Although some financial instruments on Bitcoin already existed (such as CME futures), it was not until yesterday that the US securities regulator, the SEC, authorized the first funds about Bitcoin. This is an important milestone that brings into the stock market the most famous cryptocurrency in the world. The authorization of Bitcoin ETFs opens the umbrella of the United States Securities Commission on certain legal (and financial) guarantees for those who want to expose themselves to the cryptocurrency without investing, directly, in Bitcoin.
And an ETF, or Exchange Traded Fund, is an investment product that works similarly to a fund, but is traded like a stock. In short, it allows potential investors andget exposed to the Bitcoin market and trade on its value without having to directly buy or sell the cryptocurrency.
Not only does it open the door to enter the Bitcoin market without having to have Bitcoin, it also makes it easier for investors and the general public. the possibility of investing indirectly. And without the need to do so through crypto exchanges, since what is negotiated is the value and not the cryptocurrency itself. And another important issue: by not owning the crypto itself, investors do not have to worry about safeguarding the Bitcoin itself in secure wallets, since the management of the underlying assets (the Bitcoin itself) is in charge of the ETF manager. .
Large funds jump on the Bitcoin bandwagon
In total, the SEC has approved a total of 11 Bitcoin ETF applications, including those from some of the most important funds in the market, such as BlackRock, Ark Investments, Fidelity, Invesco or VanEck, among others. All taking into account that there is still a large number of authorized voices, even within the SECwho continue to consider that these products pose a certain risk for the market and investors.
But, if it is just another investment instrument, why is SEC authorization so important? Easy, the fact that the regulator has given the go-ahead to Bitcoin ETFs is a turning point for the cryptocurrency (and for the crypto market in general), while the SEC begins to consider it, tacitly, as a recognized financial asset. And also by the most important securities institution in the world, although it does so without directly supporting it. Nothing more and nothing less than that.
The first recognition of cryptocurrency as an underlying asset of a financial instrument. Indirectly, it also represents a breath of fresh air for the general cryptocurrency market and greater credibility for this type of instruments.
More associated risks than traditional ETFs
Now, beyond that, little changes. It remains a tremendously volatile asset whose risks are also transferred to the funds that operate with them. And whose portfolios will now have exposure to said volatility. And no matter how much they can now be operated as an ETF, Bitcoin will continue to be, despite its intrinsic characteristics, a commodity and not a valueso its path compared to other investment instruments remains uncertain, beyond ETFs.
It remains to be seen how possible future Bitcoin scandals may affect the value of the funds that will operate on it. Above all because, if the past has shown anything, cryptocurrencies are instruments whose value is easily manipulatedand in general the reaction of their markets is more elastic than that of the majority of assets in the traditional ETF portfolio, considered “low risk”, generally because they are highly diversified.
Furthermore, to make matters worse, Bitcoin ETFs depend on certain authorized participants to create or redeem shares based on market demand, which is generally controlled by particular Exchanges and with much greater opacity than other assets. The malpractice of any of them, as has happened in the past (and quite frequently), also transfers that risk to the ETF itself, and by extension to the propos funds, to investors and to the market as a whole.
Despite the above, the SEC’s approval of Bitcoin ETFs represents a turning point for Bitcoin, and symbolizes its transition from a digital asset predominantly held by individual investors to institutional markets.