How a Bitcoin ETF Will Open Up Crypto to Everyone

Date Published -
September 19, 2023
The Security and Exchanges Commission (SEC) greenlighting a Bitcoin spot ETF
How a Bitcoin ETF Will Open Up Crypto to Everyone

The Security and Exchanges Commission (SEC) greenlighting a Bitcoin spot ETF - or even a general crypto ETF - is, for many, the starting gun on the next bull run. News stories about this prospect have circulated for over a year, with many now believing that without it this bear market is here to stay and, conversely, with it - the ‘$15 trillion earthquake’ that occurs as a result will take anyone already invested in crypto to the moon.

Exciting stuff. But what is an ETF? Why is it such a big deal? And what is the current state of the ‘war’ between the institutional money and hedge funds seeking approval for them and the SEC, who have taken on the role of evil bogeyman in this whole drama?

What is an ETF?

ETF stands for an Exchange Traded Fund. This is a type of mutual fund, an instrument where investors pool money together to invest in a sector, index, or commodity, which management overseen by a financial institution. The difference is that an ETF can also be purchased or sold on a stock exchange, just like Apple or Tesla stocks can.

A Bitcoin ETF would thus be a custodial investment instrument (i.e, the hedge fund holds the crypto) which would be fungible with other stocks, or cash, and which can be traded on a major stock exchange - just like the SPDR S&P 500 ETF (which tracks the S&P 500 index). Right now, ETFs that deal with cryptocurrency can only hold futures contracts or stocks of companies with exposure to crypto, not the crypto itself - which is a pale imitation of what a true Bitcoin ETF could do.

Benefits of a Crypto ETF

The benefit? A Bitcoin ETF would represent the first crypto investment instrument which would not break the fiduciary responsibility of pension funds, banks, financial institutions, hedge funds - or any other major investment institution. They are far more agreeable to these institutions than even trusts like Grayscale’s, an investment vehicle that currently stands as the second-largest entity, following Satoshi’s personal wallet, in terms of holding the largest amount of Bitcoin.

An ETF would be the first crypto instrument which would sit right alongside the world’s biggest mutual funds and ETFs, which represent the most important gateway to investment for individuals and hedge funds all over the world.

When your Mum or Dad invests in stocks, they don’t buy $TSLA on Robinhood, they buy into index funds and mutual funds. These are professionally managed portfolios that allow investors access to a hugely diverse portfolio of assets. The greenlighting of a Bitcoin ETF by the SEC would open up not just Mom ‘n’ Pop investors, but giant public institutions to hold Bitcoin and other crypto assets on their balance sheet. The potential effects on crypto’s market cap are geometric, or in other words the price movement wouldn't just be linear or proportional; it would be exponential — up into the right!

SEC Losing Cases Paves Way for Bitcoin ETF

So. When? Well,  apparently soon and, according to the SEC insider ‘inevitable’, even as recent applications by Blackrock (the world’s largest asset management firm) and others have been punted to October. The SEC keeps losing crypto cases. They lost to Grayscale, with the courts saying that the SEC ruled arbitrarily and failed to explain different treatment of similar products. They lost their case against XRP, with the judge saying that the XRP token is not a security. It’s currently involved in big legal battles with Binance and Coinbase - the two largest CEXs in the crypto market. If it loses those too, then crypto’s status as a legally entrenched financial project will continue to skyrocket, bringing more trusted actors to the table.

Exchange. Trade. Fund.

A Bitcoin ETF, or even an Ethereum ETF, will absolutely spark a flood of investment into crypto. At HollaEx, we create white label exchanges that let any business spin up their own branded exchange and deliver high-end crypto trading to their customers, with ready-made liquidity. When the $15 Trillion earthquake happens, give your firm the foundation it needs to profit with an open source, battle-tested, and customized HollaEx exchange.

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