The price of Bitcoin has surged in 2023 as investors await approval of the first Bitcoin spot exchange-traded fund in the United States, which would be a milestone for cryptocurrency investors, experts say.
In early December, the digital currency surpassed $44,000 for the first time since April 2022, and year-to-date gains were more than 160%, as of December 21, mainly fueled by optimism over a bitcoin ETF in cash.
Meanwhile, discussions between the Securities and Exchange Commission and asset managers hoping to list Bitcoin ETFs have progressed to technical details, signaling to some experts that approval could be imminent.
More than a dozen companies, including BlackRock, WisdomTree, Valkyrie and others, are awaiting the green light from the SEC, which could come in early January.
“For ETF investors, this would be the best product on the market,” said Bryan Armor, director of passive strategies research for North America at Morningstar. “All other options are currently flawed to varying degrees.”
Currently, U.S. investors can purchase Bitcoin futures ETFs, which own Bitcoin futures contracts, or agreements to buy or sell the asset later at an agreed price. The long-awaited Bitcoin spot ETF would invest directly in the digital asset.
If the SEC approves a bitcoin spot ETF, Armor plans a “batch approval,” with multiple ETF listings on the same day. “I would expect them to rule on cash ETFs holistically because most issuers take similar approaches” to applications, he said.
“There are a lot of good signs that the SEC is taking the latest batch of filings more seriously,” Armor said. “I’m more bullish on a Bitcoin ETF than ever.”
Some crypto investors expect bitcoin to rise after approval, but it’s also possible the price could fall as investors sell to reap profits, Armor said.
Although the SEC’s approval of a spot Bitcoin ETF could make the asset class more accessible to the general public, experts urge investors to consider their risk tolerance and goals before diving in. .
“I think it depends on the investor,” said certified financial planner Ben Smith, founder of Cove Financial Planning in Milwaukee. If you’re a more aggressive investor with an appetite for higher risk, a spot Bitcoin ETF could fit into a diversified portfolio, he said.
However, experts often suggest limiting exposure to cryptocurrencies, such as 1% to 5% of your allocation, to minimize downside exposure. “It remains an extremely volatile and speculative asset,” Armor added.
According to a 2022 Nasdaq survey of 500 advisors, about 72% of financial advisors said they would be more likely to invest in crypto if spot ETFs were approved in the United States.
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