A fake post on the official account of the US Securities and Exchange Commission (SEC) on Tuesday, January 9, on the social network X (formerly Twitter) has again triggered an avalanche of comments and discussions by journalists and analysts in capital markets and digital assets about the potential importance and the size of bitcoin-based ETFs, and their capabilities.
Namely, on January 15, the SEC should make a long-awaited decision on the practical legalization of bitcoin ETFs, including their trading in regular securities channels. If it is positive, that decision will have the power to create capital measured in tens, even hundreds of billions of dollars in one day in the digital asset market. On the other hand, it can “delete” enormous value from the market.
The controversial tweet on the official account of the SEC talked about the Commission’s alleged acceptance of bitcoin ETFs, which this American regulatory financial institution urgently denied, adding fuel to the fire, i.e. igniting the topic of real or fake possibilities of such funds, and that only a few days before important decisions.
ETF (Exchange Traded Fund) is a fund that mainly invests in a large number of funds, and investors trade the entire index of that fund on the stock market. By buying an index, they buy a diverse portfolio, thus protecting themselves from possible risks. On the other hand, a bitcoin ETF is a fund that only invests in bitcoin, so there is no diversification with it.
Why invest in Bitcoin ETF instead of buying Bitcoins directly?
First, because of regulations. Some institutional investors can’t invest in Bitcoin but can invest in funds. Also, many don’t feel comfortable keeping Bitcoin themselves, especially on crypto exchanges, after the unfortunate events of last year (the fall of the FTX stock market). On the other hand, those used to traditional exchanges would probably sleep easy knowing that, say, Blackrock is keeping their bitcoins safe. This is why it is expected that such ETFs could bring a real explosion when it comes to institutional acceptance of Bitcoin as an investment.
The eventual approval of a bitcoin ETF could be a milestone that opens the door to mass bitcoin adoption, with analysts comparing the potential bitcoin ETF to the gold ETF launched in 2004. After its introduction, the price of gold jumped by more than 300 per cent in the next few years.
Bitcoin could experience a similar jump if the SEC adopts it.
A large amount of capital should be invested in cryptocurrencies through these funds. Most investors have realized the importance of including Bitcoin in their portfolios and have been waiting for this option for a long time. On one hand, there is a significant demand, and on the other, the limited quantity of 21 million tokens for Bitcoin results in a price surge.
