Macro Intelligence: US SEC approves landmark bitcoin ETFs

Article by Juliette Saly (ausbiz)

A landmark decision

In this week's edition of IG Macro Intelligence, we examine the recent approval of US-listed Bitcoin ETFs and its implications for Australian investors.

ETF approval

On January 10, the US Securities and Exchange Commission (SEC) approved 11 US-listed spot Bitcoin ETFs.

The decision came amidst controversy, following a security breach of the SEC's X account just a day earlier. SEC Chair Gary Gensler emphasised that the approval did not constitute an endorsement of the cryptocurrency.

"While we have approved the listing and trading of certain spot Bitcoin ETP (Exchange Traded Products) 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," Gensler stated.

Approved bitcoin EFTs

Crypto flurry

The approval triggered robust demand, with US$4.6 billion in shares traded on the first day. This demand drove Bitcoin's price to a two-year peak, surpassing US$49,000 per coin for the first time since December 2021.

However, this surge was fleeting, as Bitcoin's price fell during Friday's trading, leading investors to seek the next narrative and opinions among analysts are divided regarding the volatility of assets linked to spot Bitcoin ETFs.

Egor Sidelska, co-founder and director of Magnet Capital, told ausbiz that the SEC's decision was a significant milestone for the industry, and volatility can be beneficial for investments.

"This is a monumental event, probably the most significant in Bitcoin's history so far. It demonstrates Wall Street's endorsement by one of the world's largest regulators, affirming that this is now a product accessible to all," said Sidelska.

Conversely, David Rosenberg, partner at Rosenberg, cautioned investors in a note, stating that the inherent volatility of Bitcoin and similar cryptocurrencies makes them more speculative than investment-worthy.

Coinbase Global (NASDAQ:COIN), a US publicly traded company operating a cryptocurrency exchange platform, released a statement expressing confidence that "January 10, 2024, will be remembered as a pivotal moment in Coinbase's evolution and a significant step forward for the crypto economy."

Bitcoin at a two-year high

Shortly after, bitcoin retreats from two-year high

Australian access

The SEC's approval has simplified access for retail investors to the cryptocurrency market.

Global X is currently offering a Bitcoin ETF to Australian investors, trading on Cboe.

Mid-year, Australian regulators are expected to approve a local spot Bitcoin ETF. The Australian Financial Review reports that the ASX is poised to approve a Bitcoin ETF by Monochrome Asset Management, with Betashares preparing a similar product. Additionally, DigitalX has submitted an application to the ASX for its own product.

Experts view

Citi recommends buying Block, while Ord Minett suggests accumulating with a target price of $128 per share, indicating a 28% increase from its current level. Millennial-focused Raiz Investment (ASX:RZI) and DigitalX (ASX:DCC) also have exposure to cryptocurrencies.

Broker recommendations