upon approval, Armour highlighted the possibility of a price dip as investors sell to secure their profits. He advised investors to consider their risk tolerance and investment goals before diving into the asset class. Ben Smith, a certified financial planner and founder of Cove Financial Planning, suggested that more aggressive investors with a higher risk appetite may consider including a spot bitcoin ETF in their diversified portfolios.
However, experts consistently recommend limiting exposure to cryptocurrencies to minimize downside risk. They suggest allocating only 1% to 5% of one’s portfolio to highly volatile and speculative assets like bitcoin. Despite the potential accessibility to the masses that an SEC-approved spot bitcoin ETF would offer, Armour stressed that bitcoin remains an extremely volatile asset.
A 2022 Nasdaq survey of 500 advisors revealed that 72% of financial advisors would be more inclined to invest in cryptocurrencies if spot ETFs were approved in the United States. This highlights the potential impact of such ETFs on the investment landscape.
As the wait for regulatory approval continues, the anticipation surrounding the first U.S. spot bitcoin ETF is palpable. Cryptocurrency investors are eagerly awaiting the potential approval and subsequent impact it could have on the market.
