$3 billion of new Bitcoin funds changed hands in first trading day

$3 billion of new Bitcoin funds changed hands in first trading day

More than $3 billion changed hands in a newly approved investment product tied to Bitcoin in the first few hours of trading on Thursday, as cryptocurrency enthusiasts celebrated a watershed moment for the industry.

Eleven products, known as exchange-traded funds, or ETFs, began trading on popular platforms like the Nasdaq a day after they were authorized by federal regulators, creating a way for investors to bet on cryptocurrency markets. The easy method is ready. Major financial companies, including asset managers such as BlackRock and Fidelity, are offering ETFs.

It may take months to assess the impact on the cryptocurrency industry, which is still reeling from a recent series of market crashes and high-profile corporate bankruptcies. Early trading data did not reveal how much new investment came into Bitcoin funds; Some trading activity may originate from investors who purchased shares and then immediately flipped them.

“This is not a one-day event,” said Sandy Kaul, who runs the digital assets arm of Franklin Templeton, one of the firms offering the ETF. Six months is a really good moment to understand: is this a transformative product?

The price of Bitcoin briefly rose to $49,000 on Thursday and then fell to $46,000. Optimism that the funds were close to approval by the Securities and Exchange Commission sent the price of Bitcoin rising more than 60 percent in recent months to its highest level since the market crash in 2022.

The approval was a major victory for the crypto industry as it prepares for a series of legal battles with the federal government. The SEC has sued the largest US crypto exchange, Coinbase, and several other major companies, arguing that they illegally marketed unregistered securities, posing a potential existential threat to the industry.

In a statement announcing the ETF’s approval, SEC Chairman Gary Gensler said the agency “has not approved or endorsed Bitcoin.” He said most crypto trading platforms are breaking the law and “often have conflicts of interest.”

Historically, anyone who wanted to invest in Bitcoin or any other cryptocurrency had to store the assets in special wallets or open accounts on crypto exchanges like Coinbase and Binance, which faced regulatory scrutiny. Many investors have struggled to understand the intricacies of these online platforms, or have been frustrated by bugs, hacks, and high transaction fees.

ETFs offer a simple alternative. Instead of buying Bitcoin outright with the risks and inconveniences, investors buy shares in an ETF that includes the currency. Funds are offered on traditional stock exchanges in a format that has been adopted by many money managers.

Crypto enthusiasts have been clamoring for a Bitcoin ETF for more than a decade, predicting the product would attract billions of dollars in new investments. But the SEC repeatedly rejected those efforts, arguing that crypto markets were rife with fraud.

The situation changed in August when the federal appeals court in Washington ruled that the SEC’s rejection of crypto firm Grayscale Investments’ application was “arbitrary and capricious.” On Wednesday, Mr. Gensler said the decision effectively gave him no choice but to approve the products.

“Grayscale deserves a huge amount of credit for today,” said Coinbase Chief Executive Brian Armstrong. Posted Wednesday at X. “Absolute Legends.” Coinbase is working with several companies offering ETFs, including BlackRock, to store bitcoin held in the fund.

The 3-to-2 vote to approve Bitcoin products also highlighted divisions within the SEC over crypto regulation. Mr. Gensler sided with two Republican commissioners over the objections of two Democratic commissioners.

In a statement, Carolyn Crenshaw, one of the Democrats, mold The approval has been described as a dangerous mistake that has put the agency “on a wrong path that could further harm investor protection.” He cited illegal manipulation of crypto prices as well as rampant fraud that pushed the industry into recession in 2022.

Hester Pierce, a Republican commissioner who frequently clashes with Mr. Gensler, also criticized The SEC, which handles Bitcoin applications, said the agency has alienated the industry and created confusion in the market.

“We missed a decade of opportunities to do our job,” he wrote. “Today’s order does not mitigate the multiple harms resulting from the inequitable treatment of spot bitcoin products.”

For now, the approval has restored the enthusiasm that the crypto industry showed in 2021, when prices last rose. On Wednesday evening, crypto enthusiasts gathered for a party At Bitcoin-themed bar Pubki in Manhattan. Official X account for Franklin Templeton changed your profile picture To include laser eyes, a popular Bitcoin meme.

“I’ve never seen this much passion over anything ETF-related,” said Steven McClurg, chief investment officer at Valkyrie, the firm offering the new bitcoin product. “It’s very exciting to have a completely new type of asset class that makes its way into the traditional financial system.”

His expectations for the market are very high. Mr McClurg predicted the price of Bitcoin would exceed $150,000 by the end of the year.

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