What is a BTC spot ETF and what does it mean for it to be reviewed by the SEC?

veDAO研究院

23-07-31 22:00

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Source: veDAO

There has always been a barrier between traditional investment and the cryptocurrency market: traditional investors refuse to enter the cryptocurrency market because of its high volatility, while cryptocurrency investors are unwilling to tolerate slow growth in traditional investments.

On July 16th, institutions including BlackRock, Fidelity, Vaneck, WisdomTree, and Invesco submitted applications for Bitcoin spot ETFs to the US Securities and Exchange Commission (SEC). On July 17th, the SEC officially confirmed receipt of the Bitcoin ETF applications from the aforementioned institutions. On July 19th, the SEC will begin reviewing the applications for six Bitcoin spot ETFs, which may take up to 240 days for approval or rejection. Since the beginning of this year, eight major financial institutions, including BlackRock, have submitted applications for Bitcoin spot ETFs to the US SEC.

Bitcoin Spot ETF What is ETF

ETF stands for Exchange Traded Fund. ETFs sell shares to investors on the open market and use the proceeds to build a portfolio of assets based on market indices, stock market sectors, or other asset classes. ETFs were introduced in 1993 and have become popular as a way for individual investors to invest in a diversified portfolio of assets in a single transaction. ETFs are similar to mutual funds, but unlike mutual funds, ETFs trade on stock exchanges like any other stock.

What is Bitcoin spot ETF?

Simplified investment process: Bitcoin spot ETF provides investors with a worry-free and supervised BTC investment option, without the need to deal with the complex issues of holding and maintaining digital currencies.

Diversification: Bitcoin spot ETF allows investors to achieve portfolio diversification. By increasing investment in Bitcoin (which historically has low correlation with traditional asset classes such as stocks and bonds), investors can reduce overall portfolio risk and increase potential returns.

Professional Management: Bitcoin spot ETFs are managed by professional investment companies with expertise in portfolio management and risk mitigation. These companies conduct research, monitor market trends, and make wise decisions on behalf of investors, potentially optimizing returns and managing risks.

Regulatory Compliance: Bitcoin spot ETF operates within the regulatory framework, providing investors with the protection and supervision that may be lacking in unregulated cryptocurrency markets. Compliance with regulatory requirements can provide investors with greater confidence and assurance.

Cost-effectiveness: Investing in Bitcoin spot ETF is more cost-effective than directly purchasing and storing BTC. ETFs typically have lower trading costs, management fees, and operating expenses, making them an attractive choice for cost-conscious investors.

Impact of Bitcoin Spot ETF on the Market

In short, once a Bitcoin spot ETF is approved, it means that trillions of dollars will enter the market, which is a huge positive for Bitcoin. The Bitcoin spot ETF is expected to increase the liquidity of this cryptocurrency. Secondly, including Bitcoin in such a large financial market will help increase its popularity and exposure.

For most conservative investors, cryptocurrency is still an unknown choice, which is both a risky bet and a curious novelty. However, the Bitcoin spot ETF is expected to raise the mainstream credibility and acceptance of Bitcoin investment to a new level, further enhancing the overall credibility and acceptance of cryptocurrency. The approval of the Bitcoin spot ETF by the SEC will represent a new recognition of the mainstream market, and more importantly, make it easier for institutional investors to build positions.

If the Bitcoin spot ETF is implemented, more and more people will be willing to learn about Bitcoin, including its basic operation and trading mode, which will promote the globalization and popularization of Bitcoin. At the same time, due to decentralization, these digital assets face greater security risks. However, purchasing Bitcoin spot ETF does not require direct holding of coins, which eliminates investors' concerns about asset security and greatly reduces the threshold for participation, allowing them to participate immediately without prior knowledge.

Once the Bitcoin spot ETF is officially listed in the United States, it will become a milestone event in the global blockchain industry. The US regulatory authorities have legally recognized the status of Bitcoin as a financial product, and the influence of the US on the price of Bitcoin will be even greater.

Conclusion

The launch of Bitcoin ETF is a major step forward for the development of the cryptocurrency industry. Despite the existing legal barriers, the entry of large companies such as BlackRock into the market indicates that traditional financial institutions are becoming more open to digital assets. If Bitcoin exchange-traded funds are approved, the general public may find it easier to access Bitcoin, institutional investors may be attracted, and the entire cryptocurrency industry may move towards full maturity.