The US Securities and Exchange Commission (SEC) has approved the first-ever spot Bitcoin exchange-traded fund (ETF) in a monumental decision that will have widespread implications for local BTC bulls and investors.

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In total, 11 pending applications for Bitcoin ETFs were approved for trade on major US exchanges. Among the approved applicants was BlackRock, the world’s largest asset manager with over $US9 trillion worth of assets under management.

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Crucially, this decision marks a turning point in Bitcoin’s trajectory as a legitimate investment, allowing a wider range of investors to engage with the cryptocurrency market in the more familiar, accessible and regulated vehicle of an ETF.

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Unlike the direct ownership of Bitcoin, which involves technical challenges such as managing wallets and cryptographic keys, investing in ETFs offers a more conventional and straightforward way to gain exposure to Bitcoin’s market movements.

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While Australian investors have had access to physically backed Bitcoin ETFs since May 2022—via the 21shares Bitcoin ETF (EBTC) listed on Cboe Australia—the SEC’s nod to Bitcoin ETFs in the US is particularly noteworthy due to the influence this will have on US and global financial markets.

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Related: Investing In Cryptocurrency In 2024

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Why the Approval Matters

ETFs embed Bitcoin within the mainstream financial system by wrapping it in a familiar package and allowing investors to buy it through their regular stock broker, online trading account or fund.

A key aspect of ‘spot’ Bitcoin ETFs is their direct correlation to Bitcoin’s actual market price, which is achieved through a one-to-one backing of Bitcoin to ETF shares. This type of ETF is in contrast to futures-based funds that are tied to contracts predicting Bitcoin’s future price, often leading to price discrepancies and, more notably, not driving trade volume to the Bitcoin asset itself.

The approval of spot Bitcoin ETFs not only means a more straightforward and potentially less-risky avenue for exposure to Bitcoin’s price movements, but it will also potentially drive an increase in demand for Bitcoin itself, as the funds acquire BTC holdings to provide backing to their ETF shares.

Leading up to the ETF approval deadline, investors have speculated that the approval would significantly increase demand for Bitcoin, potentially driving up the price. Since BlackRock’s initial Bitcoin ETF application in June 2023, BTC grew almost 90% to a two-year high of $US49,000 just before the decision last week, reflecting the confidence that the ETF would eventually be approved.

Despite the asset’s recent surge, it’s important to note that its current value is still below its peak of over $US69,000 in 2021, reflecting the BTC’s inherent volatility.