Spot bitcoin ETFs can start trading as SEC clears final hurdle

Spot bitcoin ETF applicants have seen their S-1 forms go effective, according to Bitwise CIO Matt Hougan, meaning that trading of these products can get started as early as tomorrow.

Final versions of the prospectuses are now appearing on the SEC's website, including BlackRock's iShares Bitcoin BTC +1.96% ETF and Ark Invest/21Shares.

The timing matches an earlier release by Grayscale that said it expected the SEC to declare its Form-3 registration statement effective at 5pm ET.

Bitwise posted on X that the Bitwise Bitcoin ETF with the ticker BITB will start trading on January 11. It also said it plans to donate 10% of profits from the fund to Bitcoin open-source development. 

“We expect significant demand for bitcoin ETFs like BITB,” said Bitwise CEO Hunter Horsley in a statement. “Every year for the past six years, financial advisors have identified ETFs as their preferred way to help clients access bitcoin. Last year, 64% of financial advisors preferred a spot bitcoin ETF over existing vehicles. Across our existing client base of thousands of investment professionals, we hear the same thing. Now, at long last, a spot bitcoin ETF is arriving.”

This comes shortly after the applicants saw their 19b-4 forms approved all in one go, a pivotal moment in the approval process. A document was published to the SEC website, approving 11 spot bitcoin ETFs by Bitwise, Grayscale, Hashdex, BlackRock, Valkyrie, BZX, Invesco, VanEck, WisdomTree, Fidelity and Franklin.

Alongside the omnibus approval order, the SEC published a speech by Chair Gary Gensler. He confirmed the approvals but added a warning. "While we approved the listing and trading of certain spot bitcoin ETP 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," he said.

Earlier today, the Cboe BZX exchange sent letters to the Securities and Exchange Commission on Wednesday, requesting “acceleration of registration” for proposed spot bitcoin ETFs. A few hours later, it issued listing notifications for six prospective ETFs saying that trading would begin on Thursday. This was prior to any approvals by the SEC.

BlackRock ready to trade

BlackRock said in a statement that trading in its spot bitcoin fund was expected to begin on Thursday.

"Through IBIT, investors can access bitcoin in a cost-effective and convenient way," said Dominik Rohe, Head of Americas iShares ETF and Index Investing business at BlackRock.

Valkyrie Investments and VanEck have also both said they expect trading to begin on Thursday. Those comments were made ahead of the approvals.

Valkyrie co-founder and CIO Steven McClurg said he expects $200 million to $400 million of investors’ funds coming to Valkyrie’s ETF, and all participants might see $4 to $5 billion of inflows over the first couple of weeks.

VanEck estimated that $1 billion of funds would flow into these products over the first few days, and $2.4 billion within a quarter. Galaxy anticipates inflows of $14 billion within the first year. Bitwise said it reckons the market for spot bitcoin ETFs will reach roughly $72 billion within five years. 

The issue of each product's sponsor fee could help determine where the funds flow. Currently, Bitwise is offering the cheapest ETF, with a fee of 0.2%. Ark/21Shares is offering a similarly low fee of 0.25%, while BlackRock is offering a reasonably competitive 0.3%. Multiple spot bitcoin ETF issuers have also offered discounts for the first funds that arrive to their products, with many firms offering zero fees for the first billion — or several billions — of dollars of inflows.

Final touches

Over the last few weeks, such applicants had filed multiple amendments to their spot bitcoin ETF applications as they addressed many of the SEC's concerns involving creation and redemption models, authorized participants and how to manage hard forks and airdrops.

On Tuesday, the SEC’s X account was compromised and a post went out claiming the SEC had granted approval for listing bitcoin ETFs on all registered securities exchanges with an image showing a quote by SEC Chair Gary Gensler. It was shortly deleted with follow up posts claiming it was unauthorized and that spot bitcoin ETFs had not been approved by that point.