What are Bitcoin ETFs and Why Investors are Lining Up? Gate Learn Offer Insight

A now-deleted tweet by CoinTelegraph erroneously reported that the United States Securities and Exchange Commission (SEC) had approved the BlackRock Bitcoin ETF, resulting in Bitcoin (BTC) surging to $30,000 before correcting to pre-rumour levels around $28,000.

Although the tweet only existed briefly, the BTC market spiked immediately as the unconfirmed rumour spread. Had the news been confirmed, it would have marked the first such approval of a spot bitcoin ETF in the country. The market’s reaction shows that many crypto investors eagerly await the SEC’s consent for a spot bitcoin ETF in the United States and are ready if one makes it past their approval process.

Recently, two ETFs have been in the spotlight, one from BlackRock, the world’s largest asset manager, and another by Grayscale Investments. The latter recently won a court battle against the SEC, with analysts saying approval is now inevitable.

Many may already be familiar with trading Bitcoin on cryptocurrency exchanges, but what exactly is a spot bitcoin ETF, and why are so many anticipating the approval of one?

As outlined in the Gate Learn article ‘What Is a Bitcoin ETF?’, an ETF (exchange-traded fund) is a common type of security that tracks the value of an underlying asset. They are found throughout traditional stock exchanges, like the NASDAQ, NYSE, or TSX.

In short, the article describes a bitcoin ETF as a tradable asset whose price correlates to Bitcoin; when the price of BTC changes, so does the corresponding ETF’s price. It differs from trading BTC on the crypto markets because investors do not trade BTC itself, but rather the corresponding ETF, and trading would be conducted on a stock exchange rather than a cryptocurrency exchange.

A spot bitcoin ETF will provide investors with much more exposure to BTC. It can provide a lower barrier to entry and is a way to diversify one’s portfolio without having to learn the technicals of wallets and private keys or worry about scams or theft. Investors more familiar with traditional investing methods may feel more comfortable dealing with a spot bitcoin ETF than BTC on the crypto markets.

The SEC has approved bitcoin ETFs on the futures markets in the past, which are actively traded today. Additionally, the SEC lost in its court battle against Grayscale’s spot bitcoin ETF, with no plans to appeal the court decision.

With Grayscale’s application back on the table and BlackRock, the world’s largest asset manager, also lining up, it is more likely than ever that a spot bitcoin ETF will hit the market soon. Some speculate that billions of capital could flow into these ETFs through the traditional stock market from retail and institutional investors yet to be exposed to the cryptocurrency markets.