Seen from here, the revolution of the SEC’s approval of eleven Bitcoin ETFs on January 10th is a little less shocking. At least, as far as the operations of an Italian retail investor interested in the matter are concerned. To take a tour among the intermediaries and the companies that build those products, the most common answer to the question “what changes for us?” is: “Little or nothing”. Of course, there is an unprecedented announcement effect. And there is the bet that the customs clearance of the underlying will emancipate cryptocurrencies in the eyes of the traditional market. Without forgetting that the dimensions of US finance alone are a factor game changer. But we Europeans already had similar products before our eyes.
ETF on Bitcoin: a historic decision for the world of cryptocurrencies by Luigi dell’Olio 09 January 2024
The SEC (reluctantly) breaks down a wall
Remaining with the “high” evaluation of the matter, it is clear that the SEC’s approval breaks down a wall of skepticism. From Kraken to Coinbase to Binance, the US authority has repeatedly crossed arms with the crypto world. It is equally evident, from the way it was announced, that it was a painful choice, with some members who wanted to put their skepticisms on paper. A green light “forced” by two factors: never, in the memory of those who follow the authorities’ matters, had there been such a rush for authorizations as to line up eleven heavyweights of US finance to push for the same product. The SEC was against spot ETFs on Bitcoin, while it had given the green light to those on futures. Reason: in the second case you remain in a regulated market (by Cme), while in the first the underlying is subject to manipulation. It was the external intervention of a Court that overturned this asymmetry, bringing President Gary Gensler to celebrate the wedding that didn’t have to happen: green light for ETFs that directly hold Bitcoin.
The impacts on the crypto queen
The market aspect we are wondering about is: if there is really interest in these instruments, how will the underlying react? Judging by the first reactions of Bitcoin, the news was obvious. In the future, for some it will be a price support factor (more requests for ETFs will force issuers to stock up on cryptocurrency), for others it could increase its intrinsic volatility.
The 15 years of bitcoin, the adolescent currency now seeks stability 05 January 2024
In the ears of the Authorities, the growing background noise on the topic risks fueling the fear of being left out and therefore taking part in a race whose (high) risks are not understood.
And those about savers
But then, coming back to us, what changes? Benjamin Dean, director of digital assets at Wisdom Tree (which has its own ETF) reminds us that «since 2019, investors in Europe have been able to access spot ETPs (i.e. those that directly follow the market price) on a wide range of cryptocurrencies» . Instruments formally different from American ETFs, for the Ucits regulation which prevents the funds from being non-diversifying, but essentially overlapping. The same Wisdom Tree it already has eight on the market, and has just lowered the commissions on the one with physical custody of Bitcoin (from 0.95 to 0.35%, while the ETFs approved in the US fluctuate between 0.2 and 1.5% , with several ongoing “promos” that will reset them for the first few months).
Fineco reports the most traded: the Bitcoin Exchange Traded Crypto Etc and the 21Shares Bitcoin Etp. Products often authorized in Northern Europe and then passported throughout the continent, including Italy (where Consob has never issued such green lights). Own 21Shareswhich launched the product in the USA with Ark fund by Cathie Wood, has a suite that now exceeds 40 Etp. Its manager for Southern Europe, Massimo Siano, reads the awakening of attention in recent weeks as «a missed opportunity for years on the part of European institutional managers, who could have diversified – with prudence – but did not do so». Investors have found plenty of reasons to doubt in the news. Stocklytics calculates that in 2023 only one institutional in three increased exposure to cryptocurrencies, despite it being a year of +155% for Bitcoin: «Concerns relating to the intrinsic risks and uncertainties associated with cryptocurrencies remain unresolved».
From next year, with the Micar directive in force and crypto-assets attracted into the scope of supervision, the EU will take a further step beyond the US, with a probable stimulus to emissions of this type. And American ETFs? Remaining with Fineco, for example, you can negotiate four of them independently with a current or trading account. You need a professional profile, because they don’t have Kid. But fiscally they are complicated: since they are not harmonized, whoever puts them in the portfolio must declare them by deducting the withholding tax on the proceeds from the Irpef.