On January 10, local time, U.S. Securities and Exchange Commission (SEC) documents showed that the SEC approved 11 Bitcoin spot ETFs. However, SEC Chairman Gary Gensler said,
SEC Commissioner Caroline Crenshaw issued a dissenting opinion, calling the SEC's behavior "unsound and inconsistent with historical trends." "I am concerned that these products will flood the market and go directly into the retirement accounts of American families who can least afford to lose their savings to the fraud and manipulation that is prevalent in the Bitcoin spot market," she said in a statement.
Boosted by this news, blockchain concept stocks opened higher in Hong Kong stocks in early trading. As of press time, BC Technology Group (00863) rose 13.75% to HK$9.1; Meitu Corporation (01357) rose 3.32% to HK$3.42; Xinhuo Technology Holdings (01611) rose 1.96% to HK$2.08.
So, what impact will the Bitcoin ETF be officially approved on short-term capital flows?
Zhao Wei, a senior researcher at OKX Research Institute, told China Business News that currently, Blackrock, Valkyrie, Wisdomtree, Invesco/Galaxy, iShares, Ark/21Shares, and Vaneck have all submitted updated S-1 documents for Bitcoin ETF applications to the U.S. SEC. Among them, BlackRock announced that it had injected US$10 million in seed funds into its Bitcoin spot ETF early this morning Beijing time; VanEck said it would provide US$72.5 million in seed funds for the pending Bitcoin spot ETF.
In addition, Pantera Capital also announced that it is preparing to invest US$200 million in Bitwise’s pending Bitcoin spot ETF. However, the remarks came with a disclaimer stating that they were merely an investment of interest and were not legally binding. As for the scale of inflows that may be brought about in the future, industry insiders generally believe that it will be at the level of hundreds of billions of dollars, but this is only an estimate and does not have actual reference value.
Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, said that BlackRock may inject $2 billion in assets on the first day of spot Bitcoin ETF trading, breaking the first-day flow record. The seed funding may provide BlackRock with momentum in the race for 11 ETFs. All these ETFs could raise up to $4 billion on their first day of trading and $50 billion within two years.
According to a report from Standard Chartered Bank, the approval of relevant ETFs will greatly change the rules of the game for Bitcoin, allowing institutional and retail investors to invest in Bitcoin without directly holding Bitcoin. The bank predicts that it may attract US$50 billion to US$100 billion in funds in 2024 alone.
However, some industry insiders told China Business News that after the news officially came out, Bitcoin and other cryptocurrencies did not rise as expected, probably because the market has already digested most of the expectations. Moreover, you need to pay attention to risks in subsequent investments, as there may be a "buy news, sell facts" type of retracement.
The approval of the Bitcoin spot ETF has been full of twists and turns. The earliest relevant application occurred in 2013, and in the following ten years, the SEC rejected more than 30 similar applications. A veteran of the cryptocurrency market who founded a blockchain institution in California previously analyzed to a reporter from China Business News that in addition to concerns about liquidity and market manipulation, regulators are also worried that Bitcoin's fluctuations may be too dramatic for ordinary investors.
In fact, a farce before the ETF approval once again caused fluctuations in cryptocurrencies such as Bitcoin. About 24 hours before the SEC officially announced its approval of the ETF, a post appeared on social platform X, claiming without authorization that the Bitcoin ETF had been approved. Affected by this, the price of Bitcoin fluctuated violently on Tuesday and Wednesday of this week, and tens of billions of dollars in market value were wiped out in a matter of minutes.
In addition, the above-mentioned market veteran also said that another point questioned by the SEC is whether funds have the information needed to fully evaluate tokens such as Bitcoin, including whether they can verify who owns the underlying token. In 2021, Gensler testified before the Senate Banking Committee that the lack of regulation and oversight in the cryptocurrency market has led to "concerns about the possibility of fraud and manipulation." As recently as January 9, Gensler posted on social platform X that crypto assets posed a “serious risk.” To allay some of the SEC's concerns, BlackRock and other issuers have proposed so-called regulatory sharing agreements to reduce the risk of market manipulation and fraud. Coinbase (COIN.US) is the only publicly traded pure spot cryptocurrency exchange in the United States, and has therefore become the preferred partner of related ETF issuers.
Zhao Wei analyzed that the prototype of ETF can be traced back to the 1970s, and it has now developed very maturely. Traditional stock exchanges are very familiar with its product design process, and generally speaking, there are no technical obstacles. However, given the particularity of crypto assets such as Bitcoin being traded 24/7, regulatory authorities may have more discussions with trading institutions in the future to improve the market operation mechanism.
Compared with the impact on short-term capital flows, the market is more concerned about the impact of this incident on the cryptocurrency industry.
Zhao Wei told reporters that in the short term, the passage of the Bitcoin spot ETF will stimulate the development of the encryption market. In the long run, there are two main aspects. On the one hand, it promotes crypto assets such as Bitcoin to reach a larger financial surface. "The United States is one of the largest financial markets. The listing of Bitcoin spot ETFs on mainstream exchanges can simultaneously reach a larger investor group such as qualified investors, institutional investors and retail investors, injecting great vitality into the crypto market. In addition, it will cover a wider range of investment channels." He said, "In the past, traditional asset management departments, such as various fund managers, financial advisors, etc., found it difficult to include crypto assets in their investment portfolios without Bitcoin spot ETFs. After the adoption of Bitcoin spot ETFs, this obstacle will no longer exist."
On the other hand, he believes that the incident will indirectly increase the investment community's acceptance of the asset class and will also promote industry compliance. He said that Bitcoin spot ETF products issued by institutions such as BlackRock and Fidelity will be more easily accepted by mainstream funds due to the brand endorsement of these institutions. At the same time, such products will have higher compliance clarity, attract more investment and promote the construction of related ecosystems.