SEC Approves Spot Bitcoin ETFs – Commentary

The industry reacts to the SEC’s decision to approve Bitcoin ETFs.

Moody’s On Bitcoin Spot ETFs

Moody’s Corporation (MCO) has provided comments on the SEC’s decision to approve 11 Bitcoin Spot ETFs applications and its impact on the industry.

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Rajeev Bamra, SVP, Digital Finance, Moody’s Investors Service:

The approval of spot bitcoin ETFs by the SEC has the potential to simplify and secure Bitcoin investments for a broader investor base, which may reshape the dynamics of cryptocurrency investments. It could lead to substantial inflows from institutions interested in entering the cryptocurrency market as it may provide a reliable and transparent price discovery mechanism. This could result in a more stable and liquid crypto market, representing a positive development for the digital finance ecosystem. In 2023, Bitcoin and Ether have made cryptocurrencies the best performing asset class. Whether this trend will hold depends on the trajectory of global monetary policy-making as well as the availability of cryptocurrencies to institutional investors through products that meet regulatory standards, ensuring their safety and security.

Yiannis Giokas, Senior Director, Moody’s Analytics:

The SEC’s approval of Bitcoin Spot ETFs marks a significant step towards the institutionalization of cryptocurrency, expanding Bitcoin’s accessibility to a wider audience in a more regulated and simpler manner. Such an ETF could lead to increased demand for Bitcoin, and enhance both price discovery and market liquidity. However, this development also brings certain risks. The notorious price volatility of Bitcoin, as well as its fluctuating values against stablecoins and other cryptocurrencies, could expose mainstream investors to a less familiar spectrum of investment risks.

LSEG Lipper comments on SEC decision to approve Bitcoin ETFs

Bob Jenkins, Global Head of Research at LSEG Lipper, comments: “The reality is that investors seem intent on incorporating crypto into their portfolios, regardless of access to ETF products. Today’s approval for spot products may therefore represent an enhanced level of organized oversight and transparency to this asset class, so will likely benefit investors.”

Aaro Capital’s CEO Peter Habermacher On the symbolic significance of SEC’s approval of BTC ETFs and implications for investors and digital assets space

With the SEC announcing today the approval of multiple applications by major money managers and crypto firms for spot Bitcoin ETF products, this regulatory approval provides a more comfortable regulatory black backdrop for the digital assets sector in the US, according to Peter Habermacher, CEO and Co-Founder of Aaro Capital, a cryptoassets and DLT investment specialist company. Please see the reactionary comments below and feel free to use these comments as quotes attributable to Peter. 

‘We believe the significance of this decision lies beyond just the liquidity that this may inject into the crypto markets due to fresh money coming in. This would create an easy and low operational risk access point for, in particular, US RIA managed money, who are the gate keepers for around $5 trillion in assets, as well as similar wholesale investors in the US and around the world.”
 
“More importantly, it has a symbolic significance for the industry, which may still be immature but full of attractive investment opportunities. In addition, this decision exemplifies how major regulators around the world are getting to grips with this fast-evolving industry. It would give the first official stamp of approval from the SEC which is considered the most hostile major financial regulator towards crypto globally outside of China. In addition, we expect this to be the first of many such stamps of approval. This is particularly symbolic from the SEC given the primary reason for the rejection of a bitcoin ETF to date has been the possible manipulation of crypto markets. Therefore, this decision could possibly be interpreted as the SEC seeing an end in sight for their crusade to ensure safe and reliable crypto finance infrastructure.”
 
“It remains our strong conviction that the most effective way to gain exposure to investment opportunities in this fast-growing asset class are afforded by professionally managed funds of funds portfolios, which can deliver various mixes of risk and returns based on the individual strategy’s objectives.” According to Aaro Capital’s research, actively managed funds in the digital assets space have outperformed passive investment approaches by well over 100% with around a third less volitility and just over half of the maximum drawdown since the start of the Aaro Capital Fund Indices (ACFI). “These indices are based on our proprietary database with 1000+ liquid crypto funds, which we believe is the largest in the industry. We expect this trend of active management outperformance to continue in 2024, driven by inefficiencies and volatility in the underlying digital assets which warrants careful risk management ensuring downside risk protection while capturing most of the upside.”
 
“Looking forward, we see plenty of opportunities for all types of investment approaches driven by strong secular growth of digital assets. We believe there is a benign period ahead not just for Bitcoin and Etherium but a range of altcoins and other investment opportunities derived from the burgeoning applications for blockchain technology.”

Alex Adelman, CEO and Founder of leading bitcoin rewards app, Lolli, on Bitcoin ETF approvals

“The approval of spot bitcoin ETFs is a historical milestone for bitcoin, signaling the dawn of a new era of mainstream bitcoin adoption. The floodgates have now opened to even more financial products from Wall Street giants that will let everyone from retail investors to global institutional clients gain exposure to bitcoin and learn more about its potential as a sound global digital currency.

While spot bitcoin ETFs give investors indirect exposure to bitcoin, we can expect to see more people custodying bitcoin directly as demand for bitcoin grows.

The approval of spot bitcoin ETFs has set bitcoin and crypto on track for its best year yet. In 2024, bitcoin will experience even more pivotal growth drivers like its Halving event, which increases its scarcity effect and historically drives up price, as well as lower interest rates. With these strong tailwinds, bitcoin will almost inevitably continue its upward climb to new all-time highs in 2024.”