Ethereum
Why Bitcoin, Ethereum and Dogecoin are rising today
It’s finally here. The long-awaited spot Bitcoin (CRYPTO:BTC) The ETF has been approved by the Securities and Exchange Commission (SEC), with 11 spot exchange-traded products officially receiving the green light from regulators, after years of denial and a very hawkish regulatory stance. Since the Winkelvoss twins first proposed a spot Bitcoin exchange-traded fund (ETF) in 2013, investors have been waiting for more than a decade for the product to launch.
Bitcoin briefly soared to nearly $49,000 per token after the announcement, the highest level seen in nearly two years. Ethereum (CRYPTO: ETH) and Dogecoin (CRYPTO:DOGE) saw similar spikes this morning, but has since given up some of those gains. As of 1 p.m. ET, Bitcoin is currently trading flat (having seen a big increase in valuation yesterday before this announcement), but Ethereum and Dogecoin are up 6.2% and 7.7% in the last 24 hours .
Now let’s see what this approval means for Bitcoin and other top cryptocurrencies.
What does this one-time Bitcoin ETF approval mean for the crypto industry?
The potential impacts of this approval on Bitcoin are notable. A range of estimates for the amount of capital that could flow into these ETFs have been offered, but Standard Charter estimates the figure could be as high as $100 billion. This represents a huge amount of money and could certainly change the investment landscape for institutional funds looking to diversify their portfolios across these asset classes.
The SEC’s formal approval of a series of ETFs could pave the way for the launch of future Ethereum spot exchange-traded products. It is one of the main drivers of enthusiasm within the second largest cryptocurrencywith Dogecoin rallying as it usually does in tandem with the sector, in a manner familiar to higher volatility today.
The 11 spot Bitcoin ETFs approved by regulators include: Grayscale Bitcoin Trust, iShares Bitcoin Trust, Valkyrie Bitcoin Fund, Ark 21 shares Bitcoin trust, Invesco Galaxy Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree Bitcoin Trust, Fidelity Wise Origin Bitcoin Trust, Bitwise Bitcoin ETF, Franklin Bitcoin ETFAnd Hashdex Bitcoin ETF. These funds are now trading and experiencing mixed performance.
Part of this divergence among Bitcoin exchange-traded funds may be related to the fairly wide range of fees offered by providers. Updated prices provided by a number of funds ahead of today’s approvals show that many ETFs have reduced their fees significantly, by as much as 0.2%. Given the similar nature of each of these funds, this could indicate a race to the bottom in terms of management fees, which is a great thing for investors.
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Notably, crypto traders betting against Bitcoin have lost a substantial amount of money in the derivatives market. Estimates suggest that closed short positions cost around $100 million.
Is now the time to buy a Bitcoin ETF?
The value offered by these ETFs is remarkable. Bitcoin, as a representative of all cryptographic and digital assets, is gaining legitimacy in the eyes of many investors. Additionally, investors now no longer have to worry about creating a portfolio, researching how blockchain technology works, and jumping through what may be perceived as too many hoops to invest in crypto.
For institutional investors, these ETFs also provide liquidity, allowing seamless integration within their portfolios and allowing things such as model portfolios (which are investment products tailored to specific investors) to include some proportion of crypto. Being able to easily trade Bitcoin on open markets is a big deal for asset managers, and I think the market is right to assume that this will lead to a tsunami of liquidity in this space.
Ethereum’s prospects for approval of proposed spot ETFs may be murkier. Given the incredibly long time frame between proposals and approvals for Bitcoin ETFs, these products may still have a ways to go. That said, these approvals provide a template for regulators reviewing spot Ethereum ETFs, and given the SEC’s rather favorable stance toward Bitcoin and Ethereum, one could certainly assume that the likelihood of approvals futures has increased in the last 24 hours.
As with many asset classes, there are pros and cons to investing in ETFs. For those who are comfortable purchasing Bitcoin directly, saving even 20 basis points each year can add up in the long run. That said, for those looking for simplicity and convenience, these products certainly seem more intriguing than getting involved in the hubbub around buying and selling Bitcoin on exchanges. Personally, I think a race to the bottom in fees could make Bitcoin ETFs the preferred investment option for most investors, and I think it’s certainly worth considering right now.
Should you invest $1,000 in Bitcoin right now?
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Chris MacDonald has positions in Ethereum. The Motley Fool posts and recommends Bitcoin and Ethereum. The Mad Motley has a disclosure policy.
Why Bitcoin, Ethereum and Dogecoin are rising today was originally published by The Motley Fool