Securities and Exchange Commission Approves Spot Bitcoin ETFsDate Written: January 19 2024 Written By: Joseph Singer
Since the earliest days of crypto, the biggest challenge needing to be addressed has been how the average person can get involved. For many people the world of crypto is confusing and scary, made worse by constant fearmongering from the mainstream media. As Bitcoin becomes more of a household name, investor interest in the crypto has skyrocketed. Despite this, investor action has been tepid because there are no surefire ways of getting into crypto without taking on some sort of risk. For this reason, financial companies have been creating ETFs that are backed by Bitcoin.
For much of 2023 the hype surrounding Bitcoin ETFs was on the rise because of news that the Securities and Exchange Commission began looking into the application for quite a few of these Bitcoin ETFs. Last week, the SEC announced the approval of Bitcoin-backed ETFs, signaling a big victory for proponents of crypto in the US and around the world.
What Does This Mean for Bitcoin?
Fundamentally, the decision by the SEC to allow for the trading of Bitcoin-backed funds in the US does not change anything about Bitcoin itself. Instead, the widespread belief is that this decision is yet another move by cryptocurrency into the mainstream. For years, people like JP Morgan’s Jamie Dimon and others have said that crypto will have no place in the modern US financial system. Whether pointing to scams, money laundering, or any host of other “issues”, the talking heads of the US financial sector have seldom said anything positive about Bitcoin.
Now, we are seeing many of these same people remain silent in the wake of the SEC decision last week.
For those who might be wondering, an ETF, or Exchange Traded Fund, is an investment vehicle that functions much like a stock. As opposed to a stock, an ETF is a single investment vehicle comprised of many, usually from a specific industry or sector. For example, there are precious metals ETFs that allow people the opportunity to invest in many gold, silver, and other precious metals companies. Instead of buying stock in one gold company, and stock in another silver company, ETFs will have both of these companies and more rolled into one. Not only does this approach help reduce investor risk, it allows for the diversification of an investment portfolio.
There have so far been 11 Bitcoin-backed ETFs approved by the SEC, but there are many more lying in wait that are expected to hit the market sometime in 2024. As for what this means for the future of Bitcoin, there is no clear way to say. In the United States however, one can reasonably expect that an increasing number of people will buy into crypto thanks to the introduction of these Bitcoin ETFs. People who otherwise would have never touched Bitcoin may buy an ETF, enjoy their investment experience, and decide to delve a bit further into the world of crypto. No matter what way you flip it, this is a net positive for the crypto community in the United States and worldwide.