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New bitcoin ETFs excite crypto bulls

US regulator’s approval seen as victory for industry despite warnings about ‘myriad risks’

Giving approval to bitcoin exchange-traded funds (ETFs) will allow people to invest in bitcoin without having to buy it on a crypto exchange such as Coinbase or Binance. Photograph: Dan Kitwood/Getty Images
Giving approval to bitcoin exchange-traded funds (ETFs) will allow people to invest in bitcoin without having to buy it on a crypto exchange such as Coinbase or Binance. Photograph: Dan Kitwood/Getty Images
Proinsias O'Mahony's picture
Proinsias O'Mahony
Tue Jan 16 2024 - 05:00

Regulators’ approval of the first US exchange-traded funds (ETFs) for bitcoin was greeted euphorically last week by cryptocurrency advocates.

“Bitcoin is no longer considered shady or infamous,” said Kevin de Patoul of cryptocurrency firm Keyrock, a comment that ignores the decidedly cautious sentiments expressed by Securities and Exchange Commission (SEC) chair Gary Gensler.

The SEC’s approval of Bitcoin ETFs doesn’t mean it approves or endorses Bitcoin, said Gensler. The SEC remains sceptical, but a court ruling gave it little choice but to give the go-ahead to Bitcoin ETFs.

Perceptions about Bitcoin’s shadiness remain, as evidenced by JPMorgan’s Jamie Dimon commenting last week that it’s useful only for “sex trafficking, tax avoidance, anti-money laundering, terrorism financing”.

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Nevertheless, bitcoin bulls expect ETFs from BlackRock, Fidelity, Invesco, and others will drive increased interest from ordinary investors. Standard Chartered notes gold prices quadrupled in the seven years following the approval of the first gold ETF in 2004. It predicts a similar but faster quadrupling for bitcoin, saying inflows of up to $100 billion could help drive the value of a bitcoin to $200,000 next year.

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One obvious counterargument is that bitcoin, while still well below its November 2021 high of $69,000, has already more than tripled since bottoming at $16,000 in December 2022, with much of that rise coming in recent months as investors bet on SEC approval. Price performance aside, investors would do well to heed Gensler’s advice and to “remain cautious about the myriad risks” associated with crypto.

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