We believed that bitcoin could change the world, and we were and remain excited at the prospect of democratizing access to this asset”
–Grayscale CEO Michael Sonnenshein
Overview
Grayscale investment CEO made this statement on historical approval of Bitcoin ETFs by SEC. It was a lengthy battle to reach this milestone, but on January 10, 2024 this this defining moment took place, which was also called “The watershed of crypto market”. SEC has approved 11 application on this case including some big fishes of Financial world i.e. BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck. Don’t Forget the application of Grayscale was rejected by SEC firstly, after approaching federal appeals court rules in August that the decision made by SEC was “arbitrary and capricious”
Critics’ Corner: Assessing the Perspectives
The federal court ruling put plenty of pressure that monitory institutions needs to reconsider their decision, The Statement made by the Chair of SEC was quite contrary as he is assumed to be a critic of crypto, some of them are:
“The step should not be seen as an endorsement of cryptocurrencies from the US market regulator”
Gary Gansler
“In light of the court ruling, approving the products was “the most sustainable path forward,” but added the agency did not endorse bitcoin, calling it a “speculative, volatile asset” also used to fund crime”
Gary Gansler
“No way” a signal that the SEC would be easing up on its crackdown on crypto players it says are flouting its laws”.
Gary Gansler
While we approved the listing and trading of certain spot bitcoin ETF shares today, we did not approve or endorse bitcoin”.
Gary Gansler
“Remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto”.
Gary Gansler
That isn’t all, Gansler; a democrat join with two republican commissioners of SEC to vote in favor while other two democrats vote against it. Caroline Crenshaw, cited investor protection worries. Some other influential individuals have made critic statements such as;
Bitcoin was still vulnerable to crypto fraudsters and said approving the ETFs was a “historic mistake.” The SEC’s action today has changed nothing about this worthless financial product: bitcoin and crypto still have no legitimate use”.
Dennis Kelleher, CEO of investor advocacy think tank Better Markets
“unsound and ahistorical” The SEC’s actions could further “sacrifice investor protection.”
-commissioner Caroline Crenshaw
Embracing Optimistic Views on approval by SEC
As we all know Bitcoin have always being a controversial topic for everyone, Retail investors wanted to invest in it but afraid of being scammed or trapped in some kind of exchange fraud. Every security, treasury bill, bond or other financial instruments required to be backed by credible financial institutions and state. Such backing grant confidence to investors that their investment is in secure hands. Incase of Bitcoin which was available for institutions firstly but not individual investors, this decision was much needed and indicates the diversifying markets from traditional ways and granting fresh opportunities.
Along with critics some optimistic responses have been witnessed on this occasion, such as;
“The introduction of these ETFs by traditional institutions will inject significant liquidity into the sector”
“Instead of having to think about creating a wallet, memorizing 12-word seed phrases and holding their keys, this product scraps all of that and provides a well-known path”
– Rita Martins, a financial services executive, advisory board member, and author
“It’s a huge positive for the institutionalization of bitcoin as an asset class”
Andrew Bond, managing director and senior fintech analyst at Rosenblatt Securities.
new products should provide “increased choice for investors who want to engage with” crypto.
Cynthia Lo Bessette, head of digital asset management at Fidelity
Rita Martins statement about liquidity is quite valid, definitely the new development will bring liquidity injection in market, creating new opportunities and widen the market horizons. The key reason is the non-hectic and secure way of transactions. While Andrew bond has declared it an asset, on the other hand most of the economist, analyst and other financial experts contradicts from this theory.
Navigating Confusing Questions Surrounding the Decision
To understand it clearly we need to dive in the deep see of factual foundations, Let’s hop in the time machine and go back to 2009, the first crypto Bitcoin was introduced, as we all know if you introduce any new product In market you need to have Unique Selling Point (USP), this point distinct you product from all the rival products available. So, Bitcoin was also introduced with 2 USPs which were; The alternative currency to FIAT currency and decentralized currency which cannot be controlled by a state or authority solely.
The optimistic statements make people confident and confuse them at the same time, The common man who wants to invest in Bitcoin ETF and avail this opportunity to get some returns may get bother by question pop-up in their minds such as;
- Is this a currency or an asset?
- If crypto is on its way to getting approved as a security then How it is still decentralized?
- The concept of FIAT currency is; it is losing value and lack certainty. Does approving Crypto eliminate its unique aspects of alternative?
Decoding Technical Details
If we have a technical glance at Bitcoin price response on achieving milestones we found some interesting juicy facts, so let’s begin! On October 23, 2023 Bitcoin price surged by more than $3000, the reason was IShares of Bitcoin ETF listed on Central Depositary Trust and clearing corporation with the ticker IBTC, SEC declare it a standard process not approval.
While after the approval of Bitcoin ETF, Bitcoin Price witness the huge decline on 12 January, 2024 which was more than $4400 in a single day. Form approval day till now It loses its price by $200+. The Bitcoin has Mar capitalization of $841.96B on this date and reach all time high at $1.28 Trillion in November 2021. On the other hand, US ETF’s net total assets are at $6.5 Trillion. The highest cap of Bitcoin is almost 19% of US ETF net Assets.
The race has already begin, Approved ETFs lowered their fees to $0.25-$1.5, and some of the fund exempt the fees for the beginning period of adaption. Companies started advertisements to reach more and more people
Conclusive Reflections
We’ve discussed the various opinion and possible questions on this historical step of the SEC which will probably change the face of the financial world sooner or later. No matter what is your intake on this and how you perceive this change it won’t change the fact that Cryptocurrency is no longer some kind of idea with a blurry future, with this step it becomes a reality and most likely this is the beginning of a merger of Digital and traditional assets
“Once the dam has been breached, it’s going to be really hard for the SEC to continue its ‘just say no to crypto’ approach”
Jim Angel, associate professor at Georgetown’s McDonough School of Business.
