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SEC Bitcoin ETF Approval: A Look at Bitcoin’s Over a Decade-Long Journey to Get Here

Last Updated January 14, 2024 9:12 AM
Teuta Franjkovic
Last Updated January 14, 2024 9:12 AM

Key Takeaways

  • The SEC’s approval of 11 spot Bitcoin ETF applications is a significant milestone for the cryptocurrency industry.
  • The launch of Bitcoin ETFs is expected to expand Bitcoin adoption, not replace existing methods.
  • The approval of Bitcoin ETFs marks a turning point for BTC legitimacy and acceptance in the mainstream financial landscape.

The United States Securities and Exchange Commission (SEC) on Wednesday, January 10. It approved the first Bitcoin exchange-traded fund (ETF), a decision that has been sought by the cryptocurrency industry for over a decade.

This significant development marks a turning point for both Bitcoin’s legitimacy and its acceptance in the financial landscape.

Bitcoin’s Long Journey to Spot ETF Approval: A Timeline

Let’s delve into the timeline of Bitcoin’s evolution:

  • 2016: The Winklevoss brothers refine their application, specifying the exchange where the product would be traded and amending it to name State Street as administrator . Grayscale submits an application to convert its Bitcoin trust into a spot Bitcoin ETF.
  • 2017: The SEC rejects the Winklevoss application , citing concerns about the maturity of Bitcoin markets. Grayscale withdraws its initial attempt to convert its trust into an ETF, citing a lack of regulatory clarity.
  • 2018: The SEC rejects the Winklevoss twins’ second application  for a spot Bitcoin ETF. It cites insufficient safeguards against manipulation by cryptocurrency exchanges.

  • 2020: Grayscale transforms its Bitcoin trust  into an SEC-reporting entity. This allows its shares to trade on the over-the-counter market, known as the “pink sheets.” While not an ETF, it becomes the first publicly traded Bitcoin fund in the U.S.
  • 2021: Canada becomes the first country to approve a spot Bitcoin ETF . Gary Gensler takes over as SEC Chair in April.
  • October 2021: The SEC approves the ProShares Bitcoin Trust, listed on the Chicago Mercantile Exchange (CME), marking the first U.S.-listed futures-based Bitcoin ETF. It quickly accumulates over $1 billion in assets, setting a record for the fastest asset accumulation for any ETF.

The Last 12 Months

  • August 2023: A federal appeals court in Washington D.C. rules in favor of Grayscale. It finds that the SEC failed to adequately justify its rejection of the company’s spot Bitcoin ETF application. Europe’s first spot Bitcoin ETF begins trading on the Euronext Amsterdam stock exchange.
  • October 2023: The SEC decides not to appeal the court’s ruling in the Grayscale case and is required to reexamine the application.
  • January 10, 2024: In a landmark decision, the SEC approves 11 proposals from issuers including BlackRock, Fidelity, and VanEck to launch spot Bitcoin ETFs. This marks a significant step in the legitimization of Bitcoin as an investment asset and opens up the door for broader institutional adoption of the cryptocurrency.

Bitcoin ETFs Will Expand BTC Adoption, Not Replace Existing Methods

The launch of Bitcoin ETFs has sparked debate about their potential impact on existing methods of accessing Bitcoin, such as Coinbase and cold wallets. Some argue that ETFs will simply cannibalize these other avenues, while others believe they will attract new investors and expand Bitcoin adoption overall.

Historical parallels suggest the latter scenario is more likely. According to Matt Hougan, CIO at Bitwise Investments and former CEO of ETF.com, when gold ETFs first emerged , many feared they would compete with traditional gold ownership methods, such as bars and coins. However, the opposite occurred. Demand for physical gold surged, tripling from 293 tonnes in 2003 to 1,107 tonnes in 2022.

In a document shared with CCN.com, Hougan explains that the reason for this unexpected outcome was straightforward: the ETF launch helped legitimize gold as a mainstream investment, attracting a wider pool of investors. While some opted for ETFs, others still preferred physical gold ownership.

Gold price
Credit: Bitwise Asset Management

Hougan expects a similar dynamic with Bitcoin ETFs.

He said: “I suspect we’ll see the same thing here. Many investors will find their way to bitcoin ETFs, even as the number of investors accessing bitcoin through Coinbase and holding it in cold wallets soars. There will likely be some cannibalization, but I suspect the pie will grow so much that no one will care.”

In essence, the launch of Bitcoin ETFs is not about replacing existing methods. Rather, it could be about growing Bitcoin’s reach and accessibility to a wider range of investors. Just as gold ETFs expanded gold’s influence, Bitcoin ETFs could do the same for Bitcoin, making it an even more prominent player in the financial world.

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