Crypto Traders Await SEC Decision on Bitcoin Spot ETF
Crypto traders are eagerly anticipating the decision of the United States Securities and Exchanges Commission (SEC) regarding the approval or rejection of the first bitcoin spot exchange-traded fund (ETF). Valkyrie Investments, one of the issuers, is expecting a decision soon. According to Valkyrie Investments co-founder and CIO Steven McClurg, if the ETFs are deemed effective by the SEC, trading could begin on Thursday morning. McClurg predicts that Valkyrie’s ETF could attract $200 million to $400 million in investors’ funds, with an overall influx of $4-5 billion over the first few weeks.
First Wave of ETF Launches
While not all 13 ETF applicants may launch simultaneously, McClurg believes that the first batch of 10 ETFs will be launched at the same time. He acknowledges that some may face delays due to the extensive work involved in launching an ETF. One complication is having two custodians—one for crypto and one for cash—and ensuring their seamless connection. However, McClurg is confident that his team has put in the necessary effort to be prepared for launch.
Expectations for Investor Inflows
The hope for bitcoin spot ETFs has been to attract institutional investors in the US. However, McClurg suggests that retail investors will likely be the first to invest. He anticipates significant inflows from retail investors, financial advisors, and outflows from Grayscale’s fund (GBTC), which is also attempting to convert into an ETF. Financial advisors typically prefer a track record of two to three years before recommending new financial products to clients.
No Concerns About Coinbase
Unlike traditional ETFs, spot bitcoin ETFs require issuers to hold assets with a crypto exchange rather than a traditional custodian. While Coinbase is the custodian for most bitcoin ETF issuers, it is currently facing a lawsuit from the SEC. McClurg believes this is not an existential threat to Coinbase’s business and considers it a normal part of any financial firm’s reality. He emphasizes that Coinbase’s custody business is unaffected by the SEC complaints against its consumer-exchange side.
Fierce Fee Competition
The race for the lowest fees among spot ETF issuers has been intense, with issuers competing to offer the lowest rates. Fees range from 0.24% to 1.5%, with Valkyrie offering 0.8%. Despite the low fees, McClurg acknowledges that profitability may take time and expects initial losses before turning a profit. However, he remains committed to the ETF business in the long term and believes Valkyrie’s ETF will become profitable within its first year of trading.
Hot Take: Bitcoin ETF Poised to Shake Up Crypto Market
The approval of a bitcoin spot ETF by the SEC could have significant implications for the crypto market. With the potential influx of billions of dollars from investors, the market may experience increased liquidity and price volatility. Retail investors are likely to be the first to invest, followed by institutional investors once they gain confidence in these new financial products. While challenges remain, such as extensive preparation work and regulatory scrutiny, the launch of bitcoin spot ETFs marks an important milestone in bringing digital assets into mainstream investment portfolios.
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