Where Bitcoin goes, mayhem always follows – and the debut of exchange-traded funds based on the cryptocurrency’s spot price was no exception.
In a will-they-or-won’t-they saga that lasted for years, the US Securities and Exchange Commission had repeatedly rejected applications to launch an ETF.
But when 2024 arrived, there was growing confidence that the regulator would finally give the green light to these funds.
The waters were muddied further when an announcement posted on the SEC’s official X account turned out to be fake – fuelling BTC’s volatility even further.
But a day later, on Wednesday 10 January, the commission’s chairman Gary Gensler confirmed that – reluctantly – 11 Bitcoin ETFs would be allowed to launch a day later.
Bitcoin ETF impact
It’s very early doors, but a few interesting trends have already emerged.
There’s a lot of interest in Bitcoin ETFs because of how they allow investors to gain exposure to this digital asset without owning it directly.
But 11 funds offering the same thing might be a touch excessive – and in the coming months, we’ll undoubtedly see some products dominate in terms of trading volumes.
BlackRock, the world’s largest asset manager, has already surged to $1 billion in assets under management – firmly establishing itself as an early leader in the space.
Grayscale, which has converted its Bitcoin trust into an exchange-traded fund, also had over $25 billion in assets under management despite charging some of the highest fees.
The company’s CEO, Michael Sonnenshein, recently predicted that only two or three BTC ETFs will have a long lifespan, and expressed confidence that his would be among them because of Grayscale’s track record as a crypto specialist.
But there’s also been a bigger cloud on the horizon: Bitcoin’s tepid performance since the ETFs hit the market. In the hours after their debut, BTC hit highs of $49,000. One week later, the world’s biggest cryptocurrency was battling to cling on to $40,000.
Can you invest in Bitcoin ETFs in the UK?
In short, no. Your only option is to gain exposure to BTC ETFs based on the futures markets, which aren’t as reliable an indicator of where this digital asset is headed.
Experts from Hargreaves Lansdown have also expressed cynicism over whether the UK’s Financial Conduct Authority, which has adopted a tough regulatory approach to crypto, would be inclined to follow in the SEC’s footsteps.
Head of Communications Danny Cox told Investment Week: “Bitcoin may be gaining more legitimacy, but it is still showing all the hallmarks of a troublesome teenager. It is an unpredictable and volatile investment that could drain your bank account.”
While Prime Minister Rishi Sunak has spoken of his ambition of transforming the UK into a global cryptoasset hub post-Brexit, that policy seems to have fallen off his agenda as a general election nears – and the Tories face a slump in the polls.
Britons basically have two options: buying BTC directly through exchanges like Coinbase and eToro if they’re willing to take the risk, or gaining exposure to crypto-related stocks such as MicroStrategy.
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