A ‘sell the news’ event or a critical crypto adoption moment?
The United States Securities and Exchange Commission (SEC) on January 10 approved the first Bitcoin exchange-traded fund (ETF) to be publicly traded in the US.
In the landmark ruling, the SEC approved 19b-4 applications from ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex and Franklin Templeton, allowing their positions to list Bitcoin (BTC) ETFs. And they were traded on regulated exchanges. Trading of ETFs begins on January 11 when the markets open.
The approval of the position paves the way for Bitcoin ETF investors to gain direct exposure to the value of Bitcoin without buying. Investors would instead buy shares in listed ETFs that hold physical bitcoin as their underlying asset.
Samir Kerbage, Chief Information Officer at Hashdex – one of the asset managers to get SEC approval for its Bitcoin ETF – told Cointelegraph that it is a big day in the history of digital assets, and the approval marks the next phase of the industry. For US investors to fully participate in the promise of Bitcoin.
“Hashdex is pleased to partner with Tidal to offer the Hashdex Bitcoin ETF, one of the first regulated U.S. products to give investors exposure to the value of Bitcoin,” he said.
The race for the Bitcoin ETF position in the US has been long, with multiple filings and rejections before the new application cycle begins in 2023.
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In the year During the 2017 bull market, several institutional funds such as Bitwise tried to launch a spot Bitcoin ETF. Bitwise filed for the Bitwise Bitcoin ETF Trust, which was later rejected by the SEC.
Wilshire Phoenix offers a unique approach by combining Bitcoin and US Treasurys with a Bitcoin and Treasury Investment Trust. However, the SEC rejected this proposal in February 2020.
The SEC has previously rejected proposals for a spot BTC ETF, citing market volatility and the small size of the market. However, with a much larger market size and growing institutional interest, the new offering cycle in 2023 has reignited optimism among crypto enthusiasts.
A number of factors have contributed to the adoption of BTC ETFs at this time.
First, BTC's market cap of nearly $1 trillion is huge, with increasing institutional demand.
The world's largest asset manager, BlackRock, has joined the ETF race and registered a spot Bitcoin ETF in June 2023. BlackRock's entry into the Bitcoin ETF race comes as a major development for the crypto community on a global scale. The largest asset manager – with over $8 trillion in assets under management – and a track record of successful ETF approvals.
BlackRock boasts 575 approvals for an ETF rejection in its history, and with spot BTC ETF approvals, the record now stands at 576-1.
Blackrock introducing their ETF app pic.twitter.com/rJNPCXwr0v
— rwlk (@sherlock_hodles) January 10, 2024
The historic day also commemorates the Bitcoin Run, a date dedicated to Hal Finney's historic tweet on January 10, 2009, saying “Bitcoin Run”. Finney was the first person to download and receive Bitcoin.
Running Bitcoin
— Halfin (@halfin) January 11, 2009
The US CEO of Bitstamp crypto exchange, Bobby Zagotta, called the approval a historic day in the history of Bitcoin. He told Cointelegraph that ETFs provide a familiar entry point to the world of cryptocurrency for those looking from afar.
“It is vital that the industry cooperates effectively to ensure that crypto ETFs are equipped with robust safeguards from the outset, to prevent fraud and market manipulation,” he added.
The Bitcoin ETF Case “Buy the Rumor, Sell the News?”
The main point of discussion that has divided the crypto community is the potential impact that the approval of the BTC ETF will have on the price of Bitcoin. On the one hand, Bitcoin fans and enthusiasts believe that the spot ETF will be a milestone in Bitcoin history and potentially a serious event for the price.
On the other hand, several key observers believe that the approval will be a “news selling” event, where it could lead to short selling and the ETF news is already sold, causing the price of BTC to fall.
The idea of ”Buy the Rumor, Sell the News” is the idea of using market movements to predict an announcement that could change the market. Traders often take large profits and close their positions after the news breaks. This theory is popularized by people like Cathy Wood, CEO of ARK Invest.
Bitcoin's price remained largely unchanged before and after the approval, hovering around the $46,000 mark. Many crypto fans have noticed that the price of BTC rose above $48,000 on January 9 on fake news.
Andrey Stoychev, a project manager at crypto brokerage firm Niko, told Cointelegraph that the size of the event could still push Bitcoin's price significantly higher, even if the news caused an initial fall.
If gold ETFs are to be introduced in 2013–2014, Bitcoin is likely to reach a new all-time high of late. That is, the rapid price action of Bitcoin does not carry much weight in the long term and is not worth paying attention to, because this development has long-term prospects,” Stoychev said.
According to Vettel Lunde, senior analyst at K33 Research, the fake news on the ETF approval gave a hint of how the market might react to the real approval news. “The market showed its hand yesterday; the ETF approval exercise supports the news-the-news reaction,” Lunde wrote on X.
The market showed its hand yesterday; ETF approval practice favors news-of-the-news response.
Immediately after the announcement, it quickly overwhelmed the market and forced a whiplash in the following minutes. BTC headed down; The SEC “stepped in” and created the below… pic.twitter.com/beHqe8fyNv
— Vetle Lunde (@VetleLunde) January 10, 2024
Others believe the rally could begin when US markets open on January 11 and ETFs actually begin trading. When ETF trading begins, billions could flow into BTC through stock markets, with Bloomberg estimating the flow into BTC at around $4 billion.
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Ken Timsit, managing director of Cronos Labs, believes that the crypto market in general is currently very driven by news, and news that has been expected for some time already has value. He cited Ethereum's move to proof-of-concept and Bitcoin's halving in a matter of months as examples.
“The possible result is that there are high market conditions in the short term, followed by an equal correction when major volumes fail to materialize – in other words, increased volatility in both directions.”
Oliver Lynch, general counsel of crypto exchange Bittrex Global, told Cointelegraph that he does not expect a dramatic price increase after the approval of BTC from the spot: “I don't expect to see a very dramatic acceleration effect because this is mostly the case.” It has already been priced in the markets. I know it may not be music to the ears of many traders, but with the upcoming Bitcoin halving, among other developments, there is still a chance that Bitcoin will build on its current trajectory regardless of the outcome.
Spot approval opens up a new regulatory-compliant way for Bitcoin ETF investors to access the crypto market. Experts expect massive inflows into these ETFs as they begin public trading, marking a watershed moment in Bitcoin history.
