These approved rule changes will allow the creation of bitcoin exchange-traded funds in the U.S., a long-awaited move that will give regular investors access to the controversial and volatile cryptocurrency.
We may look back on this in 5 years as the start of mainstream adoption acceptance of crypto.
Many of the largest fund managers in the US have already launched a product to cater to this market.
This key change now allows investors to gain exposure to crypto without the complications of setting up wallets and accounts with crypto exchanges some of which have poor cyber security records and have been prone to hacking.
ETFs are a tightly regulated highly liquid product traded daily on the US stock markets making crypto easily available to investors.
The acceptance by the SEC of this asset class will inevitably bring crypto into the mainstream and force large pensions and other funds to buy crypto. Greater acceptance of crypto as a suitable asset for investment purposes should in the longer term reduce volatility.
Soon, crypto will likely remain highly volatile and not for the faint-hearted, and since its approval there has been a significant sell-off which often happens.
As an IFA over the past few years, we have been aware of the development of Bitcoin in particular and the crypto market. We have witnessed people make life-changing amounts of money by buying into things like Bitcoin early. However many have also lost significant sums of money due to the high levels of volatility which have been associated with crypto.
Added to the volatility of the asset has also been the difficulty of buying and holding the asset and its liquidity. As with most new assets there have also been many negative stories about crypto and in 2023 this caused various banks in the US to default as well as one of the largest crypto exchanges.
The SEC has fought hard to keep this asset out of the mainstream but the recent change which has allowed the creation of Bitcoin ETFs is almost certainly a game changer. As a small IFA company, we can adapt to change quickly and help clients benefit when significant changes like this occur.
While it is still too early for all clients to potentially benefit from this change we feel for those clients with a ‘high risk tolerance’ and who can wait out the likely volatility the returns from this asset class are likely to be outstanding.
Over the last few months, there has been much speculation that the SEC would announce these changes and as a result, the price of Bitcoin and other crypto assets has mostly surged. As mentioned the announcement has caused a significant correction in the market which often happens but in the next few days and weeks, the crypto market will likely resume its climb.
Investing in crypto is not for the faint-hearted and as an IFA is something I have shied away from recommending to clients for the following reasons:
Not properly regulated and as a result many investors have been scammed.
Difficult to purchase and hold and almost impossible to pass on to your beneficiaries in the event of your death.
Often associated with terrorist financing and money laundering.
Due to it not being regulated and being a ‘mainstream investment’ it has been highly volatile and therefore not suitable for the majority of investors.
The recent acknowledgment and approval by the SEC of these new crypto ETFs is likely to be a turning point in the evolution of crypto. This is likely to create a significant investment opportunity for the investor who has a high-risk tolerance and the patience to wait out the volatility.
If you would like to know more about this article and whether investing in a Bitcoin ETF is suitable for you please hit the link below so we can arrange an appointment.
Opportunities like this do not come around very often so get in early and call us to see if this is appropriate for YOU!