Bitcoin ETF Approved: What Now?
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On Jan. 10, the United States Securities and Exchange Commission (SEC) made a historic decision to approve the spot Bitcoin exchange-traded fund (ETF) for 11 investment management firms. This decision is a significant step towards the mainstream adoption of cryptocurrencies. The approval of the ETF opens up new opportunities for the typical investor, allowing them to gain exposure to Bitcoin by buying it on the US stock market, all without needing to directly own the digital asset. Notable financial institutions offering the Bitcoin ETF include BlackRock, Grayscale, WisdomTree, ARK Invest, and Fidelity.
The ETF surpassed $4.6 billion USD in trading volume on the first day of approval, with Grayscale's ETF accounting for $2.6 billion USD. However, the price of the digital asset was a stark contrast against the hype many institutional investors had before the SEC announced its decision. Many had expected the price of Bitcoin to recover to its former all-time high of $69,000 USD. However, Bitcoin dropped over 12 per cent, from $47,000 to $41,000 USD, within the first two weeks of approval. Investors sold more than $2 billion USD worth of the Grayscale Bitcoin Trust (GBTC) since the trust was converted from a closed-ended fund into an exchange-traded fund earlier this month. According to private data reviewed by CoinDesk and inside sources, a large amount of this sell-off was due to FTX's bankruptcy liquidating 22 million GBTC shares, worth around $900 million USD at the time.
Despite the sell-off, the price of Bitcoin recovered back to $52,000 USD in the first fiscal weeks of February. On Feb. 16, Markus Thielen, Head of Research for crypto platform Matrixport wrote, "Bitcoin appears to target $57,000 USD as its next resistance, and considering BTC's performance in the previous pre-halvings, the odds for another leg being higher are increasing." Bitcoin could run towards a $57,000 USD price target, Thielen wrote, citing strong liquidity and increasing demand for Bitcoin futures.
The price of Ethereum, the second largest crypto in terms of market capitalization after Bitcoin, broke through the $2,700 USD resistance on Feb. 15 for the first time since May 2022 as investors bet on the possibility of a spot Ethereum ETF approval in the US as early as Q3 of 2024. The SEC is expected to follow the strategy employed in approving spot Bitcoin exchange-traded funds for spot Ethereum ETFs, starting with rejections and granting approval on the initial final deadline of May 23, according to a recent report published by Standard Chartered Bank.