Head of Saxo Strats
Summary: The US regulator SEC has approved the first US ETFs holding spot Bitcoin opening up Bitcoin exposure to a much wider global audience. There will be 11 new ETFs starting trading today all with low expense ratios as the arms race has begun to become the world’s largest spot Bitcoin fund. What it will mean for the Bitcoin price is difficult to say at this point, but in other markets such as gold and uranium where ETFs were holding the underlying physical asset the impact has been positive on the price. For European investors under ESMA regulation the new US ETFs on spot Bitcoin will not mean much as they will not be compliant for European investors.
After a horrible 2022 for cryptocurrencies the market bottomed out in November 2022 and since then spot Bitcoin is up 185% with the trade in 2023 increasingly being about anticipating the upcoming SEC decision on US ETFs tracking spot Bitcoin. Following the SEC decision, we have not seen much price movements with spot Bitcoin trading around the 46,250 level up less than a percent in today’s trading session.
The big question is now whether this Bitcoin trade was a buy the rumour sell the facts like we saw back in 2017 when CME Group and Cboe Global Markets launched the first Bitcoin futures. ETFs holding underlying physical assets have in other markets such as gold and uranium been a positive factor for price developments and especially in the case of uranium, the new physical ETFs have tighten the market causing uranium prices to rally. The question is whether we will see the same developments over time with these 11 new ETFs holding spot Bitcoin as it opens the door for many more investors in the world’s largest financial market. It is important to note that SEC Chair Gary Gensler that specifically that while the SEC has approved these ETFs the regulator are by no means endorsing the underlying market, saying that retail investors should still be very cautious on investing into cryptocurrencies.
While the SEC approval is a big thing in the US, ETFs holding spot Bitcoin and other cryptocurrencies have been available to investors outside the US for a long time. For European investors the launch of US ETFs on spot Bitcoin mean little as these ETFs will not be available for retail investors in the EU as these ETFs will not be compliant with UCITS regulation. As such, the new spot Bitcoin ETFs will only be available to professional investors in Europe.
For jurisdictions outside ESMA regulation such as Switzerland, UAE, and APAC the launch of US spot Bitcoin ETFs will open up new opportunities for investing more cheaply into Bitcoin. There are jurisdictions such as United Kingdom where crypto derivatives are banned for UK investors and Hong Kong were cryptocurrencies are illegal. For those two jurisdiction none of these new ETFs will make any difference.
So for many European retail investors the access to spot Bitcoin will not change the largest ETF is the Bitcoin Tracker EUR incorporated and listed in Sweden with €828mn in total assets and total expense ratio of 2.5%. So for this particular ETF in Europe the new US ETFs could put on some pricing pressure as it is 20 times more expensive than the iShares Bitcoin Trust and thus any professional investor in the EU that has exposure to Bitcoin through the Bitcoin Tracker EUR ETF would ideally switch fund exposure.
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