Ever since the collapse of FTX – one of the world’s largest cryptocurrency exchanges – in November 2022, the cryptocurrency market has been weathering quite the storm. Bitcoin and many other cryptocurrencies were left trading sideways, several other crypto exchanges came under intense regulatory scrutiny, and institutional interest largely fell by the wayside.
But, as the industry has continued to prove through years of volatility and change, it always seems to bounce back. And this time, it’s been spurred on by a rush of financial institutions pursuing Bitcoin ETFs.
On June 15, BlackRock announced it had filed an SEC application for a bitcoin spot ETF, which was followed shortly thereafter by a filing from Fidelity, Invesco, WisdomTree, and Valkyrie. And ARK Invest, which previously filed for a spot Bitcoin ETF in June 2021, amended its filing to make it similar to BlackRock. In total, seven institutional giants have now filed for a spot Bitcoin ETF to date.
In the past, the U.S. Securities and Exchange Commision rejected these products due to concern over volatility and potential manipulation. In fact, the regulator is currently in a legal battle with Grayscale over whether the firm will be allowed to convert its Grayscale Bitcoin Trust into an ETF.
However, a filing from BlackRock – the world’s largest asset management firm and provider of ETFs – has given rise to speculation that the SEC might finally relent and approve Bitcoin ETFs. It also helped push the world’s largest cryptocurrency to above $30,000 – its highest value in over a year.
What are Bitcoin ETFs?
A Bitcoin ETF is an exchange-traded fund (ETF) physically backed by Bitcoin. They work in much the same way as other ETFs in that they are traded on a traditional exchange, as opposed to a cryptocurrency exchange. Investors buy shares in the ETF through whatever brokerage they buy stocks, and can trade them the same way they’d trade shares in Apple or Tesla.
Bitcoin ETFs are particularly appealing, as investors don’t have to worry about private keys, storage, or security that comes from holding bitcoin directly. They own shares in the ETF just like their shares of stock and can gain exposure to the cryptocurrency market without having to go through the process of purchasing and holding crypto on their own.
As BlackRock’s filing said, “The Shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange.”
If these filings are approved, it would essentially bring Bitcoin to Wall Street, with Bitcoin ETFs traded through the same places as Tesla stock, bonds, gold, oil, or any other traditional asset.
While the SEC has yet to approve BlackRock’s filing, they have recently acknowledged its application for a Bitcoin ETF, signifying that the regulatory agency has started its formal review. While this is only the first step in a lengthy process, it’s a significant milestone for the Bitcoin community. If approved, it would certainly breathe new life into the cryptocurrency market, likely putting an end to a long crypto winter.
At the very least, BlackRock’s decision to file for a Bitcoin ETF highlights the growing acceptance and recognition of cryptocurrency within the traditional finance sector.