The moon only looks like it is made of gold, but is not made of the precious metal. Good for gold’s stock-to-flow ratio. Image by Dan Meineck via License: Creative Commons

It was the perfect surprise: the fake news about the ETF approval was followed a day later by the actual approval.

So now, seriously, it has happened: The US Securities and Exchange Commission has approved a variety of Bitcoin spot ETFs, and they are expected to hit exchanges this week.

A “spot ETF” means that the security reflects the so-called “spot price” of Bitcoin, i.e. the price at which Bitcoin is traded on exchanges, in contrast to future ETFs, for example.

The official approval explains that several exchanges, such as New York’s Nasdaq and Chicago’s Cboe and BZX, have registered a variety of ETFs:

  • Grayscale Bitcoin Trust
  • Bitwise Bitcoin ETF
  • Hashdex Bitcoin ETF
  • iShares Bitcoin Trust
  • Valkyrie Bitcoin Fund
  • ARK 21Shares Bitcoin ETF
  • Invesco Galaxy Bitcoin ETF
  • VanEck Bitcoin Trust
  • WisdomTree Bitcoin Fund
  • Fidelity Wie Origin Bitcoin Fund
  • Franklin Bitcoin ETF

“This decision,” the document explains, “authorizes applications on an expedited basis.” After the SEC blocked every ETF for around ten years, it now seems to have suddenly become urgent.

But that’s not the only strange thing about this approval. It starts with the fact that just last night, after its Twitter account was hacked, the SEC wrote that it did not approve ETFs and has not corrected that tweet today.

She must have known last night that approval was imminent. Then why did she claim the opposite? She could have phrased it differently. And is it really just a coincidence that the account was hacked exactly one day before the approval in order to invent it?

Then there are the statements from SEC boss Gary Gensler and his counterpart, SEC Commissioner Hester M. Peirce. They replace the previously missing official press release and are both irritatingly opinionated. Gensler, on the one hand, leaves no doubt that he approved the ETF reluctantly and under pressure, while Peirce makes no secret of the fact that she is still outraged that the ETF has only now been approved.

Admission with teeth grinding

Gensler explains that the SEC has rejected more than 20 ETF applications since 2018 and acknowledges that the applications now approved are “similar to those we previously rejected. However, circumstances have changed.” By this he does not mean that the Bitcoin markets have become more regulated, transparent and orderly – which he had previously called for – but that a US court “ruled that the SEC failed to adequately explain why it did so.” rejected the ETF proposed by Grayscale.”

It was not persuasion, but legal pressure that brought about the turning point. After all, Gensler continues, an ETF also has advantages. Investors can already invest in Bitcoin in numerous ways today. With the approval of ETFs, they now enjoy greater protection as ETFs are subject to strict information requirements, traded on fully regulated exchanges and are thoroughly monitored by the SEC.

After this rather grudgingly made concession, Gensler emphasizes what the approval does not mean: Firstly, it “in no way means that the Commission is prepared to approve such applications for other crypto asset securities.” Gensler emphasizes again that the vast majority of crypto assets are “investment contracts and fall under the federal securities law.” By definition, they cannot become the basis of an ETF.

Second, approval does not mean that the SEC approves or endorses Bitcoin. “While the underlying assets of metal ETFs have applications for users and businesses, Bitcoin is primarily a speculative, volatile asset that is also used for illegal activities, including ransomware, money laundering, sanctions evasion and terrorist financing.”

There’s a bit of bitterness about this lost battle, right? But Gensler’s counterpart, the liberal, crypto-friendly Hester M. Peirce, reacts no less bitterly to this victory.

“No compensation for past damage”

Hester Peirce writes that the Commission finally approved the spot ETF registrations after a decade, and had it not been for the court’s ruling, it would have taken even longer.

The damage caused by the SEC’s hesitation is immense. It has “driven private investors to less efficient means of investing in Bitcoin,” such as shares in companies that hold or mine Bitcoins. The commissioner complains that the SEC has already approved an ETF on Bitcoin futures in 2022, even though it is more complex and difficult to manage than a spot ETF.

Even now, Peirce complains, that the SEC has changed its mind, it is not admitting fault but resorting to weak excuses. And the approval itself was noticeably reluctant, as can be seen from the fact that the SEC requires a correlation test, which it does not do for other ETFs, and only allows settlement in cash, i.e. in dollars.

Therefore, she concludes, “today’s decision does not make up for the harm caused by the unfair treatment of spot Bitcoin products.” That doesn’t sound particularly happy.

“We expect a Bitcoin price of $100,000 by the end of the year”

The Bitcoin price doesn’t seem particularly happy either. While he briefly exploded after the fake tweet, he received the actual approval with equanimity. You have to look very carefully to find any movement at all. The price was 41,700 euros 24 hours ago, today it is almost 42,200. In between, it dropped to 40,850 euros and rose to 43,400. Everything in the usual channel.

This raises the question of whether a Bitcoin ETF is a huge nothing burger, two sticky slices of bread with a huge nothing in between, because everyone has already bought Bitcoin and the ETF effect has long been priced in.

Coindesk magazine contradicts this. On the occasion of the approval of the ETFs, it is a reminder of the impact that the introduction of gold ETFs had on the price of gold two decades ago. Even before that, anyone who wanted could invest in gold, directly, in coins and bars, or even through papers on stored gold. The ETF still had an enormous effect.

“The price of gold has more than quadrupled in the seven years since its launch in 2004,” explains Coindesk, quoting an expert from the bank Standard Chartered as expecting “that Bitcoin will enjoy price gains as a result of the approval of a sports ETF in the USA be of a similar order of magnitude.” However, he assumes that these profits will materialize over a shorter period of time, around one to two years. The bank expects Bitcoin to rise to $100,000 this year.

We are excited.


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