Every year comes with new innovations and advances for the crypto industry and this one has been marked by the approval of the first spot Bitcoin exchange-traded funds. For the better part of 2023, the whole conversation around crypto was monopolized by speculations on this major development that many deemed crucial for the fate of digital currencies. It was said that the introduction of spot Bitcoin ETFs would enhance Bitcoin’s credibility and legitimacy as a financial tool and pave the way for widespread crypto adoption.
This would also increase investors’ confidence in Bitcoin’s potential which might drive the asset’s price higher. According to Binance, the Bitcoin price has suffered some notable fluctuations since the news broke out, but it’s still too soon to tell if these predictions were right or wrong. What we do know is that the debut of spot Bitcoin ETFs was without a doubt the most anticipated event in crypto’s recent history, and it didn’t unfold quite as expected.
So, now that we’ve finally passed this long-awaited threshold and we’re patiently waiting to gauge its effects, we can take a look back and see how it all went down.
How it started
Although many have only recently found out about spot Bitcoin ETFs, the launching of such a product has been a long time in the making. The decade-long journey started in 2013 when the co-founders of crypto exchange Gemini filed the first application with the U.S. Securities and Exchange Commission (SEC) for a spot Bitcoin ETF.
Other similar applications from the Winkelvoss brothers, Grayscale Investments, SkyBridge, Fidelity and Bitwise followed over the years but they were all met with a negative response from the SEC. The US financial watchdog rejected one filing after another on the grounds of a still immature crypto market and concerns over the risk of fraud and market manipulation. Greyscale proceeded to sue the agency after several rebuffed attempts at creating a spot Bitcoin ETF.
Then in 2022, the crypto winter took over the industry, causing crypto prices to drop from unprecedented highs and leading to the demise of many major crypto companies, including Celsius Network and Sam Bankman-Fried’s FTX. With stakeholders struggling to stay afloat during the crisis, efforts for launching a spot Bitcoin ETF were put on hold.
How it happened
2023 debuted with renewed hopes of an impending recovery for the crypto market. With crypto prices experiencing slow but constant gains, talks about spot Bitcoin ETFs were brought back into the spotlight. Cathie Woods’ ARK Investments was the first to resume the filings for spot Bitcoin ETFs, but it was BlackRock’s application in June that really set the course for what was about to come, prompting a new wave of optimism across the crypto market.
Shortly after BlackRock’s filing, the SEC was flooded with a flurry of proposals from other major asset managers, including Bitwise, VanEck, Wisdomtree, Invesco & Galaxy, and Fidelity. After a court in Washington D.C. ruled in favor of Grayscale, confirming that the SEC’s rejection was unjustified, the agency was required to reexamine the application. Much to the disappointment of many crypto enthusiasts, the SEC delayed decisions on these applications several times, but that only fed into the anticipation that the approval of a spot Bitcoin ETF might be just around the corner.
And that’s exactly what happened on January 10, when the SEC finally gave the green light for 11 applications, including from Grayscale, Hashdex, BlackRock, Valkyrie, Invesco, and Fidelity. However, the watershed moment was somewhat overshadowed by the confusion created one day before the official approval.
On January 9, a post appeared on the Securities and Exchange Commission’s X account (former Twitter) announcing that the agency granted their approval for spot Bitcoin ETFs for listing on all registered national securities exchanges. Several news outlets picked up the story and reported on the SEC’s historical decision, but it was shortly revealed that the news was fake and the post was taken down.
The SEC Chair Gary Gensler immediately announced that the agency’s X account was compromised and the post was not made by the SEC or its staff. New details emerged later, revealing that an unauthorized person gained access to an agency employee’s phone number associated with the account and posted the fake tweet.
One day after the incident, the SEC gave the green light for the first spot Bitcoin exchange-traded funds, but also made it clear that the approval does not equate to support for digital currencies and consumers should remain wary. While investigators have yet to find out who was behind the fake tweet, the mayhem that ensued tempered the enthusiasm and prompted people to verify the information from various sources.
How it’s going
As with all crypto developments so far, opinions on the approval of spot Bitcoin ETFs and their long-term effects on the crypto industry are divided. Some say the event ushered in a new era for digital currencies, bringing them one step closer to mainstream adoption. Others maintain a more skeptical view, claiming that the existence of spot Bitcoin ETFs won’t have much of an impact on the health and development of the market.
After the approval of the funds, the Bitcoin price experienced an initial spike but couldn’t maintain momentum. In the following weeks, the price continued to decline, briefly going under the $40K level. It could be that the excitement around spot Bitcoin ETFs started to wear off and investors rushed to make a profit by selling their funds. But it could also be the usual volatility of the crypto market causing prices to swing erratically.
Whether the debut of spot Bitcoin ETFs is going to push digital assets forward or not remains to be seen. All eyes are now turning to spot Ethereum ETFs as the next logical step in the industry’s development, so we can expect to see more interesting events coming this year.