Alice Morgan, Photo Illustration for Investopedia by Getty Images
What you need to know
- Launched a little over a month ago, Spot bitcoin exchange-traded funds (ETFs) made it possible for investors gain exposure to cryptocurrency.
- The bitcoin price reached several all-time records in 2024, thanks to the billions of dollars invested by investors into Bitcoin ETFs.
- After the success of the bitcoin spot ETFs came the approval for spot ether, other crypto assets could be approved soon.
Spot bitcoin exchange traded funds, in their first year of trading may have changed the perceptions of investors about cryptocurrency.
The first spot bitcoin ETFs started trading in 2024. This opened up the crypto-market to more investors, and helped pave the way for other products of this type. Launching the ETFs also helped boost the bitcoin price (BTCUSD), as billions of dollars were invested.
Here's what's happened since the launch of spot bitcoin ETFs.
Bitcoin Investments Are Now More Affordable With ETFs
Investors can now gain access to bitcoins through spot ETFs.
In order to buy Bitcoin, one would typically need a cryptocurrency wallet, and then purchase the token from an exchange. If you choose a Bitcoin ETF instead, you can purchase the product with your brokerage account, just like any other ETF.
Investors are embracing this simplicity and have poured in billions of dollars into bitcoin spot ETFs. Retail and institutional investors share the same enthusiasm, and even Wall Street and hedge funds are getting involved.
Bitcoin, also known as “digital gold”, is gaining in popularity faster than gold ETFs.
Blackrock’s iShares Bitcoin Trust is one of ETFs that has seen net inflows exceeding $37 billion. The fund has seen tremendous growth with assets at over $52 billion as of Jan. 9, significantly surpassing the $33 billion in assets for the iShares’ 20-year old gold ETF (IAU), and closing in on SPDR Gold Shares (GLD)—the largest gold ETF with assets over $75 billion.
Trump’s victory drove price rally, Bitcoin ETFs to be halved
The cryptocurrency is the main asset of Spot Bitcoin ETFs. As more investors put their money in the ETF the ETF must buy more bitcoin. This demand drove bitcoin’s price to new highs in the last year.
Bitcoin traded at close to $46k on Jan. 10 when the Securities and Exchange Commission approved bitcoin ETFs for trading. In the weeks immediately following the ETFs starting trading, the price dropped below $40,000. However, it recovered quickly to reach a new peak of more than $73,000 before the bitcoin halves.
The Bitcoin halves, which occur roughly every four-years, has a slowing effect on the creation of new bitcoin. The price of bitcoin rose because the ETFs and tighter supply created an unbalance.
Donald Trump’s win in the presidential election of November provided an extra jolt amid hopes from investors that a cryptocurrency-friendly White House will adopt policies to support this asset class. Bitcoin reached several all-time records in the weeks following the presidential election. The currency even rose to $108,000 at mid-December. Digital currency peaked at $95,000 Friday afternoon.
Bitcoin ETFs Open the Door to More Products
It is also possible to trade options on spot bitcoin ETFs.
As the Trump Administration is set to assume control after January 20th it is likely to ease crypto-regulatory restrictions. This could result in more crypto-ETFs being approved.
SEC already has proposals on XRP(XRPUSD) & Solana(SOLUSD). Bloomberg ETF Analysts also predict that Litecoin, Hedera, and Bitcoin (BTCUSD), will be approved for ETFs in 2025 after the approval of a combined ETF.
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