Surprising Action in Cryptoland

The cryptocurrency asset class waited years for the U.S. Securities and Exchange Commission to approve a spot Bitcoin ETF. In late 2017, the Commodities Futures Commission approved Bitcoin futures, heralding the first regulated cryptocurrency instrument, a futures contract. Meanwhile, in 2017, Gary Gensler was CFTC Chairman. In 2024, Chairman Gensler is the chief at the SEC.

On January 10, after the market closed, the SEC finally approved spot Bitcoin ETF products, ushering in a new regulated product and validating the leading cryptocurrency. One day later, eight spot Bitcoin ETFs came to market. While many market participants believed the listing would cause a significant rally, Bitcoin prices that rallied in anticipation of the SEC-regulated products have been surprisingly stable.

As of January 23, Bitcoin’s market cap was nearly $850 billion, or around 50% of the cryptocurrency asset class.

Eight ETFs- GBTC leads the pack

• Eight spot Bitcoin ETFs hit the market on January 11, including GBTC, BITB, FBTC, EZBC, BTCO, BRRR, HODL, and BTCW.
• GBTC has the largest market cap. On January 23, it had over $27 billion in assets under management.
• GBTC trades an average of over 18.4 million shares daily and charges a 1.50% management fee.

 The SEC gives qualified validation

• The SEC approved spot Bitcoin ETFs on January 11.
• SEC Chairman Gensler did not endorse Bitcoin or cryptos in his approval statement.
• Gensler wrote: “While we approved the listing and trading of certain spot Bitcoin [Exchange Traded Product] ETP shares today, we did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto. Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast, Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering… sanction evasion and terrorist financing.”

 GLD changed the gold market- Will GBTC do the same?

• GLD, the successful gold ETF, began trading in November 2024.
• GLD made gold investing more accessible for a vast addressable market.
• With increased market participation, gold prices have been making higher lows and higher highs over the past two decades.
• Cryptocurrency supporters hope GLD, and other gold-related ETF products, will be the model for spot Bitcoin ETFs and price action in the coming years.

 A bullish trend since November 2022- More participation is bullish

• Bitcoin and cryptocurrencies have exhibited explosive and implosive price action since 2010.
• Bitcoin exploded to nearly $69,000 per token in November 2021.
• The price imploded, falling below $15,600 in November 2022.
• Bitcoin made higher lows and higher highs throughout 2023 and early 2024.
• The trend is primarily bullish- The potential for more investing and trading via spot ETFs is bullish.
• In a buy the rumor and sell the news reaction, Bitcoin prices have declined after the SEC’s January 11 spot Bitcoin ETF approval. Bitcoin fell below the $40,000 level on January 23.

 Caution- Only invest capital you are willing to lose

• There is a compelling case for global currencies that governments do not influence.
• The most powerful aspect of governing is the control of purse strings.
• Governments and central banks worldwide are likely to hold onto control of the money supply and refrain from surrendering it to cryptocurrencies any time soon.
• If the market cap of the cryptocurrency asset class increases significantly, expect legislative bodies and leaders to increase regulation and, in some cases, restrict or even ban using cryptos.
• Only invest capital you are willing to lose, as the potential for significant rewards comes alongside commensurate risks.

 Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!