Why a Spot Bitcoin ETF Matters to Asset Managers and Investors
The past six months have been a rollercoaster ride for the development of a U.S.-based spot Bitcoin ETF. Rewinding to October 2021, the first Bitcoin Futures ETF received SEC approval (ProShares, ticker: BITO) which allowed investors to gain exposure to Bitcoin through futures contracts. However, the first Bitcoin Futures ETF approval in the U.S. was a singular step in what has been a gradual and cautious approach by regulatory bodies towards integrating cryptocurrencies into the traditional U.S. financial system.
While the Securities and Exchange Commission (SEC) has yet to give its final approval for a spot Bitcoin ETF, analysts at Bloomberg Intelligence estimate a 90% chance of such an approval by January 10, 2024. Market speculation has been rife, especially with BlackRock preparing to seed its iShares Bitcoin ETF. Spot Bitcoin ETFs are already available in Canada and Europe, but the U.S. market remains a significant untapped potential. Companies like Grayscale, Fidelity, Invesco, and others have submitted applications for a Bitcoin ETF, but they are still in the waiting game. The potential impact of a U.S. spot Bitcoin ETF is enormous, with estimates suggesting it could attract $14 billion in investor inflows in the first year alone.
Figure showing Assets Under Management (AUM) of top global investment firms (8 of 10 based in U.S.)
Key Takeaways for Asset Managers:
Regulatory Landscape: The SEC has yet to approve a U.S.-based spot Bitcoin ETF, but the chances are high, according to Bloomberg Intelligence. It's crucial to keep an eye on regulatory developments as they will significantly impact the investment landscape.
Market Impact: BlackRock and other major firms are already preparing for the imminent approval of a Bitcoin ETF. This speculative behavior could influence Bitcoin's price and market dynamics in the short term. For example, Bitcoin is up over 22% in the past 30 days.
Figure showing change in Bitcoin price October, 2023
Global Context: While spot Bitcoin ETFs are available in other markets like Canada and Europe, the U.S. remains a significant player in financial markets. The approval of a U.S.-based spot Bitcoin ETF could have a ripple effect on global Bitcoin investment and regulation.
As a registered investment advisor, understanding these developments is crucial for advising clients on potential investment opportunities and risks in the evolving digital asset space.
