$3 Billion in New Bitcoin Funds Changes Hands on First Day of Trading
More than $3 billion of a newly approved investment product tied to Bitcoin changed hands in the first few hours of trading on Thursday, as cryptocurrency enthusiasts celebrated a turning point for the industry.
Eleven of the products, known as exchange-traded funds or ETFs, began trading on popular platforms like the Nasdaq a day after federal regulators approved them, giving investors an easier way to bet on the cryptocurrency markets. Major financial companies, including asset managers such as BlackRock and Fidelity, offer the ETFs
It could take months to gauge the impact on the cryptocurrency industry, which is still reeling from a recent series of market crashes and high-profile company bankruptcies. Initial trading data did not show how many new investments flowed into Bitcoin funds; some of the trading activity may have come from investors buying shares and then quickly flipping them.
“It’s not a one-day event,” said Sandy Kaul, who runs the digital assets division at Franklin Templeton, one of the companies offering the ETFs. “Six months is a really good time to understand: Is this a transformational product?”
Bitcoin’s price briefly rose to $49,000 on Thursday before falling to $46,000. Optimism that the funds were nearing approval from the Securities and Exchange Commission drove Bitcoin’s price more than 60 percent in recent months to the highest level since the market imploded in 2022.
The approvals were a major victory for the crypto industry, which is gearing up for a series of legal battles with the federal government. The SEC has sued Coinbase, the largest U.S. cryptocurrency exchange, and several other major companies, alleging that they illegally marketed unregistered securities, a potential existential threat to the industry.
In a statement announcing the ETF approvals, SEC Chairman Gary Gensler said the agency “did not approve or endorse Bitcoin.” He said most crypto trading platforms break the law and “often have conflicts of interest.”
Historically, anyone wanting to invest in Bitcoin or another cryptocurrency had to store the assets in specialized wallets or open accounts on crypto exchanges, such as Coinbase and Binance, which faced regulatory scrutiny. Many investors have struggled to understand the intricacies of these online platforms, or have become frustrated with bugs, hacks and high transaction fees.
An ETF offers a simpler option. Instead of buying Bitcoin directly, with all the risks and inconveniences that entails, investors buy shares in an ETF that holds the currency. The funds are offered on traditional exchanges, in a format that many asset managers have embraced.
Crypto enthusiasts have been clamoring for a Bitcoin ETF for more than a decade, predicting the products would generate billions of dollars in new investments. But the SEC has repeatedly rejected these attempts, arguing that the crypto markets were rife with fraud.
The tide turned in August when the federal appeals court in Washington ruled that the SEC’s rejection of an application from crypto firm Grayscale Investments was “arbitrary and capricious.” On Wednesday, Mr. Gensler said the ruling had effectively given him no choice but to approve the products.
“Grayscale deserves a ton of credit for today,” said Coinbase CEO Brian Armstrong. Posted at X on Wednesday. “Absolute legends.” Coinbase partners with several companies that offer the ETFs, including BlackRock, to store the Bitcoin in the funds.
The 3-to-2 vote to approve Bitcoin products also exposed divisions within the SEC over crypto regulation. Mr. Gensler sided with two Republican commissioners over the objections of two Democratic commissioners.
In a statement, one of the Democrats, Caroline Crenshaw, said form the approvals as a dangerous mistake that set the agency “on a wayward path that could further sacrifice investor protection.” She cited illegal manipulation of crypto prices as well as rampant fraud that plunged the industry into crisis in 2022.
Hester Peirce, a Republican commissioner who often clashes with Mr. Gensler, also criticized the SEC’s handling of the Bitcoin applications, saying the agency had alienated the industry and caused confusion in the market.
“We wasted a decade of opportunities to do our work,” she wrote. “Today’s decision does not undo the many harms caused by the disparate treatment of spot Bitcoin products.”
For now, the approvals have restored some of the enthusiasm the crypto industry showed in 2021, the last time prices rose. On Wednesday evening crypto enthusiasts gathered for a party at Pubkey, a Bitcoin-themed bar in Manhattan. The official X account for Franklin Templeton changed his profile picture including laser eyes, a popular Bitcoin meme.
“I’ve never seen so much obsession with anything ETF-related,” said Steven McClurg, the Chief Investment Officer of Valkyrie, a company offering the new Bitcoin product. “It’s very exciting to have a brand new type of asset class making its way into the traditional financial system.”
He has excessive expectations for the market. Mr. McClurg predicted that Bitcoin’s price would skyrocket to more than $150,000 by the end of the year.