This year, the dream of the largest part of the cryptocurrency community finally came true. The US Security and Exchange Commission finally okayed eleven exchange-traded funds (ETFs) based on the spot Bitcoin price.
These ETFs include products from such monsters of the wealth management and investment market as Blackrock, Grayscale, Fidelity, Ark Invest, Bitwise, and VanEck. Their filings had lay with the SEC for approximately a year before the approval was granted. Grayscale had got the green light for converting its Bitcoin Trust (GBTC) into a spot ETF. After the launch in January, these ETFs began to aggressively purchase Bitcoin in order to back their product with it. Before the halving in April took place, the funds bought approximately 10,000 BTC per day.
Shortly after the regulator approved the funds, the same players handed in their filings for ETFs based on Ethereum.
Three largest Bitcoin ETFs on the market
The three largest spot ETFs on Bitcoin are Grayscale Bitcoin Trust (GBTC), iShares Bitcoin Trust (IBIT) launched by Blackrock, and Fidelity Wise Origin Bitcoin Trust (FBTC). As of May 9, IBIT holds close to $17 billion worth of Bitcoin. Grayscale’s GBTC had $19.07 billion in Bitcoin under management. Fidelity Wise Origin Bitcoin Trust contains a Bitcoin equivalent of $9.28 billion.
Still, Blackrock has the largest number of holders – 414, while Fidelity has approximately over 200. Recently, major banking conglomerate Morgan Stanley revealed a $269 million investment into the Grayscale exchange-traded fund.
Even before filing for the ETFs, these companies were major players in the cryptocurrency space. Grayscale ran its Bitcoin Trust for about a decade before it decided to convert GBTC from a trust into a spot ETF. Before changing its status, GBTC was the world’s biggest fund for investing into Bitcoin.
Its goal was to provide institutional and accredited investors with exposure to Bitcoin’s price movements via a conventional investment tool without having to hold the largest cryptocurrency directly with all the risks that emerge in this scenario. Grayscale also runs an Ethereum trust which it now intends to convert into a spot Ethereum ETF (ETHE).
Blackrock is the world’s biggest wealth manager which manages trillions of US dollars in assets on behalf of its customers. During the recent years, the company’s CEO Larry Fink has changed his rhetoric on Bitcoin from negative to positive. He has publicly acknowledged the vast potential of BTC and the blockchain technology overall as highly innovative assets. Now, they have launched their own Bitcoin fund.
Fidelity Investments is a major provider of financial services for institutional investors that offers a wide range of products and services. Even before issuing a Bitcoin ETF, the company first began to conduct crypto custody for its customers via its subsidiary Fidelity Digital Assets and then expanded its services to offer them exposure to the leading cryptocurrencies – Bitcoin, Ethereum and many others.
Here’s how spot Bitcoin funds function
Spot Bitcoin ETFs buy a certain amount of BTC and hold this crypto in a cold storage wallet (the private keys are kept offline and they cannot be stolen via the Internet) powered by a custodian. Once Bitcoins are bought, the fund emits shares whose price reflects the BTC spot price. These ETF shares can be traded on conventional stock exchanges.
Thanks to spot funds, it is easier for retail investors and traders to access an asset that is linked to the current value of Bitcoin (or another commodity) – this way, they do not have to hold BTC themselves and worry about its security, storing private keys, etc.
Among entities that have started to invest in spot Bitcoin ETFs now are emerging US pension funds. This week, the news emerged that The State of Wisconsin Investment Board has purchased $64 million in Grayscale’s spot Bitcoin ETF shares and $99.2 million worth of Blackrock’s ETF – that is 1,013,000 shares and 2,450,400 shares respectively.
Many financial experts believe that now more and more pension funds are going to begin investing in spot Bitcoin ETFs.
What about spot Ethereum ETF?
As mentioned above, several companies have submitted filings to the Securities and Exchange Commission for spot ETFs based on the second largest crypto Ethereum. Those would also allow retail investors to gain exposure to ETH via traditional markets.
Initially, many predictions made by analysts expected that spot Ethereum funds would be approved at the end of May. However, the situation began to change gradually as the SEC has been delaying decisions on this product. Now, many experts are not expecting to see the green light for Ethereum ETFs so soon since they realize that the regulator took many months to approve the Bitcoin ETFs.
As was in the case with Bitcoin funds, the SEC cited concerns over market manipulation, investor protection, and the high volatility of the cryptocurrency market.
