Bitcoin briefly tops US$47,000 in cool response to US ETF approval

NEW YORK - Bitcoin briefly scaled US$47,000 in a muted climb after the US Securities and Exchange Commission (SEC) approved exchange-traded funds (ETFs) that invest directly in the token, as traders wait to see how much money the products garner.

The largest cryptocurrency was 1.5 per cent higher at US$46,632 as at 9.46am on Jan 11 in Singapore, following a decision some view as a landmark step that widens the investor base for digital assets. Bitcoin had already jumped 166 per cent in the past 12 months in anticipation of the ETFs and looser monetary policy.

Other major cryptocurrencies were mixed. Ether, the second-biggest token, stood out with a 16 per cent advance in the past 24 hours to US$2,583 on bets that it will be the focus of the next wave of spot crypto ETF products in the United States.

Market watchers had wondered whether Bitcoin was ripe for a pullback from the actual green light for spot ETFs if speculators decide to bank some of the profits from the token’s months-long advance.

Ms Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets, said the news had largely been “priced in” and inflows into the ETFs will now be closely watched.

Mr Leo Mizuhara, founder of DeFi (decentralised finance) institutional asset manager Hashnote, said: “Most of the money immediately moving into Bitcoin ETFs will be reallocations from other Bitcoin exposure. It will take time for new money to flow into Bitcoin via the new ETFs.”

The SEC on Jan 10 approved 11 Bitcoin ETF applications, including from BlackRock, ARK Investments/21Shares, Fidelity, Invesco and VanEck, despite warnings from some officials and investor advocates that the products carried risks.

Most of the products are expected to begin trading on Jan 11, issuers said, kicking off a fierce competition for market share.

The ETFs are a game changer for Bitcoin, offering investors exposure to the world’s largest cryptocurrency without directly holding it. They provide a major boost for a crypto industry beset by scandals.

Standard Chartered Bank analysts this week said the ETFs could draw US$50 billion to US$100 billion in 2023 alone, potentially driving the price of Bitcoin as high as US$100,000. Other analysts have said inflows will be closer to US$55 billion over five years.

The green light in the US marks a U-turn for the SEC, which for a decade rejected Bitcoin ETFs due to worries they could be easily manipulated. SEC chair Gary Gensler is also a fierce crypto sceptic.

Hopes the SEC would finally approve Bitcoin ETFs surged in 2023 after a US federal appeals court ruled that the agency was wrong to reject an application from Grayscale Investments to convert its existing Grayscale Bitcoin Trust (GBTC) into an ETF. That ruling forced the agency to re-examine its position.

In a statement, Mr Gensler said that in light of the court ruling, approving the products was “the most sustainable path forward”, but added that the agency did not endorse Bitcoin, which is risky and volatile.

Companies expect a flurry of online advertising and other marketing. Some issuers, including Bitwise and VanEck, have already released ads touting Bitcoin as an investment.

Success in the battle for inflows will mostly depend on fees and liquidity, analysts say. Some issuers slashed their proposed fees in new filings this week, including BlackRock and ARK Investment/21Shares. Those fees range from 0.2 per cent to 0.8 per cent, with many firms offering to waive fees entirely for a certain period of time. For short-term speculators looking to buy in and out of the products, liquidity could be more important.

“It is pretty unprecedented, so we’ll see how it works. I’ve never been in a situation where 10 of the same ETF were launched on the same day,” said Mr Steven McClurg, chief investment officer at Valkyrie, whose ETF was among those approved by the SEC. BLOOMBERG, REUTERS