Macro Intelligence: US SEC approves landmark bitcoin ETFs
Discover the impact of the US SEC's historic approval of 11 bitcoin ETFs on January 10, 2024. Explore what this means for Australian investors, market volatility and the future of cryptocurrency investments.
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
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
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