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Despite suffering a major blow last year (with the US SEC crackdown on Binance and Coinbase in particular), 2024 has started on a positive note for the cryptocurrency ecosystem. On January 10, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin exchange-traded funds (ETFs), including BlackRock, ARK 21Shares, Fidelity, Invesco, and VanEck. BTC ETF was first proposed by him in 2013. In 2023, Bitcoin skyrocketed by 154% in anticipation of the announcement of his BTC ETF. BTC price was $16,619.10 as of January 1, 2023, and $42,152.10 at the end of the year. Bitcoin price rose to a high of $46,995.10 in January, following a pattern of trading above $40,000. Cryptocurrency experts predict that Bitcoin will need to sustain above current levels to reach the $60,000 level by the end of the year.
What is Spot Bitcoin ETF?
Amid all this noise, it’s important to know what a Bitcoin Exchange Traded Fund (ETF) is. These are pooled investments, traded on stock exchanges like stocks, and directly track the price of Bitcoin. With an ETF, you only own shares of funds that have invested in Bitcoin, not Bitcoin itself. You can buy and sell all day long.
Spot BTC ETF is a safer investment compared to Bitcoin futures ETF. Investing in a Spot Bitcoin ETF gives holders direct exposure to Bitcoin price movements without requiring them to buy and store Bitcoin. It is a convenient option as it does not require you to own a cryptocurrency wallet or obtain an account with a cryptocurrency exchange. “The fact that these ETFs are set to trade on major exchanges such as NYSE Arca, Nasdaq, and Cboe BZX Exchange brings further legitimacy to the crypto market. It opens up opportunities for families to participate in the crypto space,” said Edul Patel, CEO of Mudrex.
There are pros and cons to owning cryptocurrencies, as they remain volatile in nature. Using a Spot Bitcoin ETF allows protection against possible fraud and theft. To avoid risk, fund houses tend to charge fees, which can reduce total returns. “The primary purpose of creating such an ETF is to make Bitcoin more accessible to traditional investors who prefer the ease and familiarity of trading on a regulated stock exchange.Spot Bitcoin ETF CoinDCX is ready to streamline exposure for traditional players, open the door to retail investors, and simplify trading. “Bitcoin trading can be accessed through traditional brokerage accounts.” said Minal Thukral, vice president of growth strategy.
huge response
BlackRock’s Spot Bitcoin ETF leverages first-mover advantage to become the first in its category to reach $1 billion in assets under management in less than a week. “For the first time, investors will be able to incorporate Bitcoin into their brokerage accounts in a consistent, convenient, and cost-effective way alongside other asset classes such as stocks and bonds.” said Dominique Rohe, head of the American iShares ETF. BlackRock’s IBIT index investment business debuts on Nasdaq.
BlackRock, Fidelity, and Bitwise received a combined total of $3 billion worth of spot Bitcoin ETF inflows. BlackRock recorded inflows of $1.085 billion, Fidelity recorded inflows of $884 million, and Bitwise recorded inflows of $375 million. British multinational bank Standard Chartered expressed optimism, predicting that Bitcoin could reach a value of US$100,000 by the end of the year.
Current price
Before approval, Bitcoin price reached $46,995.10 on January 8th and $46,376.10 on January 11th. On January 12th, the price fell by more than $3,000. Why could this watershed lead to a sell-off? “Cryptocurrency markets are experiencing an unexpected surge as Bitcoin faces selling pressure due to large outflows from exchange-traded products (ETPs) to new spot ETF issuers. We are witnessing a downward trend. Once this transition subsides and investors are done investing, we can expect Bitcoin prices to rise in “profit booking”, says BuyUcoin CEO Shivam Thakral.
While the liquidation is causing the crypto market to fall, the strength of the US dollar, currently trading at 103.239, is also putting pressure on the digital currency.
What’s in it for Indian investors?
What does a Spot Bitcoin ETF mean for crypto investors in this country? Currently, the Bitcoin ETF Jamboree is available in foreign jurisdictions, so options are limited. Parth Chaturvedi, Head of Investments at CoinSwitch Ventures, said: “This brings with it challenges such as capital constraints ($250,000 per year limit) and additional complexities posed by withholding tax (TCS at 20), as well as freedom Compliance with the Standardized Remittance System (LRS) will be mandatory.” % for allocations above Rs.700,000). Additionally, the current format of Bitcoin ETFs has limited retail investor preferences as they require the use of Indian fintech providers affiliated with foreign brokerages and incur additional costs associated with fund allocation. It may not be suitable.
Nevertheless, Indian investors can participate in the foreign ETF market as it is regulated by the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India. Based on this, investors can also allocate funds of up to USD 250,000 per year to crypto investments. Additionally, since you are not actually purchasing virtual currency, the 1% TDS will not apply and therefore your capital gains tax will be lower.
Currently, the most efficient way to obtain BTC exposure is to purchase spot Bitcoin using an FIU-compliant platform.
future
The SEC’s approval is expected to significantly increase Bitcoin’s value, amplifying positive market sentiment. “This positive momentum is expected to extend beyond Bitcoin to other tokens, suggesting a broader resurgence in the crypto market as a whole,” Thukral said. “It reflects the growing acceptance of cryptocurrencies, which may not be the case for Indian investors.” Although it is not possible to trade directly with these US instruments, the ETF’s global momentum points to positive growth for the crypto industry as a whole. ”
Back in September, ARK 21Shares and VanEck took the plunge and filed for a spot Ethereum exchange traded fund. BlackRock and Fidelity followed suit. Landmark approvals and market performance give the wealth management giant further impetus. “I think there is value in having an Ethereum ETF,” BlackRock CEO Larry Fink said.
The SEC has delayed final decisions on some applications until at least March, and JPMorgan has said there is less than a 50 percent chance of approval of Ark21Shares’ proposal. Ethereum is his second most popular cryptocurrency, with MCap exceeding his USD 250 billion.
SCB experts expect the spot Bitcoin ETF market to expand and potentially attract inflows worth USD 50 billion to USD 100 billion by the end of this year.
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