Spot Bitcoin ETF – The Catalyst
By Laxmikant Khanvilkar
There are dozens of factors that led the rally in Bitcoin, but the key catalyst being several financial biggies joining the race of launching spot Bitcoin-based Exchange Traded Funds or ETF.
As we know, ETFs bundle securities like stocks and commodities allow investors to take exposure in underlying securities indirectly and dodge the vagaries such as exposure risk, regulatory issue, etc.
Given the rise in investor appetite for cryptocurrencies such as Bitcoin, who has stayed the test of time, a large number of traditional companies have made plans of launching spot-BTC backed ETF products. There’s lot of buzz around this with a number of companies preparing to enter the virtual currency ecosystem.
According to a report by Block, Fidelity Investments, one of the biggest asset management company in the U.S., is possibly on the verge of submitting a request for approval of their own spot Bitcoin (BTC) exchange-traded fund (ETF).
Soon after BlackRock submitted a request to create a spot Bitcoin ETF, other financial giants such as Invesco, WisdomTree, and Bitwise evinced their interest to offer similar product. Clearly, the race to offer ETF has just begun.
There is a strong investor appetite for such product. In fact, the retail participation has increased in the crypto currency space following the Black Swan events in the U.S. Several lender faced investor ire after the fall of three major lenders in the U.S. – Silicon Valley Bank (SVB), Signature Bank and Silvergate Bank. Many lenders still operate under the shadow of possible bank runs, making investment/deposits in them highly risky. Hence, the demand for alternative investment class such as Crypto has grown manifold.
However, the regulatory activity has intensified against crypto exchanges that are pulled up by the U.S. Securities Exchanges Commission (SEC) for offering unregulated products. A case in point is Binance – the world’s largest crypto exchange – and Coinbase – the only listed company with SEC approval.
The regulator alleged these exchanges for offering products that lack regulatory approval. As a result, investors are left with little options, but seek refuge in other masked products.
The situation is perfectly ripe for several financial services providers such as BlackRock, Invesco, WisdomTree and others to explore the opportunity in adversity.
According to the market grapevine, asset management giant Fidelity is readying to foray into ETF space through offering spot-Bitcoin backed ETF. It must be noted that earlier in 2022, Fidelity Corp had approached SEC with an ETF proposal. However, SEC rejected Fidelity’s ETF filing.
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