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Bitcoin investors are eagerly awaiting regulators to approve the first Bitcoin spot exchange-traded fund in the United States, which could be significant for cryptocurrency investors, experts say.
Last week, the price of bitcoin hit an 18-month high, climbing to $37,970, after black rock has taken its first steps towards an ether ETF. The price of Bitcoin has more than doubled since the start of 2023, but it remains well below its November 2021 peak.
At least nine asset management firms – including BlackRock, WisdomTree, Valkyrie and others – are awaiting approval from the Securities and Exchange Commission to issue a bitcoin spot ETF. Experts estimate that the first approval could come in early 2024.
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“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 its approval, but it’s also possible the price could fall as investors sell to reap profits, Armor said.
An asset that is still “extremely volatile”
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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