{"id":26280,"date":"2024-01-10T23:47:52","date_gmt":"2024-01-10T23:47:52","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=26280"},"modified":"2024-01-11T00:23:55","modified_gmt":"2024-01-11T00:23:55","slug":"sec-approves-bitcoin-spot-etfs-what-this-means-for-crypto","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2024\/01\/10\/sec-approves-bitcoin-spot-etfs-what-this-means-for-crypto\/","title":{"rendered":"SEC approves bitcoin spot ETFs \u2014 what this means for crypto"},"content":{"rendered":"<p><i>By <\/i><b><i>Amy Castor<\/i><\/b><i> and <\/i><b><i>David Gerard<\/i><\/b><\/p>\n<ul>\n<li aria-level=\"1\">Help our work: if you liked this post, please <b><i>tell just one other person<\/i><\/b>. It really helps!<\/li>\n<li aria-level=\"1\">You can also send money to our one-way ETFs! Here\u2019s<a href=\"https:\/\/www.patreon.com\/amycastor\"> Amy\u2019s<\/a> Patreon and here\u2019s<a href=\"https:\/\/www.patreon.com\/davidgerard\/\"> David\u2019s<\/a>. For casual tips, here\u2019s<a href=\"http:\/\/ko-fi.com\/amycastor\"> Amy\u2019s<\/a> Ko-Fi and here\u2019s<a href=\"https:\/\/ko-fi.com\/A1529D5\"> David\u2019s<\/a>.<\/li>\n<\/ul>\n<p>As <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/12\/31\/amy-and-davids-sure-fire-analyst-predictions-on-crypto-for-2024\/\">predicted<\/a>, the SEC today approved several <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/12\/22\/bitcoin-etfs-coming-soon-but-in-cash-only\/\">spot bitcoin exchange-traded funds<\/a> \u2006\u2014 Grayscale GBTC, Bitwise, Hashdex, BlackRock iShares, Valkyrie, ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity Wise Origin, and Franklin. [<a href=\"https:\/\/www.sec.gov\/files\/rules\/sro\/nysearca\/2024\/34-99306.pdf\"><i>SEC<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>Trading is likely to start Thursday morning. [<a href=\"https:\/\/www.investors.com\/news\/sec-officially-approves-bitcoin-etf-proposals-for-real-this-time\/\"><i>Investor\u2019s Business Daily<\/i><\/a>]<\/p>\n<p>All of the approved applicants settled for a cash-create ETF, where shares can only be bought or redeemed in cash. They would have preferred in-kind, where you could deposit or withdraw bitcoins directly \u2014 but the SEC was quite clear that wasn\u2019t going to go through.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/03\/18\/crypto-collapse-the-great-unbanking-continues-bitcoin-pumps-ftx-voyager\/money-bin\/\" rel=\"attachment wp-att-25098\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-25098\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/03\/money-bin.jpg\" alt=\"\" width=\"510\" height=\"315\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/03\/money-bin.jpg 680w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/03\/money-bin-300x185.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/03\/money-bin-348x215.jpg 348w\" sizes=\"auto, (max-width: 510px) 100vw, 510px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h3>Pumping bitcoin for fun and no profit<\/h3>\n<p>Yesterday, someone hacked the @SECgov Twitter to say the ETFs had been approved. [<i>Twitter, <\/i><a href=\"http:\/\/archive.today\/2024.01.09-213226\/https:\/\/twitter.com\/SECGov\/status\/1744829327294837236\"><i>archive<\/i><\/a>]<\/p>\n<p>This wasn\u2019t a draft announcement tweet being sent early \u2014 a hacker apparently got control of the phone number linked to the account. The SEC repudiated the first tweet half an hour later. Twitter says the account didn\u2019t have two-factor authorization enabled. [<a href=\"https:\/\/twitter.com\/SECGov\/status\/1744837121406349714\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.is\/thkhr\"><i>archive<\/i><\/a>; <a href=\"https:\/\/twitter.com\/Safety\/status\/1744924042681897343\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"http:\/\/archive.today\/2024.01.10-035145\/https:\/\/twitter.com\/Safety\/status\/1744924042681897343\"><i>archive<\/i><\/a>]<\/p>\n<p>The price of bitcoin went up $1,000 on the hacked tweet, and dropped $1,000 on the repudiation tweet.<\/p>\n<p>Nobody can work out what this was meant to achieve. Matt Levine at Bloomberg thinks a troll doing it for the LOLs is the most plausible theory. [<a href=\"https:\/\/www.bloomberg.com\/opinion\/articles\/2024-01-10\/the-sec-got-trolled-on-bitcoin-etfs\"><i>Bloomberg<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.ph\/tQxLV\"><i>archive<\/i><\/a>]<\/p>\n<p>On the actual announcement today, the bitcoin price did &#8230; nothing in particular? It\u2019s bimbling around $45,000 to 46,000. This is even with another billion tethers being deployed yesterday. Perhaps number will go up when the ETFs go live. [<em><a href=\"https:\/\/twitter.com\/whale_alert\/status\/1744725267531354322\">Twitter<\/a>, <a href=\"https:\/\/archive.is\/eKZfl\">archive<\/a><\/em>]<\/p>\n<h3>Commissioner reactions<\/h3>\n<p>The SEC really didn\u2019t want to approve a spot bitcoin ETF. SEC Chair Gary Gensler issued a statement explaining that the SEC was pretty much forced to approve by the court decision in Grayscale. He stresses that this stuff is still shaky trash. [<a href=\"https:\/\/www.sec.gov\/news\/statement\/gensler-statement-spot-bitcoin-011023\"><i>SEC<\/i><\/a>]<\/p>\n<p>Days before the approval, Gensler warned investors of the dangers of crypto. It\u2019s volatile and the space is filled with \u201cfraud \u2014 bogus coin offerings, Ponzi &amp; pyramid schemes, &amp; outright theft where a project promoter disappears w\/ investors\u2019 money.\u201d [<a href=\"https:\/\/twitter.com\/GaryGensler\/status\/1744383653008839126\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/nitter.net\/GaryGensler\/status\/1744383653008839126#m\"><i>Nitter<\/i><\/a>]<\/p>\n<p>Friend of crypto Hester Peirce did a victory lap. [<a href=\"https:\/\/www.sec.gov\/news\/statement\/peirce-statement-spot-bitcoin-011023\"><i>SEC<\/i><\/a>]<\/p>\n<p>Caroline Crenshaw was appalled that this garbage got through and voted against it. [<a href=\"https:\/\/www.sec.gov\/news\/statement\/crenshaw-statement-spot-bitcoin-011023\"><i>SEC<\/i><\/a>]<\/p>\n<h3>Some sort of news for Grayscale<\/h3>\n<p>Grayscale finally got its wish, maybe. It\u2019s been wanting to convert its GBTC fund to an ETF for years now.<\/p>\n<p>GBTC had largely been created by in-kind deposits \u2014 whales would deposit bitcoins directly and get GBTC shares they could dump on retail investors. This was remarkably profitable in 2020 when GBTC had a price premium over the bitcoins in it \u2014 even though at that time you <a href=\"https:\/\/amycastor.com\/2022\/04\/19\/welcome-to-grayscales-hotel-california\/\">couldn\u2019t get the bitcoins back out.<\/a><\/p>\n<p>The Grayscale shuffle didn\u2019t work so well from early 2021 when the price of GBTC failed to keep up with rises in the price of bitcoin. GBTC shares have been underwater since.<\/p>\n<p>We expect that GBTC as an ETF will trade much closer to the price of bitcoin. So the retail investors who listened to Grayscale ads saying this was a great retirement investment \u2014 yes, really \u2014 will be a little less unhappy.<\/p>\n<p>Grayscale took a swingeing management fee on GBTC \u2014 2% annually. Now it has competition, so the fee on the GBTC ETF will be 1.5%. But the other ETFs are charging much lower fees, some less than a quarter of a percent. Bitwise, ARK, and Invesco are offering 0% fees for the first six months.<\/p>\n<p>Retail GBTC holders aren\u2019t likely to dump their shares immediately, though \u2014 because they would have to pay taxes on the capital gains from the BTC price rise in the meantime.<\/p>\n<p>The other reason that retail is slow to dump is \u2019cos it\u2019s work and stuff. And if you offer them hopium \u2014 <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2019\/05\/27\/the-origin-of-number-go-up-in-bitcoin-culture\/\">number go up!!<\/a> \u2014 they\u2019ll do the hard work of fooling themselves.<\/p>\n<p>Even if there\u2019s an institutional GBTC dump, we expect the ETF conversion was the less-worse option for Digital Currency Group, Grayscale\u2019s owner.<\/p>\n<p>DCG needs money urgently. The alternative was dissolving the trust, and returning the $29 billion in BTC to the holders, or allowing redemptions. Either of these would have likely crashed the crypto market.<\/p>\n<p>The <a href=\"https:\/\/amycastor.com\/2023\/01\/21\/crypto-collapse-genesis-bankrupt-coindesk-for-sale-bankman-fried-attacks-ftx-lawyers\/\">currently bankrupt Genesis<\/a>, also owned by DCG, has a large pile of GBTC and an urgent need for cash to fill the hole in their accounts left by Three Arrows Capital collapsing. DCG tried to cover the hole with a <a href=\"https:\/\/amycastor.com\/2023\/10\/30\/new-york-vs-dcg-genesis-and-gemini-kids-kids-youre-both-ugly\/\">\u201dpromissory note\u201d for a billion dollars<\/a>, from its <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/02\/12\/crypto-collapse-unbanking-crypto-genesis-offers-dcg-shares-to-creditors-binance-suspends-us-dollar-transactions-sec-goes-after-staking\/\">left pocket to its right pocket<\/a>.<\/p>\n<p>The billion-dollar hole is real \u2014 and DCG may end up having to cover it.<\/p>\n<p>So GBTC going up will get DCG some way out of its bind. This is also good news for Gemini Earn customers, whose <a href=\"https:\/\/amycastor.com\/2022\/12\/18\/crypto-collapse-binance-is-not-so-fine-ftx-delaware-vs-ftx-bahamas-celsius-voyager-gemini-tether\/\">money is stuck<\/a> in that same billion-dolllar hole.<\/p>\n<h3>How good is this news for bitcoin?<\/h3>\n<p>The ETFs will be money losers. Most are storing the bitcoins at Coinbase Custody \u2014 but the fee war means they won\u2019t even make enough to cover Coinbase\u2019s storage fees \u2014 0.1% monthly, which is 1.2% annually.<\/p>\n<p>The companies can run the ETFs as loss leaders for a while, but eventually they\u2019ll have to raise the fees or quit.<\/p>\n<p>They may be hoping for a bitcoin in-kind ETF down the road \u2014 but we think they\u2019ll be waiting a long time.<\/p>\n<p>This is good news for Coinbase Custody and not such good news for the Coinbase exchange itself. The ETF fees are far less than Coinbase trading fees on bitcoin, which are between 0.5% and 1%. Anyone who just wanted to buy and hold bitcoin would do better buying ETF shares. But Coinbase has been <a href=\"https:\/\/amycastor.com\/2023\/11\/07\/coinbase-q3-earnings-regulatory-clarity-is-all-we-need-and-a-miracle-or-two\/\">openly stating<\/a> they think crypto trading isn\u2019t coming back.<\/p>\n<p>We still don\u2019t think the ETF will bring a lot of cash into crypto. Even the notoriously pro-crypto CNBC doesn\u2019t think the ETFs will bring fresh actual dollars into crypto that wouldn\u2019t have come in before. [<a href=\"https:\/\/www.cnbc.com\/2024\/01\/10\/the-spot-bitcoin-etf-heres-what-happens-when-it-starts-trading.html\"><i>CNBC<\/i><\/a>]<\/p>\n<p>We expect the number to go up because Tether printed <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/12\/06\/bitcoin-goes-up-can-5-billion-unbacked-tethers-kickstart-a-fresh-crypto-bubble\/\">4 billion USDT in the past week<\/a>. That should be enough for a few hundred dollars on a <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/12\/17\/the-bart-sudden-hundreds-of-bitcoin-pumps-or-dumps-to-burn-the-margin-traders\/\">Bart<\/a>.<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>Pumping bitcoin for fun and no profit.<\/p>\n","protected":false},"author":1,"featured_media":25098,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[3692,2231,21,1505,783,1955,288,2031,1047,2062,3687,1105,2060,3093,652,2890,1799,3686,1652,3684,33,487,3685,1461,3683],"class_list":["post-26280","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-21shares","tag-ark-invest","tag-bitcoin","tag-bitwise","tag-blackrock","tag-caroline-crenshaw","tag-coinbase","tag-dcg","tag-etf","tag-fidelity","tag-franklin","tag-galaxy-digital","tag-gary-gensler","tag-gbtc","tag-gemini","tag-genesis","tag-grayscale","tag-hashdex","tag-hester-peirce","tag-invesco","tag-sec","tag-twitter","tag-valkyrie","tag-vaneck","tag-wisdomtree"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/03\/money-bin.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/26280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=26280"}],"version-history":[{"count":8,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/26280\/revisions"}],"predecessor-version":[{"id":26288,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/26280\/revisions\/26288"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/25098"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=26280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=26280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=26280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}