Baisakhi MishraThe first exchange-traded fund connected to Bitcoin made its stock market debut this week, marking a big step forward in cryptocurrency’s mainstreaming. Simply said, anyone with a brokerage account will be able to purchase and sell Bitcoin-backed financial products on the stock market shortly.
This comes after years of US financial regulators avoiding the highly volatile cryptocurrency. However, it appears that the government is now willing to attempt new ideas.
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The debut was a huge success. The ETF surpassed $1 billion in trading volume on its first day after ProShares, the Maryland-based business behind it, rang the bell at the New York Stock Exchange on Tuesday morning.
This makes it one of the most successful ETF debuts ever. The price of bitcoin rocketed over its all-time high of $64,895 to a new high of $66,975 later that day. Experts don’t appear to be surprised.
Eric Balchunas, a senior ETF analyst at Bloomberg, told me, “It was a blockbuster, smash, home run launch.” “This adds a lot of credibility and visibility to the crypto world.”
An exchange-traded fund, or ETF, is a portfolio of securities that are linked to the price of assets such as stocks, bonds, or commodities and may be bought or sold on stock exchanges by anyone with a brokerage account. An ETF linked to Bitcoin is, of course, related to the price of Bitcoin, and all new ETFs are required to register with the Securities and Exchange Commission under the Investment Company Act of 1940.
This is significant because the agency’s approval of a bitcoin ETF signals that it is willing to allow more cryptocurrency-related products to be traded. While the SEC has previously rejected cryptocurrencies as securities, the recent development shows that it is reconsidering its position.
Regardless of the nitty-gritty technicalities, this new Bitcoin-based ETF is significant. For years, the Bitcoin community has wished for a financial product like this, but regulators have been wary of approving one. Cameron and Tyler Winklevoss proposed the first Bitcoin-based ETF in 2013, but the Securities and Exchange Commission (SEC) rejected their first application four years later — and again in 2018 — citing the cryptocurrency market’s volatility.
The SEC has postponed judgments on several Bitcoin-based ETFs since then, but it is presently reviewing several fresh proposals, which are subject to a 75-day review period after companies file them. The funds can begin trading if the SEC does nothing, as it did in the case of ProShares.
The SEC review periods for cryptocurrency-based proposals from other businesses, such as Valkyrie Investments, Invesco, and VanEck, will also finish in the coming weeks.
Balchunas noted, “It’s not like this particular ETF is going to bring in hundreds of billions of dollars or whatever.” But it’s a critical moment because “it’s a bridge to this whole other world that probably isn’t into crypto but might grow to be now that it’s being presented in the format they want.”
To put it another way, there will be more crypto-based ETFs on the horizon. And if Gensler sees that these new financial products are being traded without incident, his SEC may open the door to many more, including ones that contain cryptocurrencies like Bitcoin and Ethereum. The existence of these ETFs not only makes it easier to invest in cryptocurrency. It also means bitcoin has more in common with gold than it has in the past.
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Also read: Bitcoin Hits New Record High of $66,974