Everyone’s invited to the bitcoin party – and the host’s not happy

Investors and disciples of cryptocurrency around the world screamed with deafening hails of exuberance as they celebrated a decision by the US securities regulator to make investing in bitcoin easy and accessible to all including unsophisticated investors.

The decision by the US Securities and Exchange Commission (SEC) will usher in “a new age of crypto investing”, “take bitcoin mainstream” or “the maturation of this asset class” are but a few of the claims being made by crypto investors salivating at prospect that bitcoin’s price will take off on the back of its newfound accessibility.

Strangely, the only group that wasn’t donning party hats and blowing whistles was the SEC. To describe this decision as being taken by a reluctant regulator would be an understatement.

For years, it has been barricading mainstream exchanges such as the New York Stock Exchange and Nasdaq from listing exchange-traded funds (ETF) that hold bitcoin. But after a US court found that the SEC’s rejections had been “arbitrary and capricious”, the regulator’s chairman and an ardent critic of crypto, Gary Gensler, was ostensibly forced into an about-turn.

Unit holders in these ETFs, which will be launched by a number of large US financial institutions including BlackRock and Fidelity, will see the prices of their units move up and down, parroting the price of the underlying asset the fund holds – bitcoin.

And that price ride has been a wild one over the past seven years, making an investment in bitcoin ETFs not one for the faint-hearted.

That said, investors have been waiting for years for an easy way to play in bitcoin in a way that didn’t involve managing cryptographic keys, bitcoin wallets or by using unregulated crypto exchanges.

Bringing bitcoin into the mainstream is a regulatory headache seen by many as giving licence to mum and dad investors to take excessive risk.

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History has shown the prices of cryptocurrencies such as bitcoin to be enormously volatile, and even as he was announcing its approval status in the US, Gensler referred to it as a “speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing”.

Hardly a resounding endorsement.

Even the announcement of a green light for listed exchange-traded funds was mired in some controversy. The day before the announcement an SEC tweet that claimed the funds were approved to list on national exchanges lead to a surge in the bitcoin price. The SEC soon after said its social media account had been “compromised”.

Regardless of any warnings from regulators, there will be investors willing to take the plunge and invest in bitcoin, which has made many billionaires over the past 10 years but has also been plagued by scandals and business failings.

Seven years ago, bitcoin was trading at about $450 and rose spectacularly to about $75,000 in 2021, but fell by roughly two-thirds a year later before gaining ground again 2023. It’s currently trading at $69,322. But volatility and potential risk won’t deter bitcoin bulls.

SEC chairman Gary Gensler said bitcoin is used for illegal activities including money laundering and terrorist financing.
SEC chairman Gary Gensler said bitcoin is used for illegal activities including money laundering and terrorist financing.Credit: AP

Chief technology officer at CloudTech Group’s UB division, Robert Waugh, is predicting a swing into a bull market given the approval.

Waugh reckons with the market growing more confident and more money flowing into the market, it could mean we can see Australians start putting their super into crypto.

Evan Metcalf, chief executive of Global X ETFs in Australia, is another who believes crypto has now come of age.

“The SEC’s approval affirms the maturation of the cryptocurrency space, strengthening its position as a legitimate and promising avenue for investors,” Metcalf said.

“This decision aligns with our vision of broader global acceptance of digital assets and addresses the escalating demand for investment opportunities in the cryptocurrency sector.”

Nigel Green of deVere Group, predicts the SEC’s decision “could send prices skyrocketing in the longer-term with BTC prices perhaps hitting $60,000 this quarter”.

The wild ride, it seems, will continue.

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Source: Thanks smh.com