A decision handed down on Wednesday 10 paves the way for the first US exchange-traded funds holding bitcoin to go public. The Securities and Exchange Commission (SEC) decision will allow investors buy and sell bitcoins as easily as stocks or mutual funds.

The wait for approval of these funds by US authorities has pushed the price of bitcoin to its highest level in two years. On Wednesday, the digital currency fell to just below $46,000, down from $17,000 in January 2023.

What's changing now for bitcoins

Until now, retail investors who wanted to buy and sell digital currencies had to go through cryptocurrency exchanges and incur high transaction fees, or purchase products that tracked bitcoin less directly. At least half a dozen bitcoin futures ETFs are already on the market. These funds use futures contracts to gain exposure to fluctuations in the price of bitcoinalthough they have been criticized for often deviating from the price of bitcoin.

The 11 applications submitted by asset managers, including BlackRock, Fidelity Investments, Ark Investment Management, Invesco, WisdomTree, Bitwise Asset Management, Valkyrie and Grayscale Investments, received the green light to be listed on the stock exchange. The new funds, known as spot-bitcoin ETFs because they buy and sell the digital currency itself, are expected to begin trading on Thursday the 11th.

The trend of cryptocurrencies and Coinbase

Cryptoassets have seen mixed performance since the SEC's decision. Ether, the second largest digital currency, is up almost 10%. Coinbase Global, the largest publicly traded cryptocurrency exchange, whose price tends to move in tandem with bitcoin, fell 1.4% in after-hours trading. Coinbase is considered the custodian of at least eight bitcoin spot ETD applications.

Why did the SEC authorize the ETF?

The SEC previously rejected applications for bitcoin spot ETFs on the grounds that the underlying market was vulnerable to fraud and manipulation of the market.

Gary Gensler, chairman of the SEC, said more regulation and investor protections are needed before a group of investors can enter the cryptocurrency market. Mr. Gensler reiterated that the ETF's latest requests were similar to those the Sec had rejected in the past. But he added that a court ruling last year in favor of crypto asset manager Grayscale had forced the change.

“Based on these circumstances and those discussed in more detail in the Order of Approval, I believe the most sustainable path is to approve the listing and trading of these bitcoin spot ETF shares,” he said. -he declares. He added that the SEC “has neither approved nor endorsed bitcoin.” “Investors should remain cautious of the myriad risks associated with bitcoin and products whose value is tied to cryptocurrencies,” Mr. Gensler said.

The argument that the bitcoin market is riddled with fraud and easily manipulated was reinforced on Tuesday when the official X account of the Sec has been hacked.

Beware of possible market manipulation

The SEC order found that all exchanges seeking to list bitcoin ETFs had entered into a joint monitoring agreement with the Chicago Mercantile Exchange, where bitcoin futures are listed. It is reasonable to expect that such an agreement “contributes to the monitoring of fraudulent and manipulative acts and practices“, we can read in the order. She cites the strong correlation between bitcoin futures prices and the price of bitcoin itself.

At least one of five SEC commissioners disagrees with decision. Democratic Commissioner Caroline Crenshaw, who usually votes with Mr. Gensler, called the move “unhealthy and ahistoric,” saying it puts the agency “on an unpredictable path that could further sacrifice investor protections.”

The SEC's two Republican commissioners, Hester Peirce and Mark Uyeda, expressed support for the decision. Democratic Commissioner Jaime Lizarraga, believed to be undecided on bitcoin ETFs, said through an aide that he would not make a statement. “Today marks the end of an unnecessary but important saga,” Mr Peirce said. He said the SEC's previous rejections were based on confusing logic and pushed individual investors to resort to less efficient methods of gaining exposure to bitcoin.

The new criteria for the green light for the bitcoin investment fund

The approval order, posted Wednesday on the SEC's website, details how the agency changed its view on the risk of bitcoin market manipulation in response to the court's ruling earlier this year. august.

After losing the Grayscale case, the SEC said it had studied the correlation between the bitcoin spot market and the CME bitcoin futures market. Grayscale had claimed that the two markets were closely correlated and the judges sided with the cryptocurrency manager in their decision. The SEC said that after the new analysis, it is able to conclude that fraud or manipulation affecting prices in bitcoin spot markets would likely affect prices in CME bitcoin futures contracts in a similar manner.

Fear of cryptocurrencies after the FTX scandal

Despite these risks, many Individual investors have turned to crypto-assets in recent years, causing their prices to skyrocket during the pandemic. In 2022, however, the collapse of several prominent cryptocurrency exchanges caused prices to plummet, reducing the value of $2 trillion worth of cryptocurrencies to zero. The industry's implosion culminated in the bankruptcy of FTX, the exchange run by Sam Bankman-Fried, a now-convicted cryptocurrency entrepreneur.

And now ?

New bitcoin funds are expected to face intense competition in a very crowded market. Some asset managers have chosen to compete on costs, while others have launched a marketing campaign. THE Fees for some funds will range from zero in the first six months to 1.5% of assets. Approval of the funds could allow some financial advisors to recommend their clients to invest in bitcoin. It is much easier for an advisor to recommend an investment fund than bitcoin itself, which could require clearing a number of regulatory hurdles.

Bitcoin skeptics say approving spot bitcoin ETFs could set a dangerous precedent for other crypto-asset ETFs that may come to market in the future and make it harder for investors to be protected by the DRY. Several asset managers, including BlackRock, Ark, VanEck and Grayscale, have filed to launch the first ETFs tracking the second-largest cryptocurrency, Ether. There SEC will have a final deadline in May to approve or reject some of these funds.

“This will open the floodgates to every type of crypto token and scam imaginable that will seek SEC approval,” said Dennis Kelleher, president of Better Markets, a group that advocates for stricter financial regulations.

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