In recent months, the cryptocurrency world has been abuzz with anticipation surrounding the approval of spot Bitcoin exchange-traded funds (ETFs). The lengthy and intricate application process with the Securities and Exchange Commission (SEC) has fueled significant excitement around Bitcoin, with various amendments, meetings, and extensive filings taking place.
The introduction of these new ETFs is poised to attract a fresh wave of investors to the cryptocurrency market. Unlike the existing Bitcoin ETFs, which utilize futures to loosely mirror Bitcoin’s price, the spot ETFs aim to rectify the price disparities and high fees associated with the current options. For instance, the ProShares Bitcoin Trust (BITO) has seen a modest increase of just over 100% in the past year, while Bitcoin’s value has surged well over 150%. Grayscale Bitcoin Trust (GBTC), another futures-linked ETF, charges a hefty 2% in fees, significantly above the average for ETFs. The new spot ETFs aim to address these concerns by directly holding Bitcoins and creating ETF shares based on this, eliminating the existing price differences. Moreover, most spot ETFs are designed with low fees, typically around 0.25%, and some even offer incentives such as reduced or zero fees for early buyers, as seen with the ARK and 21Share’s ETF (ARKB).
Despite previous setbacks due to regulatory and infrastructure concerns, a notable development occurred in April 2023 when ARK and 21Shares announced their partnership to apply for a spot Bitcoin ETF. This collaboration stood out, leveraging ARK’s proficiency in technology ETFs and 21Shares’ expertise in crypto asset management. Subsequently, other major players entered the scene, with BlackRock Inc., Fidelity Investments, WisdomTree Inc., Grayscale Investments, Bitwise, and VanEck submitting applications for spot Bitcoin ETFs during the summer and fall of 2023. As these companies engaged with the SEC and publicly discussed their ETFs, the overall excitement and interest in Bitcoin intensified, leading to price surges. Notably, when BlackRock submitted its application in June, Bitcoin’s price experienced a 5% increase within a week.
To illustrate the potential gains, consider an investment of $1,000 in Bitcoin in April 2023, coinciding with ARK and 21Shares’ application announcement. Such an investment would have grown to $1,654 as of the latest market data.
On the day of the application announcement, Bitcoin closed at $28,415. Earlier this week, the price briefly surpassed $47,000, resulting in an impressive 65% increase. For context, during the same period, the Nasdaq Stock Market saw a growth of just over 30%, and Ethereum experienced a gain of just over 21%.
As the crypto market continues to evolve, these developments in spot Bitcoin ETFs showcase the potential for significant returns for early investors. Keep an eye on the latest market trends and the outcomes of SEC evaluations to stay informed about the ever-changing landscape of cryptocurrency investments.
