An Overview of Top High-Profile Bitcoin Spot ETF Applications

Fifteen prominent asset management firms, including BlackRock, Grayscale and Valkyrie Investments have been eagerly awaiting the U.S. Securities and Exchange Commission's verdict on their Bitcoin spot exchange-traded fund (ETF) applications. A decision on several applications was expected by Jan 10, 2024, and the SEC did not disappoint.

On Jan 10, 2024, the SEC approved 11 of the Bitcoin spot ETF applications, marking a significant milestone in cryptocurrency markets. Here's a comprehensive look at the top Bitcoin spot ETF applications, capturing all the essential details for those following this development.

Key Takeaways:

• Major financial entities such as BlackRock, Grayscale^® and Valkyrie applied for and won approval for Bitcoin spot ETFs. Their involvement signals a growing interest in offering regulated ways for investors to access the cryptocurrency market through traditional investment avenues.

• Despite anticipation and adjustments made by applicants, regulatory hurdles remain significant. The SEC has cited concerns regarding market manipulation, custody and investor protection, which in the past have led to delays and rejections. Recent adjustments and shifts within the SEC hint at potential changes, but uncertainties linger.

• Approval of a Bitcoin spot ETF by the SEC marks a milestone, potentially boosting Bitcoin's market liquidity, investor accessibility and overall market attention. However, challenges such as regulatory uncertainties, operational complexities and market fluctuations still pose significant barriers to the success of such ETFs.

What Is a Bitcoin Spot ETF Application?

A Bitcoin spot ETF application is a formal request to launch a type of investment fund that holds Bitcoin as its underlying asset and trades on a stock exchange. Such an application must comply with the rules and regulations laid out by relevant authorities, such as the SEC, and demonstrate that the proposed product meets the standards for investor protection, market integrity and liquidity. 

A Bitcoin spot ETF application differs from a Bitcoin futures ETF application, which is based on contracts that bet on the future price of Bitcoin, rather than holding the actual cryptocurrency.

How Does a Bitcoin Spot ETF Application Work?

A Bitcoin spot ETF application is essentially a detailed proposal outlining the structure, methodology and provider for the ETF. This comprehensive plan covers various parameters such as how the fund will acquire, securely store and manage Bitcoin holdings, along with strategies for risk management. 

In terms of structure, the application defines the operational framework for the ETF, including custody arrangements for Bitcoin storage and the manner in which profits or losses will be distributed among shareholders.

Methodology refers to the approach the fund will take in tracking the price movements of Bitcoin, which can differ across platforms and markets. The chosen methodology significantly impacts how the ETF performs and is perceived in the market.

The provider consists of both the entity responsible for creating, managing and marketing the ETF and the custodian tasked with securely holding the Bitcoin on behalf of the fund.

Crucially, any Bitcoin spot ETF application must address potential risks and challenges associated with the fund, such as volatility in the crypto market, security concerns like hacking or theft, regulatory issues, tax implications, and competition within the ETF space.

By thoroughly covering these elements, a Bitcoin spot ETF application aims to provide a clear and cohesive plan that instills confidence in regulators, investors and stakeholders regarding the fund's viability and security.

Current Bitcoin Spot ETF Application Landscape

A whirlwind of activity and uncertainty has surrounded the current landscape of Bitcoin spot ETF applications. Over the years, numerous applications have been submitted, modified, delayed, rejected and/or withdrawn, creating a dynamic environment. 

The SEC is the primary authority overseeing these applications in one of the largest and most influential financial markets, the U.S., and is tasked with either granting or denying these applications. It has approached Bitcoin spot ETF applications with some degree of caution and skepticism, raising concerns regarding market manipulation, fraud, custody, valuation, liquidity and safeguarding investor interests. 

Despite multiple submissions, the SEC has yet to green-light any Bitcoin spot ETF applications before this year. Instead, it’s kept delaying its decisions, pushing them to later dates. Nevertheless, there have been indications of a shift within the SEC toward a more receptive stance as it has sought public feedback, conducted meetings and even appointed officials more knowledgeable about cryptocurrencies. A federal court ruling effectively requiring the SEC to drop its rejection of Grayscale’s spot Bitcoin ETF application in 2023 also shifted the tone.

On Jan 10, 2024, the SEC finally approved 11 Bitcoin spot ETF applications, marking a significant turning point. While the SEC had previously sought public feedback, conducted meetings and appointed officials with cryptocurrency expertise, this approval is a watershed moment for opening up Bitcoin to retail markets. The development is not only significant for the Bitcoin market, but holds broader implications for the cryptocurrency ecosystem as a whole.

Top High-Profile Bitcoin Spot ETF Applications

Going into January 2024, the SEC was poised to review fifteen current Bitcoin spot ETF applications. Some of the applications stand out from the rest because of reputation, innovation and/or potential. Many of the applicants have now successfully secured approval and launched trading, marking a transformative moment for the crypto market. Here are some of the top high-profile Bitcoin spot ETF applications that are currently pending or in the pipeline.

Approved Bitcoin Spot ETF Applications

BlackRock

BlackRock, a global leader in investment solutions, manages a staggering $9 trillion in assets, offering diverse investment products such as mutual funds, ETFs, institutional accounts and alternative investments. BlackRock submitted its initial application for a Bitcoin spot ETF in June 2023, seeking to list the iShares Bitcoin Trust on the Nasdaq exchange.

BlackRock’s proposal outlined Coinbase as the crypto custodian and spot market data provider, with BNY Mellon acting as the cash custodian. Additionally, BlackRock designated JPMorgan and Jane Street as authorized participants for the ETF.

The application has undergone multiple amendments to address the SEC's concerns regarding potential market manipulation, custody issues, pricing mechanisms and redemption processes. Key alterations include transforming the ETF to being solely cash-based redemption and renaming the fund's ticker to IBIT.

On Jan 10, 2024, the SEC gave the green light to BlackRock's Bitcoin ETF, IBIT, which is now available for trading on the NYSE Arca exchange. To attract early investors, BlackRock is temporarily cutting a part of the sponsor's fee for the first year or until the ETF reaches $5 billion in assets, with a reduced fee of 0.12%. After this initial period or asset milestone, the fee will increase to 0.25%, creating an incentive for early participation and potential growth.

Grayscale

Grayscale, renowned for managing the largest Bitcoin investment vehicle, GBTC, began its quest for a Bitcoin spot ETF in 2016. It withdrew this initial attempt, citing regulatory hurdles. The firm’s October 2021 attempt to convert the Bitcoin trust into an ETF met a brick wall. A turning point came in August 2023, when a court ruled in favor of Grayscale and ordered a fresh SEC reevaluation. To boost its chances, Grayscale amended its application, switching to a cash-only ETF and rebranding to Grayscale Bitcoin ETF Trust. The SEC approved this spot Bitcoin ETF on Jan 10, 2024.

Grayscale was approved to uplist GBTC to the New York Stock Exchange, and it commenced trading on NYSE Arca the next day, January 11. Trading at $40.50 per share at the close (as of Jan 11, 2024), the ETF still carries a 1.50% expense ratio, which is significantly higher than its peers. However, Grayscale asserts that this fee will decrease as the ETF expands and becomes more efficient over time.

Notably, the discount of GBTC to its net asset value shrunk to 0% for the first time since February 2021. Analysts expect it to trade closer to NAV going forward.

Valkyrie Investments

Valkyrie Investments first applied for a Bitcoin spot ETF in January 2021. After facing rejection in December 2021, it resubmitted in June 2023, aligning with Coinbase as a surveillance-sharing partner, and earning SEC acceptance for review. Recent updates at the end of December 2023 introduced Jane Street and Cantor Fitzgerald as authorized participants.

Valkyrie Investment’s application made the cut and it launched the Valkyrie Bitcoin Fund (BRRR), which began trading on Nasdaq on Jan 11, 2024. BRRR implemented a 0% sponsor fee for its initial three months, after which it will increase to 0.49%. Market price for BRRR as of Jan 11 was $13.29 per share.

ARK Invest

ARK Invest, led by CEO Cathie Wood and known for its focus on innovation, teamed up with 21Shares AG to propose the ARK 21Shares Bitcoin ETF in June 2021, aiming for trading on Cboe's BZX Exchange. Facing two SEC rejections in 2022 and January 2023, the company is currently on its third application. The SEC delayed decisions on ARK Invest applications in August and September 2023, with a decision expected in early January 2024. ARK Invest has amended its application twice, adding risk warnings and clarifying the roles of authorized participants in its latest amendment. 

Among the newly approved ETFs, the ARK 21Shares Bitcoin ETF, identified by the ticker symbol ARKB, commenced trading on Jan 11, 2024, on the Cboe BZX exchange — also home to the first Bitcoin futures ETF, BITO. Closing at $46.76 on Jan 11, ARKB stands out with a management fee of 0.21%, temporarily waived for the first six months or until the fund hits $1 billion in assets, whichever takes place first. This low sponsor fee positions ARKB as one of the most competitively priced Bitcoin spot ETFs.

VanEck

VanEck has been a persistent player in the Bitcoin ETF space, initiating its first application (with Solid X) in 2018, which was withdrawn the next year. Following reapplications and subsequent rejections in 2020 and 2023, VanEck didn't lose steam, refiling again in July 2023. VanEck’s choice of Gemini as the custodian for Bitcoin stands out, alongside its chosen ticker symbol (HODL) for the potential ETF. The SEC's decision, postponed until Jan 15, 2024, hangs over this latest attempt by VanEck to secure approval for a Bitcoin ETF.

Approved alongside 10 other ETFs on Jan 10, 2024, VanEck's HODL began trading with one of the largest initial seed capitals of $72.5 million, closing at $52.92 per share on Jan 11, 2024. Trading on the Cboe BZX exchange, the ETF offers exposure to Bitcoin prices by holding the cryptocurrency in a trust, tracking the MarketVector Bitcoin Benchmark Rate. HODL carries an expense ratio of 0.25% without any waivers. VanEck plans to donate 5% of its profits from HODL to a nonprofit supporting Bitcoin developers. 

WisdomTree

WisdomTree, already offering a Bitcoin ETF in Switzerland, joined the race for a spot Bitcoin ETF in the U.S. in March 2021 to list on the Cboe BZX Exchange as BTCW. Facing rejection in December 2021 and October 2022 due to SEC concerns over market manipulation and investor safeguarding, WisdomTree reapplied in June 2023, and named Coinbase as custodian for the proposed ETF in its revised November 2023 application. 

WisdomTree’s renewed efforts paid off, and the SEC gave its Bitcoin ETF the go-ahead. The WisdomTree Bitcoin Fund (BTCW) started trading on the Cboe BZX Exchange and closed at $49.32 as of Jan 11, 2024. BTCW has a 0.30% expense ratio, waived for the first $1.0 billion of assets or the initial six months, whichever comes first. 

Invesco

Invesco, a renowned global investment management firm, teamed up in September 2021 with Galaxy Digital, a crypto-focused financial services company, to propose the Invesco Galaxy Bitcoin ETF, designating Coinbase as custodian and partner for surveillance-sharing. Invesco and Galaxy reapplied in June 2023, and the SEC put off its decision until January 2024. In a recent move, Invesco and Galaxy disclosed J.P. Morgan and Virtu Financial as authorized participants. They also announced fee waivers for the initial six months or the first $5 billion in assets held for the ETF.

The SEC approved the Invesco Galaxy Bitcoin ETF (BTCO) and trading started the next day, Jan 11, 2024, on the Cboe BZX Exchange at $46.53 per share as of January 11. BTCO offers a waiver of its 0.39% management fee for the initial six months or $5 billion in assets. 

Bitwise

Bitwise, known for its crypto investment products, initially sought a spot Bitcoin ETF in 2019, but it was rejected. Refiling in 2021, Bitwise opted for Bitcoin-based trading over futures, yet met another SEC rejection in June 2022. In a September 2023 amendment, the Bitwise team made some notable changes, such as acknowledging market competition and elaborating on pricing and reporting mechanisms. With SEC delays in August and September, Bitwise anticipated the awaited decision on its ETF application in January 2024.

Finally, Bitwise secured approval for its first spot Bitcoin ETF, BITB, to trade on NYSE Arca. BITB began trading on Jan 11, 2024, closing at $25.54. It offers a management fee of 0.20%, one of the lowest among approved spot Bitcoin ETFs, and will be waiving its fee for the first six months or the initial $1 billion in assets. BITB will directly hold Bitcoin with Coinbase Custody Trust Company LLC, the largest regulated digital asset custodian globally. Bitwise has committed to donating 10% of BITB's profits to support Bitcoin's open-source development.

Fidelity

Financial services giant Fidelity applied for a Bitcoin spot ETF in March 2021, termed the Fidelity^® Wise Origin^® Bitcoin Fund. Despite a January 2022 rejection by the SEC, Fidelity remained persistent, refiling in June 2023 and aligning with Coinbase as its surveillance-sharing partner. The SEC delayed its decision on Fidelity’s application, along with those of other Bitcoin ETF hopefuls, to January 2024. Fidelity updated its application in December 2023, naming Jane Street Capital as its inaugural authorized participant and unveiling a competitive 0.39% fee. 

The Fidelity Wise Origin Bitcoin Fund (FBTC) received SEC approval on Jan 10, 2024, and began trading on the Cboe BZX Exchange the next day. At the close of Jan 11, 2024, FBTC was priced at $40.88 per share. Fidelity is offering fee waivers until Jul 31, 2024, making it more accessible for investors, after which its fee will revert to 0.25%.

Hashdex

In August 2023, Hashdex, a crypto asset management firm, applied to convert its Bitcoin futures ETF into a spot ETF by leveraging a unique method — acquiring spot Bitcoin from the regulated Chicago Mercantile Exchange (CME) market via its existing futures ETF. This novel approach sought to transition the ETF's structure to track spot Bitcoin. Subsequently, the SEC deferred its decision on Hashdex's ETF conversion in November 2023, extending the ruling deadline to January 2024. This move by Hashdex reflects an innovative strategy within the evolving landscape of Bitcoin ETF applications awaiting SEC approval.

The Hashdex Bitcoin ETF gained SEC approval on Jan 10, 2024, following its conversion from the Hashdex Bitcoin Futures ETF launched in 2022. Trading on the NYSE under the ticker DEFI, closing at $56.04 on Jan 11, 2024. The spot Bitcoin ETF carries a management fee of 0.90%.

Franklin Templeton

In September 2023, asset manager Franklin Templeton entered the Bitcoin ETF race, proposing the Franklin Templeton Bitcoin Trust for listing on the Cboe BZX Exchange. It designated Coinbase as its custodian and surveillance-sharing partner. However, the SEC postponed making a decision to January 2024, along with those of other Bitcoin Spot ETF applications. Unaltered since its initial submission, Franklin Templeton's Bitcoin ETF joined the queue awaiting the SEC's verdict this month.

Approved by the SEC on Jan 10, 2024, Franklin Templeton’s EZBC, listed on the Cboe BZX Exchange, aims to mirror Bitcoin's performance at a cost of 29 basis points. Coinbase serves as the custodian for the fund's Bitcoin holdings, with pricing based on a reference rate from the CME. The ETF closed at $27.05 per share on Jan 11, 2024.

Pending Applications

Global X

Global X is a fund manager that offers a range of exchange-traded funds (ETFs). It entered the Bitcoin ETF race in July 2021, proposing the Global X Bitcoin Trust on NYSE Arca with Bitcoin held by an undisclosed custodian. The SEC turned down the request in March 2022, due to market manipulation and fraud resilience concerns. Global X renewed its filing in August 2023. 

Pando Assets

Pando Asset is a Swiss firm that offers Bitcoin and Ethereum exchange-traded products (ETPs) in Europe. It applied for a spot Bitcoin ETF with the SEC in November 2023, naming Coinbase as custodian for its Bitcoin.

7RCC

7RCC, an environment, social and governance (ESG)-focused asset manager, recently entered the Bitcoin ETF race, filing its application with the SEC in mid-December 2023 after an earlier attempt failed to materialize. Its unique approach blends Bitcoin with carbon credit futures, with 80% allocated to Bitcoin and 20% to futures, managed by Gemini as custodian. The company stands out by aiming to offset Bitcoin's carbon footprint through Moss.Earth, targeting ESG-conscious investors. 

NYDIG/Stone Ridge

In February 2021, New York Digital Investment Group (a subsidiary of holding company Stone Ridge) filed its ETF application with the SEC, becoming the second firm after the regulator changed leadership. The SEC rejected NYDIG’s initial filing in March 2022, along with those of other applicants. Undeterred, NYDIG refiled in August 2023.

Failed Bitcoin Spot ETF Applications

While many Bitcoin spot ETF applications are still pending or in the pipeline, some have already failed or been withdrawn, either because of SEC disapproval or lack of market interest or for strategic reasons. Following are some of the previous failed Bitcoin spot ETF applications.

Winklevoss Bitcoin Trust

The first Bitcoin spot ETF application was filed in July 2013 for the Winklevoss Bitcoin Trust by the Winklevoss twins, founders of Gemini, a crypto exchange and custodian. This application faced several delays and amendments and was finally rejected by the SEC in March 2017, and again in July 2018 after an appeal.

The SEC cited concerns over the lack of regulation, surveillance and liquidity in the Bitcoin market, as well as the risk of fraud and manipulation. The Winklevoss Bitcoin Trust was seen as a pioneer and a trailblazer for ensuing Bitcoin spot ETF applications, but it also faced many challenges and hurdles that proved to be insurmountable.

SolidX Bitcoin Trust

In July 2016, SolidX, a blockchain technology company, filed another early Bitcoin spot ETF application for the SolidX Bitcoin Trust. The SEC rejected the SolidX Bitcoin Trust in March 2017 for reasons similar to those in its rejection of the Winklevoss Bitcoin Trust. SolidX Bitcoin Trust then partnered with VanEck, a leading ETF provider, to file a joint Bitcoin spot ETF application in June 2018, withdrawing it in January 2019 due to the U.S. government shutdown, which threatened a rejection. 

The partnership refiled the application and subsequently withdrew it again in September 2019.

SolidX Bitcoin Trust then sued VanEck, accusing it of plagiarism and breach of contract after VanEck filed its own Bitcoin spot ETF application without SolidX’s involvement.

What Happens When a Bitcoin Spot ETF Application Is Approved?

The SEC's approval of Bitcoin spot ETFs marks a historic moment, with significant impact on both the Bitcoin market and the broader cryptocurrency landscape. This move offers investors an easy and secure way to invest in Bitcoin without the complexities of buying, storing or selling the cryptocurrency directly.

A Bitcoin spot ETF could boost market liquidity, transparency and efficiency, potentially reducing the premium or discount associated with other Bitcoin investment products. It's expected that it would attract more institutional and retail investors, increasing public awareness and media attention toward Bitcoin.

This development could drive up Bitcoin's price and encourage greater adoption and innovation within the crypto ecosystem. However, challenges like regulatory uncertainty, market volatility, cybersecurity risks, taxation complexities and increased competition could hinder the success of such a venture.

Operational issues like tracking errors, custody fees and counterparty risks might also pose obstacles. Moreover, concerns about centralization, governance and environmental impact within the Bitcoin network and community could emerge.

It's essential to note that while a Bitcoin spot ETF holds promise, its impact will ultimately rely on the crypto’s underlying fundamentals and the evolving dynamics within the crypto space.

The Bottom Line

Prominent investment firms, such as BlackRock, Grayscale and Valkyrie Investments, have been eagerly pursuing Bitcoin spot ETFs, aiming to provide investors with a regulated entry point into the Bitcoin sphere. Despite prior hurdles and the SEC's cautious approach, the SEC has now approved 11 spot Bitcoin ETFs. However, uncertainties surrounding regulations and market fluctuations remain key challenges for these endeavors. On their first day of trading, these spot Bitcoin ETFs traded $4.6 billion in volume. This watershed moment brings Bitcoin further mainstream, with implications for crypto enthusiasts everywhere.

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