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News/Bitcoin ETF Boom: 2024 Erupts with Tidal Wave of Crypto ETFs (January Decision!)

Bitcoin ETF Boom: 2024 Erupts with Tidal Wave of Crypto ETFs (January Decision!)

Van Thanh Le

Dec 29 2023

7 months ago6 minutes read
Chibi robot cheers for Bitcoin ETF approval on vibrant background

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Crypto ETFs 2024: Brace for a Tidal Wave in the Digital Ocean

The past year saw noteworthy performances in the crypto ETF landscape, despite the somewhat disruptive theme of the unresolved spot bitcoin ETF. In 2023, updates were aplenty, yet quite a few highlights remained tucked away in the shadow of uncertainty.

The year bore witness to the dawn of the first leveraged bitcoin futures ETF in the U.S., taking center stage thanks to Volatility Shares, marking an unforgettable scene in the continuing drama. Meanwhile, two years from the BTC futures ETFs' premier, the SEC decided to vary the act by approving ether futures funds, expanding the roster of players on the stage.

The 2x Bitcoin Strategy ETF (BITX) by Volatility Shares wasn't a mere cameo. With a captivating performance, it raised the curtains on about $170 million in assets, an evident measure of the growing audience's enthusiasm. 

Contrastingly, the sextuple act of ether futures ETFs which launched on the 2nd of October didn't quite steal the show. Pulling in a combined asset of roughly $34 million by December-end, the performance didn't live up to the initial buzz.

Art Deco investor monitors BTC on screens, awaiting SEC decision.webp

Another lead actor, ProShares Bitcoin Strategy ETF (BITO), etched its name into the hall of fame. As the inaugural and the most grandiose bitcoin futures ETF, it peaked with a staggering portfolio worth $1.7 billion, underscoring its mass appeal. 

In the wings, analysts foresee a potential migration of assets from the admired BITO to spot bitcoin ETFs, contingent upon their final approval.

Awaiting their grand entrance, funds with direct holdings of bitcoin are still hanging on the SEC's cautious discretion. Meanwhile, the prospect of spot ether ETFs seems to take a back seat, as the spotlight stays fixated on their bitcoin counterparts.

In lieu of the usual attrractions, record-breaking inflows were observed heading toward funds trading in blockchain and crypto-aligned stocks come December. The growing appeal for spot bitcoin ETFs continues with an expanding list of issuers against the backdrop of an impending SEC ruling.

Pop art rocket blasts off with ETF label, symbolizing Bitcoin launch.webp

Behind the curtains, powerhouses like BlackRock and Grayscale are getting into character, holding conversations with SEC on fund blueprints and strategic maneuvers. The stage is set with a whopping 90% forecast of approval for spot bitcoin ETFs thawing the January chill, echoing the industry's high hopes.

The impact of spot bitcoin ETFs getting the green light is anticipated to trigger a wave of investor interest and could potentially catapult BTC's price to stratospheric heights. From a modest $1 billion predicted in the initial phase to a staggering $55 billion over half a decade, analysts are optimistic about the influx into these ETFs.

Endorsing a bitcoin ETF in the U.S. would be equivalent to a standing ovation for the cryptocurrency, projecting a ripple effect of positivity in the long run.

Countdown to Crypto: Bitcoin ETF Race Heats Up as 2023 Winds Down

Challenged by the U.S. Securities and Exchange Commission (SEC), key industry players, such as ARK Invest, BlackRock, Grayscale, and 21Shares, undertake a last-minute scramble to refine Bitcoin exchange-traded fund (ETF) applications. 

The SEC's directive leaves applicant firms racing against a fixed deadline - December 29th – a high-stakes count down where latecomers risk being left out of the initial approval or denial cycle.

These intense discussions weren't confined to a closed circle of applicants but sparked engaging dialogues between the SEC, esteemed stakeholders Nasdaq and the Chicago Board Options Exchange (CBOE), and diligent legal teams representing the ETF hopefuls.

Surfers ride Bitcoin wave to financial freedom.webp

As clock ticks down to end-2022, insider whispers hint at potential regulatory green lights for spot market Bitcoin ETFs as early as 2023. One notable triumph has already spurred this optimism. A federal judge recently instructed the SEC to rethink their rejection of Grayscale's Bitcoin ETF application, a key turning point that emphasized the necessity for a consistent regulatory approach amid approval of Bitcoin futures ETFs.

Bitcoin enthusiasts keenly anticipate this blockchain breakthrough, with personality Fred Krueger forecasting a Bitcoin ETF debut as soon as January 15, 2023 - an event that, in his eyes, could revolutionize the Bitcoin landscape. 

Amid this speculation, Analyst Dan Rover drops his bold prediction: approval of the BlackRock Spot ETF package could catapult Bitcoin's price to a staggering $200,000. As the world's most influential asset manager, BlackRock boasts a formidable 99.8% ETF approval rate, with its CEO branding Bitcoin as digital gold, thereby escalating its investment allure. 

And the curiosity isn't just limited to BlackRock. Other influential asset management firms, including Vanguard and Fidelity, are also putting forward applications for Bitcoin spot ETFs, marking a burgeoning interest and rising confidence in the cryptocurrency market.

Grayscale Revamps ETF Playbook to Appease SEC, Sparking Investor Rethink

In the wake of an amended S-3 filing submitted to the SEC on December 26, 2023, Grayscale Investments pivots to meet the regulatory body's cash-only redemption stipulation for their Bitcoin (BTC) exchange-traded fund (ETF). Echoing similar strategies of other spot BTC ETF candidates, including the industry giant, BlackRock, this transition marks a considerable operational change. 

Stepping aside from traditional "in-kind" transactions, the amendment paves the way for Grayscale to create and redeem funds using cash, thus replacing the direct exchange of ETF shares with the underlying asset. Regulatory authorities view this approach as a measure to curb market manipulation and illicit activities. However, it amplifies the risk for prospective investors banking on a spot-based Bitcoin ETF for BTC exposure.

An intriguing fallout of this development centers on airdrops and forks. Grayscale's amended filing suggests that the spot Bitcoin ETF shareholders would be excluded from benefits accruing off these. The organization will irrevocably relinquish rights to such cryptocurrencies, necessitating SEC approval should there be a policy reversal.

A renowned player in the cryptocurrency market since 2013, Grayscale Investments has continuously held the spotlight for digital currency investing and crypto asset management.

While significant alterations surge within the operations of principal players like Grayscale and BlackRock, the broader crypto market continues to adapt, evolving amidst multifaceted legalities and a shifting regulatory environment. Such dynamic movements are a testimony to the ever-changing cryptocurrency landscape where even industry stalwarts like Changpeng Zhao continue to reinvent their strategies.

Crypto ETFs Shakeup: SEC's Cash Rules Spark Ripples of Uncertainty

There's been quite a buzz in both financial and crypto circles surrounding the SEC's stalwart position on authorized participants (APs) conducting creations and redemptions in cash, straying from the beaten path of in-kind transactions. Here, we're delving into how this affects not just the nuts and bolts of crypto ETFs' functionality but also the industry titans' sentiments.

Industry heavyweights, such as U.S. financial law expert Scott Johnsson and venture capitalist maestro Nic Carter, are among those asserting their reservations on the potential implications of the SEC's stance, via platforms including the rebranded X (previously known as Twitter).

Adding to the mix, the Bitcoin Spot ETF approval has sent ripples of exhilaration through the markets, fanning the flames of investor optimism. Eyes around the globe are trained on the anticipated substantial economic upsurge to follow in its wake, with predictions placing possible approval as early on the calendar as January.

Johnsson, in his critique, spotlights the SEC's hesitation to greenlight amendments for crafting or cashing in digital assets in-kind. He postulates this could unintentionally create a breeding ground for new vulnerabilities, and undermine investor safeguards – a curious paradox considering the SEC's chief mission to uphold market integrity and investor protection.

Offering another viewpoint, Carter opines the SEC's stance might trigger an uptick in the creation and redemption expenses of crypto ETF shares. Subsequently, he warns, this could drudge up tracking inaccuracies and inflated expense ratios, resulting in a bigger financial burden for investors.

Company BitMEX, meanwhile, echoes these concerns, underlining the historically pivotal role of APs in driving ETF efficiency through in-kind transactions. With the SEC's apparent inclination towards cash operations, BitMEX fears this could mean bidding farewell to these benefits, shrinking competition, and ultimately, diminishing the overall efficacy of ETFs.

Bitcoin ETF Brawl: Cathie Wood vs. Max Keiser

ARK Invest's trailblazer, CEO Cathie Wood, voices an unconventional forecast for the short-term aftermath of spot Bitcoin ETFs' approval. She predicts the initial ripple effect could lean into negative territory as investors rush to capitalize on "big anticipatory moves," gratifying their craving for immediate gains. 

Yet, volatility doesn't undermine her buoyant long-term perspective, specifically her leaning toward institutional investors. Wood sees in spot Bitcoin ETFs - once greenlit - a golden gateway for institutions to plug into the Bitcoin ecosystem and catalyse powerful price currents.

The impact, she estimates, could be substantial, even at a modest 0.1% to 0.2% institutional asset allocation to Bitcoin. Teaming up with 21Shares, ARK Invest, and 14 other firms are already at the frontline, actively pursuing a spot Bitcoin ETF.

Recent dialogues with SEC have followed an encouraging trajectory, marked by up-close, in-depth technical queries, hinting at a subtle paradigm shift within the SEC toward Bitcoin ETFs. Taking cues from these positive strides, Wood paints a hopeful picture of the first spot Bitcoin ETFs gaining momentum by January.

On the opposing frontline stands Bitcoin champion, Max Keiser, challenging Cathie Wood's support for spot Bitcoin ETFs. Keiser underscores the tangential disparity between holding actual Bitcoin and a surrogate placeholder such as spot Bitcoin ETFs.

Keiser presents apprehensions over Wall Street's hand in glove cooperation with the government desks in managing these ETFs, raising the specter of ulterior motivations.

Stressing the essence of true ownership, he notes the Achilles' heel of ETF investors who may end up clutching an empty bag sans real Bitcoin.

Keiser also shines a spotlight on the apprehensive scenario of governmental supreme control over these ETFs. Implementing sovereign authority might lead to investors being handed fiat currencies instead of Bitcoin upon redemption.

Grounded in the traditional tenets of crypto world, "Not your keys, not your coins," Keiser's sharp critique emerges from his desire to uphold true ownership in the futurology of cryptocurrencies.

Crypto Lobby Makes a $70 Million Push for Bitcoin ETF in Washington

The crypto fraternity stands on tiptoe as the possibility of a Bitcoin exchange-traded fund (ETF) looms - this glimmering hope seen as a watershed moment in crypto's mainstream acceptance march. Three very influential players in the crypto realm, Coinbase, Circle, and a16z, have pooled in their resources, pledging a close shave to $80 million, in a strategic move to bend U.S. crypto rules in their favor. 

This significant capital injection finds its way to Fairshake, a newly formed political action committee (PAC) with a mandate to turn the political tide in favor of digital currencies. High stakes crypto stakeholders, Fermi rotary names like Ron Conway, Fred Wilson, alongside the Gemini's Winklevoss twins, too, have pitched in their support for Fairshake as an umbrella for unlimited contributions advocating "pro-crypto leadership."

The move, though noble, is not devoid of controversies. Fairshake's inception shadows the storm around Binance and the legal verdict passed on FTX's trailblazer, Sam Bankman-Fried - issues that have somewhat stirred the crypto industry's image. Political circles aren't free from doubts either. Senator Elizabeth Warren has rung the alarm bells on potential national security risks associated with digital assets, reinforcing the dire need for backing in political corridors for the industry.

Overflowing treasure chest Bitcoin ETF unlocks golden opportunities.webp

Consequently, the decision of Senator Patrick McHenry, a substantial pro-crypto voice, to hang his boots on politics after the 2024 elections signals a potential gap in the political support base for crypto. This makes the lobbying efforts critical for swaying the future elections and potentially ensuring the rise of crypto-friendly lawmakers. 

The anticipation further spills over to January 10, 2024, as the U.S. Securities and Exchange Commission is slated to cast its decision on several Bitcoin ETF applications —an approval that could substantially boost institutional interest in Bitcoin. Additionally, these lobbying initiatives might rise to clearer regulations for crypto exchanges, thereby fostering a more robust and transparent trading system.

As interest from major financial powerhouses such as JPMorgan and Morgan Stanley deepens, and tokenization continues to rise, the introduction of crypto-friendly legislation seems to be inching closer. 

Bitcoin ETF: A Game Changer Awaits?

As the cryptocurrency world grapples with uncertainty, the anticipated nod to a spot Bitcoin ETF approval appears to be poised for a groundbreaking impact. This turning point stands to reshape Bitcoin's volatility, redefine its relationship with orthodox financial assets, and imminently transform market liquidity.

Envisioned as the unheralded frontline, arbitrage desks and ETF providers are pinned to muster a defense, providing an absorptive buffer support against initial demand and curtailing market front-running. Nonetheless, as with any buffer, its potency is destined to wane over time.

Long term, Bitcoin's price teeters on a tightrope, delicately balanced between the immediate thirst for this digital gold and the quantity of coins available at distinct price tiers. 

In an interesting twist, the spot Bitcoin ETF appears to be an appealing draw for baby boomers. Simplified entry into Bitcoin investment promises an irresistible lure for this age bracket, sitting atop significant retirement savings, and could be a catalytic factor propelling Bitcoin's price skywards.

Diverse people celebrate unity as Bitcoin connects lives in collage.webp

This unfolding scenario also presents lucrative prospects for asset managers. Industry heavyweights like BlackRock and Fidelity might find themselves drawn to offering Bitcoin ETFs, given the tantalizing potential of management fees. This situation could ignite a fervor for more robust marketing and sales strategies.

An analysis of past trends in the ETF industry offers insight into an intriguing dynamic - a notable gathering of assets around the top issuers, thereby underscoring the significance of an early bird entry into this budding market.

From a regulatory viewpoint, a green signal to a spot Bitcoin ETF could assuage concerns, giving Bitcoin's reputation a much-needed booster shot, and streamlining the investment process for advisors. 

With its promise of a straightforward investment route as opposed to the convoluted process of direct cryptocurrency investment, the ETF format exudes an allure for investors seeking simplicity.

In the short term, the resultant ripples may be barely perceptible. However, the cumulative effect of these deftly intertwined elements could potentially propel Bitcoin to consistently hover above the $100,000 mark in the long run.

Bitcoin ETF Frenzy: Fact vs. Fiction as Launch Date Nears

Exchange-Traded Fund (ETF) experts put to rest the swirling conjectures about Bitcoin ETF holdings. They reveal that these funds will be substantiated by actual Bitcoins, not so-called 'paper Bitcoin' or fractional reserves.

Market speculations indeed run high when it comes to the substantiation of Bitcoin ETFs, especially as we approach the key January unveiling. Danny Kroeger, founder of Deezy, voiced his fear, suggesting the 'cash in, cash out' structure of ETFs may correlate to 'paper Bitcoin,' thereby possibly causing a Bitcoin price dip.

The notion of the Bitcoin ETFs drawing on fractional reserves, where banks maintain only a fraction of their depositors' cash, has also incited a fair share of market anxiety.  

However, seasoned ETF pro and president of ETF Store, Nate Geraci, dismisses these elements of mistrust and assures that spot Bitcoin ETFs will emphatically hold the actual Bitcoin and be fully backed by it, thereby restoring confidence.

Elevating the conversation, analyst James Seyffart confirms these reassuring perspectives, decrying the disinformation and confirming that Bitcoin ETFs will indeed be substantiated by actual Bitcoin.

Meanwhile, the fervent race to enter the ETF domain continues unabated. With an ambitious pool of 14 potential entrants, including big names like Grayscale ARK, iShares, Bitwise, and more, the competition heats up. The SEC has set a decisive deadline of December 29 for all emerging prospects to submit their applications and filings.

In a rather cunning move, Ark has reportedly liquidated its total Grayscale Bitcoin Trust holdings, ploughing back approximately $100 million from sales into BITO, the ProShares Bitcoin Strategy ETF, revealing a tactical tilt in the Bitcoin ETF landscape.

ARK Makes Last-Minute Push for Spot Bitcoin ETF

On December 29, ARK Invest, under the leadership of Cathie Wood and in collaboration with 21Shares, presented an updated filing on their proposed spot Bitcoin ETF, standing out in the dynamic crypto ETF territory. The submission took place just in time, ahead of the SEC’s December 29 deadline, demonstrating ARK's stringent adherence to timeline regulations.

Central to the amendments was a clear focus on authorized participants, emphasizing ARK's careful consideration of the ETF's operational mechanisms. The company's recent withdrawal from Grayscale Bitcoin Trust (GBTC), coupled with the adjustments to the ETF filing, indicate an intentional shift in strategy, predicated on the pending approval of their Bitcoin ETF.

Wood's upbeat conversations with SEC officials have stoked market enthusiasm about ARK's impending ETF approval. The anticipation around this development is set to coincide with the upcoming Bitcoin 'Halving' event in 2024, seen as a potential major market influencer.

The filing featured 16 noteworthy clarifications and novelties, shedding light on the ETF's diverse operational, financial, and regulatory details. For instance, there's a specified index price for the Bitcoin-U.S Dollar trading pair, along with concise definitions regarding Bitcoin Counterparties.

The amendments also introduced changes to the share redemption process and laid out new regulations for marketing support agreements. Risks connected with share creation and redemption, particularly during market upheavals, were distinctly outlined, contributing to foresight measures.

The filing also shed light on the risks related to Bitcoin Custodian and Prime Broker providing services for competing products, highlighting the potential for service provider concentration risk. Furthermore, ARK established a dynamic model for determining interest rates on trade credits, abiding by prevailing market conditions.

Revisions were made to explain tax implications on shareholders resulting from share sales and redemption - a salient element of the proposed spot Bitcoin ETF. Finally, the document included a thorough disclosure of the estimated expenses bound up with share issuance and distribution.

Hong Kong Vaults Open for Bitcoin ETFs: In-Kind or Cash, You Choose

Hong Kong's financial sector is diving headfirst into the world of cryptocurrency with the Securities and Futures Commission (SFC) issuing pioneering guidelines for providers of spot Bitcoin exchange-traded funds (ETFs). Unlike its American counterpart, the SFC is adopting a flexible stance, permitting both cash and in-kind creation of these financial instruments. 

The innovative approach was unveiled on December 22 when the SFC published the new rules, unveiling the framework for authorizing investment funds where over 10% of their net asset value are in virtual assets like Bitcoin. 

This decision reflects the SFC's coherent understanding of the rapidly evolving cryptocurrency landscape, where products like crypto ETFs are gaining popularity among not just professional investors but also the public. 

In fact, the growing desire for crypto exposure in Hong Kong led the SFC to set up systems to offer certain virtual assets to the public, all while ensuring robust investor protection. Since October 2022, it started receiving applications for ETFs primarily exposed through futures contracts. 

A cute chibi cubic-styled humanoid robot excitingly celebrating bitcoin etfs.webp

This coincides with the effective implementation of the licensing regime for virtual asset trading platforms in June 2023 providing Hong Kong investors with access to top virtual assets, albeit with strict eligibility and protection measures in place. 

In this innovative landscape, the SFC requires all crypto transactions and acquisitions by authorized funds to go through SFC-licensed platforms or accredited financial institutions. The transactions must comply with the rules of both the Hong Kong Monetary Authority and the SFC. This move has allowed both in-kind and in-cash subscription and redemption methods for spot virtual asset ETFs. 

In a sharp contrast to the more restrained U.S. Securities and Exchange Commission's cash-only model, Hong Kong's financial watchdog is fostering a dynamic environment for Bitcoin ETFs. The first decisions on the U.S. applications, necessitating amended registrations, are expected in early January. Only time will tell which approach will entice more crypto-enthusiasts.

Conclusion

The year 2024 promises to be a watershed moment for Bitcoin, marked by the potential approval of spot ETFs. This tidal wave of investment could reshape the crypto landscape, propelling prices, attracting institutions, and boosting market liquidity. While uncertainties linger, the potential rewards paint a picture of a transformed Bitcoin ecosystem, poised for mainstream embrace.

FAQs

1. When will Bitcoin ETFs be approved?

The SEC is expected to decide on several Bitcoin ETF applications on January 10, 2024. A green light could trigger immediate market movement.

2. How will Bitcoin ETFs impact the price?

Increased demand from institutions and retail investors could significantly boost Bitcoin's price, potentially pushing it above $100,000 in the long run.

3. Are there any risks associated with Bitcoin ETFs?

Cash-settled ETF structures might introduce tracking errors and higher expenses. Additionally, government control over these ETFs could raise concerns about true ownership.

This article has been refined and enhanced by ChatGPT.

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