There was a significant push by the crypto community for the approval Bitcoin Exchange-traded Funds (ETFs). They would provide investors with a variety of benefits. The US Securities and Exchange Commission has not approved any ETFs.

What benefits will SEC-approved ETFs offer the crypto market?

They will make it easier for institutional investors to invest in Bitcoin

Bitcoin ETFs make it easier to invest because they can be purchased and sold through a standard brokerage account. They would be a great way for American institutions to invest in Bitcoin without the need to purchase the underlying asset. Grayscale Bitcoin Trust is currently the only US-based trust that has access to bitcoin. This is due to US regulatory restrictions. Major companies that want to access the cryptocurrency directly must use the agency, and they have to pay a premium.

In jurisdictions such as Canada, which has approved numerous ETFs, investors also have the choice of investing in short-selling ETFs, with the latest entrant being The BetaPro Bitcoin ETF by the Horizons ETFs Management Inc.

Retail Investors Would Benefit From A SEC Bitcoin ETF Aproval

On the US side, there’s still some fear about bitcoin investments. However, the recent influx by prominent mainstream retail investors will likely change things. US citizens who want to invest in Bitcoin must hold the coins in their wallets. This poses a number of security risks that could result in substantial losses. Many mainstream investors are concerned about security issues such as losing the cryptographic keys to their wallets or having them stolen. These issues can be addressed by an ETF.

Another advantage to having an ETF approved by the US government is that many major US banks and financial institutions have the resources to support ETF products. ETF funds that are Bitcoin could also be used to invest in tax-free savings accounts, TFSAs, and retirement savings plans (RRSPs). Individual investors can save money on their investment taxes by using these investment vehicles.

The Impact on the Wider Bitcoin Market

Many bitcoin market analysts believe that approval of a bitcoin ETF would cause a significant price rise. Truth is, the reaction would be more complicated than people think. Although this might have been true years ago, the cryptocurrency market is much more dynamic than it was a few years back.

Bitcoin has a market capitalization of over $1 trillion and is more mainstream and decentralized than ever. It can withstand the unpredictable events that would have caused market volatility a few years back.

The market is also much more interlinked to the wider stock market, as witnessed in the March 12 downturn that occurred last year. The covid-19 instigated market crash caused the digital currency to drop below $4,000 levels in lockstep with the bigger stock market. It is unlikely that an ETF approval will have immediate results.

Ultimately, however ETFs will help to draw larger investments into the market and this would certainly have a compounding impact on demand, which would propel bitcoin to greater heights.