The long-discussed bitcoin exchange-traded funds (ETFs) began trading on Thursday, after the U.S. Securities and Exchange Commission finally approved them on Wednesday. The decision should expand interest in bitcoin, the world’s most popular cryptocurrency, for investors who were leery of holding the digital token directly. It could also bring more technological innovations to the crypto industry.
The SEC made clear that it was not endorsing the safety of bitcoin. In his statement approving the ETFs SEC Chair Gary Gensler said that “investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
But the demand was immediately evident. Two of the ETFs, the Grayscale Bitcoin Trust and BlackRock’s iShares Bitcoin Trust, saw millions of shares of trading volume within the first 10 minutes of Thursday’s session. The competition set off a fee war, with BlackRock dropping its proposed fee from the initial 0.30% to 0.25%.
The SEC has been considering—and rejecting—proposals for a bitcoin ETF since 2018. BlackRock, the world’s largest asset manager, submitted paperwork to begin marketing a bitcoin ETF nearly a year ago.
Implications for the Industry
As much as this changes investor options, the most significant aspect of it may be its effect on digital currencies in the long run. Growing investor demand for cryptocurrencies could incur long-overdue improvements in the business and technology of crypto.
“Increased demand and its potential impact on bitcoin’s price is what’s being talked about most here, but the implications go much further than that,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Attitudes toward the asset class will begin shifting. Further research into the industry should help spur innovation and development. Financial institution tooling such as storage, custodial services, prime broker servicing, settlement services, derivatives, and payment applications will all pick up.”
“All of these things are going to help grow adoption within the digital asset ecosystem as more institutions and retail participants will realize the various use cases and solutions that digital asset products offer,” he said. “The need for self-custody tools for any participants will only increase from here.”