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Bitcoin investors are eagerly awaiting regulatory approval of the first U.S. spot bitcoin exchange-traded fund, which could be a big deal for cryptocurrency investors, experts say.
Last week, Bitcoin's price hit an 18-month high, rising to $37,970. Black rock took the first steps towards an ether ETF. Bitcoin's price has more than doubled since the start of 2023, but is still well below its November 2021 peak.
At least nine asset managers – including BlackRock, WisdomTree, Valkyrie and others – are awaiting approval from the Securities and Exchange Commission to issue a spot bitcoin ETF. Experts say the first approval could come in early 2024.
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“For ETF investors, this would be the best product on the market,” said Bryan Armour, director of passive strategies research for North America at Morningstar. “All other options at this point are flawed to varying degrees.”
Currently, US investors can buy Bitcoin Futures ETFs, which hold Bitcoin Futures contracts, or agreements to buy or sell the asset later at an agreed upon price. The highly anticipated bitcoin spot ETF would invest directly in the digital asset.
If the SEC signs off on a spot Bitcoin ETF, Armor expects a “batch approval,” with multiple ETF listings on the same day. “I would expect them to decide on spot ETFs holistically because most issuers are taking a similar approach” to applications, he said.
“There are many good signs that the SEC is taking the latest batch of filings more seriously,” Armor said. “I'm more optimistic about a bitcoin ETF than ever before.”
Some crypto investors expect a bitcoin rally after approval, but it's also possible the price will fall as investors sell to make a profit, Armor said.
Still an 'extremely volatile' asset
While the SEC's approval of a spot bitcoin ETF could make the asset class more accessible to the masses, experts urge investors to consider their risk tolerance and objectives before jumping in.
“I think it depends on the investor,” says certified financial planner Ben Smith, founder of Cove Financial Planning in Milwaukee. If you're a more aggressive investor with an appetite for more risk, a spot bitcoin ETF could fit into a diversified portfolio, he said.
Yet experts often suggest limiting cryptocurrency exposure, such as 1% to 5% of your allocation, to minimize downside exposure. “It still remains a highly volatile and speculative asset,” Armor added.
About 72% of financial advisors said they would be more likely to invest in crypto if spot ETFs were approved in the US, according to a 2022 Nasdaq survey. questionnaire of 500 advisors.
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