The decision by the US securities regulator to approve the first US-listed exchange traded funds (ETFs) to track Bitcoin was welcomed on Thursday, and an expert said it could allow for more regulatory clarity and an influx of capital.
The CEO of the deVere Group, Nigel Green said the decision by the US Securities and Exchange Commission (SEC) was a groundbreaking move for Bitcoin and the cryptocurrency industry.
He said said that “this was a landmark moment for Bitcoin and could send prices sky-rocketing”.
Green said in his statement that the move “will boosts prices in the long-term, even if there’s a sell-off in the near-term”.
The US’s SEC approved 11 applications, including from BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck, according to Reuters.
According to the SEC, the new products will be allowed to be placed on US markets that would be run by the New York Stock Exchange, and Nasdaq.
This decision would offer investors exposure to Bitcoin without directly holding it.
According to CoinDesk, the new products allow any retail customer the ability to gain exposure to Bitcoin's price using their investment apps and accounts.
It will also grant traditional financial institutions the ability to invest without going through cryptocurrency exchanges.
Cynthia Lo Bessette, head of digital asset management at Fidelity said that these ETFs will give investors more choices.
REASONS TO BE OPTIMISTIC
He noted that there are a number reasons to be bullish for the long-term price trajectory, following the SEC approval.
Institutional validation is number one, he said, adding that the approval of Bitcoin ETFs represents a resounding institutional validation of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset.
Secondly, he noted that there will be an influx of capital.
“One of the primary catalysts for the anticipated surge in Bitcoin prices is the massive influx of capital that is expected to follow the approval of ETFs. These investment vehicles provide a convenient and regulated avenue for both retail and institutional investors to gain exposure to Bitcoin without the complexities of managing private keys or navigating unregulated exchanges,” Green said.
Third, there will be more accessibility and liquidity.
“Bitcoin ETFs help democratise access to the cryptocurrency market, allowing a broader range of investors to participate.
“Increased accessibility is likely to contribute to higher liquidity in the Bitcoin market, reducing price volatility and enhancing the overall stability of the cryptocurrency,” according to the analyst.
Lastly, Green noted that the decision will allow for market integration and more regulatory clarity.
“The approval of Bitcoin ETFs represents another significant step towards the integration of cryptocurrencies into the mainstream global financial system. Regulatory clarity surrounding these investment vehicles provides a framework for market participants to operate within established rules, promoting a more secure and transparent environment,” he said.
Green concluded that as regulatory uncertainties dissipate, more and more institutional and individual investors can confidently engage with the crypto market, further reinforcing the legitimacy of Bitcoin.
It is interesting to note that despite the news, the share price of Bitcoin has dropped when compared to Wednesday. At 10.10am on Thursday, Bitcoin share price was $46,086 (around R859,470). Wednesday, it traded as high as $46,926 (around R874,864).
It should be noted that by 1.30pm, Bitcoin share price was up to $47,083 (around R875,945), illustrating that the market may have welcomed the SEC decision.