A groundbreaking moment for the cryptocurrency industry is set as several bitcoin spot price-linked exchange-traded funds (ETFs) are scheduled to commence U.S. trading on Thursday. The long-awaited approval from the U.S.
Securities and Exchange Commission was granted on Wednesday, marking the end of extensive negotiations with major asset managers including BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck.
“The potential approval holds the promise of streamlining and enhancing the security of Bitcoin investments, potentially reshaping the landscape of cryptocurrency investments for a wider investor audience,” stated Rajeev Bamra, Senior Vice President of Digital Finance at Moody’s Investors Service.
Early premarket trading has commenced for BlackRock’s iShares Bitcoin Trust (IBIT.O) and Grayscale Bitcoin Trust. The VanEck Bitcoin Trust, Invesco Galaxy Bitcoin ETF, and ARK 21Shares Bitcoin ETF are anticipated to initiate trading shortly.
Competition for Market Dominance
The anticipated regulatory approval is poised to trigger fierce competition for market dominance among issuers who have preemptively reduced fees for these products significantly below the standard in the U.S. ETF industry.
Bernstein analysts project a gradual accumulation of bitcoin ETF flows, estimating a surpassing of $10 billion in 2024, with a trajectory toward reaching $80 billion by the end of the following year.
Describing the landscape, the brokerage noted, “Bitcoin ETFs are anticipated to become a highly competitive arena for asset accumulation, with 11 prominent asset managers simultaneously entering the market.
In the competitive landscape of ETFs, where all assets’ price-tracking ETFs aim to deliver uniform returns, market share is often dictated by fees. Some issuers have disclosed fees as low as 0.20%, with certain offers to waive fees for a specific period or until reaching a set asset threshold.
Bitwise, VanEck, and other ETF issuers are actively marketing their products, promoting bitcoin as a lucrative investment. Leading up to the SEC decision, bitcoin, the world’s largest cryptocurrency, surged over 150% in 2023, boasting a market capitalization exceeding $900 billion as of January 10, according to CoinGecko.
The potential SEC approval is anticipated to attract significant institutional inflows into the cryptocurrency market, as noted by Moody’s Rajeev Bamra. The SEC’s earlier rejection of all spot bitcoin ETFs raised hopes for a change in stance, especially after a federal appeals court ruled in favor of Grayscale’s application for a spot bitcoin ETF.
Cryptocurrency-related stocks, including bitcoin miners Riot Platforms and Marathon Digital, saw gains of 4.2% and 5%, respectively, in premarket trading. Notably, Microstrategy, a bitcoin investor, gained 2.5%, Coinbase, the crypto exchange, rose by 4.4%, and the ProShares Bitcoin Strategy ETF, tracking bitcoin futures, added 0.4%. Retail trader-focused brokerage Robinhood also experienced a 3% increase in its shares.