The rise of cryptocurrency reached new heights in January 2024 when the SEC approved 11 Bitcoin spot ETFs. This monumental decision sparked a surge of global investors, resulting in nearly $5 billion in inflows on the first day of trading. With this crossover between traditional finance and digital assets, the market is now firmly established and poised for continued growth and opportunities. This marks the end of a decade-long struggle for legitimacy, showcasing the success of progress not only in blockchain technology itself but also in the public’s perception of money. It is clear that crypto is here to stay.
In the early years of Bitcoin, many native crypto investors believed that Wall Street needed Bitcoin, but not vice versa. This one-way love affair was true for a while, but mostly due to the lack of regulatory clarity worldwide.
The crossover from traditional finance to crypto has always been limited and cautious. Every time there was a market correction, experts from Wall Street were quick to declare “Bitcoin is dead” or “the bubble has finally burst.” However, research on Binance shows that the assumed death of Bitcoin has occurred over 400 times, yet every revival and bull run did not sway skepticism of this emerging technology. Traditional finance has finally woken up and accepted that the world has changed since the last global financial crisis and is now ready for crypto.
But now that the Bitcoin ETF has arrived, the crypto industry celebrates the milestone with mixed feelings. It has been quite a journey to get here. The ETF approval process began in 2013 with the launch of the Grayscale Bitcoin Trust. Gemini’s spot application in the same year was eventually rejected in 2017. Then, the first futures ETF launched in 2021, paving the way for an eventual spot approval this month.
Since the first approval, many early crypto investors have pushed back against the spot ETF. They continue to hold onto the belief of ‘not your keys, not your coins.’ Their concern is that the mainstream institutionalization that these ETFs represent will challenge the decentralization concept held dearly by many in the crypto community.
While it is important to be cautious about centralization, it is time for the Bitcoin industry to transform the existing outdated infrastructure and focus on welcoming more people to enjoy the benefits of digital assets. Let us not forget that one of the fundamental purposes of Bitcoin was financial inclusion and helping the unbanked. However, with the high cost of transaction fees on the Bitcoin network and the increasingly monopolized mining industry, the playing field has tilted to favor those with the most resources and scale of operations.
That said, Bitcoin has transformed into a stronger store of value, attracting both crypto and traditional finance. Institutional investors are rushing in to amass as much crypto as fast as they can. This is great for the industry to grow and mature, but the people that the technology was designed to help in the first place remain more or less as stuck as before.
Bitcoin has also faced numerous other challenges, from technical threats such as numerous forks and debates over increasing block size, to bans imposed by a number of nation-states. With the approval of the spot ETFs, the global regulatory environment has turned a corner, now feeling much more open and accepting of Bitcoin investors.
As Bitcoin becomes increasingly adopted by the mainstream in the form of various financial products, it delivers a rare opportunity to directly help those in need. From payment firms to green energy transitions, Bitcoin can help struggling economies by backing their foreign currency reserves and bringing in new investment opportunities through Security Token Offerings and Real-World Asset products. Other innovations can include the issuance of tokens that are pegged to Bitcoin or stablecoins for use in financial applications. The list goes on where Bitcoin can make an impact in people’s day-to-day lives by including them in a globally connected digital economy facilitated by blockchain technology.
Looking ahead to the next decade, the revolution to improve lives around the world through cryptocurrencies will continue. This industry, with Bitcoin at the helm, will continue to reshape an understanding of the changing macroeconomic environment, geopolitical risks, and most importantly, the challenging concept of money. The industry has achieved stunning growth and is already impacting the way we interact in society. Changing the world sometimes feels like a movie where you don’t know what the ending is, but it is every small step you take that makes you feel hopeful is all worthwhile.
This is a guest post by Yiwei Wang, with contribution from Nick Ruck, COO of ContentFi Labs. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Unlocking the Potential: The Decade-Long Battle for Legitimacy of Bitcoin ETFs
In 2008, a mysterious whitepaper was released by an unknown individual known as Satoshi Nakamoto, introducing a new digital currency called Bitcoin. Fast forward to over a decade later, and we have seen the rise and fall of Bitcoin, with its value reaching an all-time high of almost $64,000 in April 2021. Along with its rise in popularity and market value, there has been a growing demand for a Bitcoin Exchange-Traded Fund (ETF), which would allow investors to trade and invest in Bitcoin in a more regulated and traditional manner. However, the road to establishing a Bitcoin ETF has been a long and tumultuous one, with several regulatory hurdles and a decade-long battle for legitimacy. In this article, we will explore the history of Bitcoin ETFs and the ongoing efforts to unlock their potential.
Background of Bitcoin ETFs
Before diving into the battle for legitimacy, it is crucial to understand what an ETF is and its significance in the investment world. An ETF is a type of security that tracks the value of an underlying asset, such as stocks, commodities, or cryptocurrencies, and can be traded on a stock exchange. Simply put, it is a more traditional and regulated way to invest in assets without directly owning them. This feature makes them an attractive option for investors who may not be familiar with the complexities of buying and storing cryptocurrencies.
In 2013, when Bitcoin was still in its infancy, brothers Cameron and Tyler Winklevoss first filed for a Bitcoin ETF with the U.S. Securities and Exchange Commission (SEC). The twins are well-known figures in the crypto world, having been early investors in Bitcoin and co-founding the cryptocurrency exchange Gemini. However, their first attempt at a Bitcoin ETF was rejected by the SEC in 2017, citing concerns about fraud and market manipulation.
The Decade-Long Battle for Legitimacy
Since the Winklevoss brothers’ initial attempt, many other companies have also filed for Bitcoin ETFs in the United States, but to no avail. Some notable attempts include VanEck and SolidX’s joint proposal in 2017, which was also rejected by the SEC in early 2019. In October 2019, the SEC once again rejected Bitwise Asset Management’s proposal for a Bitcoin ETF.
The main reason for the repeated rejections of Bitcoin ETFs lies in the SEC’s concern with market manipulation and investor protection. The cryptocurrency market is highly volatile and lacks regulation, making it a prime target for price manipulation. Additionally, the SEC has expressed concerns regarding custody and valuation of Bitcoin, as well as the potential for fraud and cybersecurity risks.
However, many experts argue that ETFs would bring much-needed legitimacy and regulation to the cryptocurrency market, leading to increased stability and mainstream adoption. They also point out that other commodities such as gold and silver have successful ETFs, and Bitcoin should not be treated differently.
Recent Developments
Despite the repeated rejections, Bitcoin ETF proposals keep coming, and the fight for legitimacy continues. There have been some promising developments in recent years, with the SEC allowing the launch of two Bitcoin futures ETFs in late 2021. While these are not physically backed by Bitcoin, they represent a significant step towards a fully functioning Bitcoin ETF.
There is also hope in Canada, where regulators have approved several Bitcoin ETFs, including the world’s first physically backed Bitcoin ETF launched by Purpose Investments in February 2021. This ETF has seen great success, with over $1 billion in assets under management in its first week, solidifying the demand for a regulated and traditional way to invest in Bitcoin.
Another notable development is the partnership between VanEck, SolidX, and Cboe Global Markets, who have refiled their proposal for a Bitcoin ETF in December 2021. They hope to address the concerns raised by the SEC by structuring the ETF as a traditional fund, rather than a trust, and using regulated custodians to hold Bitcoin.
The Potential Impact of Bitcoin ETFs
If a Bitcoin ETF is eventually approved, it could have a significant impact on the cryptocurrency market. Some potential benefits of a Bitcoin ETF include:
- Increased mainstream adoption and interest in Bitcoin and other cryptocurrencies
– Enhanced market stability and reduced volatility due to increased regulation
– Easier access for institutional and retail investors
– Diversification of investment portfolios
– Facilitated cash settlement, simplifying the buying and selling process
Additionally, the added legitimacy and regulatory oversight of ETFs could potentially pave the way for more widespread adoption of cryptocurrencies in traditional finance and commerce.
Practical Tips for Investors
While it is still uncertain when or if a Bitcoin ETF will be approved, there are some things investors can do to prepare for its potential launch:
– Stay updated on the latest developments and keep an eye on SEC filings for ETF proposals
– Consider consulting a financial advisor to understand the potential risks and benefits of investing in a Bitcoin ETF
– Familiarize yourself with the processes and regulations surrounding traditional ETFs to get a better understanding of what a Bitcoin ETF could look like
– Educate yourself about Bitcoin and the cryptocurrency market to make informed investment decisions
In Conclusion
The battle for legitimacy of Bitcoin ETFs has been a decade-long struggle, with the SEC raising concerns about market manipulation and investor protection. However, there have been promising developments in recent years, and it seems only a matter of time before a Bitcoin ETF is approved in the United States. Once that happens, it could have a significant impact on the cryptocurrency market and pave the way for more mainstream adoption. As we wait for the SEC to make its final decision, investors can prepare themselves by staying informed and educating themselves about the potential benefits and risks of a Bitcoin ETF.
