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Crypto advocates have won a huge victory getting spot bitcoin ETFs to market . What does that mean for investors ?

By Christopher Robbins

The path that led to the approval of these products was a particularly long and difficult one . Spot bitcoin ETF advocates , including crypto fans and asset managers , had fought a 10-year battle against regulators , elected officials and financial industry leaders . Team crypto ’ s eventual victory hinged on a federal appeals court ruling that found the SEC had erred in rejecting applications for the new products .

“ I think it ’ s important to think about the regulatory and reputational implications here ,” says Doug Schwenk , the CEO of Digital Asset Research , a cryptocurrency researcher and data provider that works with institutions , asset managers and wealth managers . “ I think we ’ ll see continued progress in bitcoin as an investable asset and less of the regulator pushback . We ’ ll see fewer statements that crypto should be outlawed . It becomes a harder argument to make .”

While arguing for U . S . -listed spot bitcoin ETFs , cryptocurrency enthusiasts often repeated the claim that the products would provide an easy entry point for wealth managers and their clients . Indeed , some market watchers predict that hundreds of billions of dollars could flow into these new products within the first year , increasing both the market capitalization of bitcoin and total ETF assets in the U . S .

Now that the debate over whether these ETFs should be approved is over , it may be time to take a closer look at spot bitcoin ETFs and whether they ’ re really the big answer that advisors — and the digital assets industry — are looking for .

The Good

Investors will certainly enjoy better access to cryptocurrency now that it ’ s offered in ETF wrappers . Anyone can trade an exchange-traded fund . It ’ s tax-efficient by design and can trade in real time ( like the underlying tokens ).

It also means that a product representing the spot price movements of a digital asset can , for the first time , be held in a brokerage account in the U . S . alongside other asset classes like equities and fixed income .

“ This makes exposure to bitcoin more broadly available , and I don ’ t really think we ’ ve seen the effects of that yet ,” Schwenk says . “ It ’ s going to take a while for these things to percolate to all the people who may not be paying as much attention , or who may have been turned off by the lack of access in brokerage accounts .

“ As the news trickles down and the new availability of bitcoin does play out and people rethink their investment theses , we ’ re

34 | FINANCIAL ADVISOR MAGAZINE | JANUARY / FEBRUARY 2024 WWW . FA-MAG . COM