11 BITCOIN ETFS BEGIN TRADING FOR THE FIRST TIME
$4B in funds tied to cryptocurrency changes hands
More than $4 billion of a newly approved investment product tied to bitcoin changed hands in the first day of trading Thursday, as cryptocurrency enthusiasts celebrated a watershed moment for the industry.
Eleven of the products, known as exchange-traded funds, or ETFs, started trading on popular platforms such as the Nasdaq a day after federal regulators authorized them, creating a simpler way for investors to bet on the cryptocurrency markets. Major financial firms, including asset managers like BlackRock and Fidelity, are offering the ETFs.
The early volume was impressive, analysts said, comparing favorably with other ETF debuts. But it may take months to gauge the impact on the cryptocurrency industry, which is still reeling from a recent series of market crashes and high-profile corporate bankruptcies. Initial market data did not show how much new investment flowed into the bitcoin funds; some of the trading activity may have stemmed from investors who bought shares and quickly flipped them.
“It’s not a one-day event,” said Sandy Kaul, who runs the digital asset arm of Franklin Templeton, a firm offering the ETFs. “Six months is a really good moment to understand: Is this a transformational product?”
Bitcoin’s price briefly rose to $49,000 on Thursday before dipping to $46,000. Optimism that the ETFs were nearing approval by the Securities and Exchange Commission drove bitcoin’s price up more than 60 percent over recent months to its highest levels since the market imploded in 2022.
The approvals were a major victory for the crypto industry as it gears up for a series of legal battles with the federal government. The SEC has sued Coinbase, the largest U.S. crypto exchange, and several other major firms, arguing that they have illegally marketed unregistered securities, a possible existential threat to the industry.
In a statement announcing the authorization of the ETFs, Gary Gensler, the SEC chair, said the agency did not “approve or endorse bitcoin.” He said most crypto trading platforms were breaking the law and “often have conflicts of interest.”
Historically, anyone who wanted to invest in bitcoin or another cryptocurrency had to store the asset in specialized wallets or open accounts on crypto exchanges, such as Coinbase and Binance, which have faced regulatory scrutiny. Many investors have struggled to understand the intricacies of these online platforms, or have grown frustrated with bugs, hacks and high transaction fees.
An ETF offers a simpler option. Rather than buy bitcoin outright, with all its risks and inconvenience, investors buy shares in an ETF that contains the currency. The funds are offered on traditional stock exchanges, in a format that many wealth managers have embraced.
Crypto enthusiasts have fought for a bitcoin ETF for more than a decade, predicting the products would draw billions of dollars in new investment.
But the SEC repeatedly rebuffed those efforts, arguing that crypto markets were rife with fraud.
The tide turned in August when the federal appeals court in Washington ruled that the SEC’s rejection of an application by the crypto firm Grayscale Investments was “arbitrary and capricious.” On Wednesday, Gensler said the ruling had effectively given him no choice but to approve the products.