As you may have already heard, some major news dropped this week as the U.S. Securities and Exchange Commission officially approved Bitcoin-spot ETFs (Exchange-Traded Funds). This is a landmark event, as regulatory approval for this type of financial product has been sought in the U.S. for over a decade.
The anticipation of a Bitcoin-spot ETFs is partly what has caused the price of Bitcoin to go up significantly in the past few months. As a result, Bitcoin even ended 2023 as the year’s best-performing asset class, according to analysts from the firm Goldman Sachs.
After years of rejections, intense debates, and a bizarre hack (seriously, you never heard of 2FA?), the U.S. SEC finally said "yes" on January 10, 2024.
Wait, what happened exactly?
Financial asset managers, including BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck were given permission by the US Securities and Exchange Commission to launch Bitcoin-spot ETFs.
Spot ETFs are designed to closely follow the real-time market price of an asset, like stocks, currencies, precious metals like gold, or, in this case, Bitcoin. This makes Bitcoin-spot ETFs an enticing option for investors who want to gain some exposure to the Bitcoin market while mitigating risks associated with market volatility.
In other words, Bitcoin-spot ETFs allow you to invest in Bitcoin's price movements without actually owning any Bitcoin. Think of it as kind of like betting on a horse without buying it.
What kind of impact will this have?
What’s the big deal, you ask? The arrival of Bitcoin-spot ETFs in the U.S. paves the way for all sorts of investors who were previously sitting on the sidelines to potentially enter the Bitcoin market. This includes:
- People and institutions with little experience trading cryptocurrency, who will now be able to buy and sell Bitcoin in some form
- Institutional fund managers, who can add it to their investment funds
- Retirement planners, who can now include it in employer-sponsored 401(k) plans.
This move should also increase Bitcoin’s credibility and legitimacy, adding a new financial product that blends the innovative spirit of Bitcoin with the more highly regulated world of traditional finance. It may even help accelerate Bitcoin’s adoption by making the currency more mainstream.
That said, don’t take this for granted, or start trading only based on this. There's still a great deal of uncertainty and risk involved.
What does that mean for me, a Canadian?
While the SEC’s recent announcement applies only to the U.S. market, it should have significant repercussions worldwide, including in Canada. After all, the U.S. is the largest financial market in the world, representing an estimated 40% of all financial assets globally. When Goliath moves, it leaves a footprint.
Canadians already have a good deal of experience with Bitcoin ETFs, as Bitcoin-spot ETFs have been available in Canada since 2021. That said, the SEC’s decision in the U.S. is likely to create more interest for these products in Canada.
With Canadians from all walks of life becoming increasingly curious about cryptocurrency, it’ll be important for advisors, regulators, elected officials, and other stakeholders to deepen their understanding of Bitcoin. If you want to learn more about Bitcoin, Shakepay is here to help, as we love providing education for our stakeholders.
If you’re looking to get into the Bitcoin market, make sure to use platforms regulated in Canada. Shakepay is one of the few registered crypto asset trading platforms in Canada to be registered as a Restricted Dealer and focus primarily on Bitcoin.
Sounds good. What’s next?
The SEC’s decision to approve Bitcoin-spot ETFs represents a critical turning point for the cryptocurrency market. We’re stepping into a bold new era for Bitcoin, and Canada is in a good position to benefit.
And that’s just 2024 warming up. Keep an eye out later this year for the next Bitcoin halving in April, which may also impact Bitcoin’s price. Fingers crossed as well for possible interest rate cuts from regulators, which could also bring good news for the Bitcoin market, as non-yielding assets like Bitcoin or gold can benefit when interest rates are low.
In short, buckle up – sure seems like the Bitcoin market is about to get even more interesting 🚀💫