The crypto industry has enthusiastically welcomed the recent approvals of Bitcoin and Ethereum spot ETFs by the US SEC. These long-awaited decisions have unlocked new opportunities for traditional investors and institutions eager to enter the crypto sector. Additionally, this development sends a positive signal to merchants accepting cryptocurrency payments.
In this article, we delve into the significance of the SEC’s Bitcoin and Ethereum ETF authorisations and explore the potential benefits for merchants.
Key Takeaways
- Spot ETFs augment digital assets’ liquidity and market depth.
- The decision signals growing institutional acceptance of digital assets, boosting confidence and trust among merchants and consumers.
- With the crypto industry set to see significant growth, merchants and business owners can now benefit from accepting crypto payments.
Bitcoin ETF Approval: A Watershed Moment
For years, the cryptocurrency industry has been lobbying for the establishment of spot Bitcoin ETF (Exchange-Traded Fund) products but has faced numerous rejections and delays from the SEC. However, on Jan 11, 2024, the regulator finally gave its green light to 11 key filings from markets seeking to list spot Bitcoin ETFs, marking a significant milestone for the industry.
The main advantages of the SEC Bitcoin ETF approval are that it allows traditional investors to get access to the digital currency without needing to hold or trade it directly, provides better liquidity for Bitcoin, and increases its accessibility. Moreover, the big win for digital currency advocates is that it legitimises Bitcoin as a mainstream asset, paving the way for its broader adoption.
Record Inflows in the First Month
The approval of spot ETFs has opened new investment opportunities for institutional and retail investors and ignited a surge in demand for crypto-based investment products. In February 2024 alone, Bitcoin ETFs attracted a record-breaking $2.4 billion of the total $2.45 billion that flowed into digital asset investment products, according to crypto asset management firm CoinShares.
Most of the Bitcoin ETF inflows went to the newly approved US-based spot Bitcoin ETFs: BlackRock’s IBIT and Fidelity’s FBTC, which garnered $1.6 billion and $648 million, respectively, in just one week.
First BTC futures exchange-traded funds were launched as early as October 2021. While spot Bitcoin ETFs hold the cryptocurrency directly as the underlying asset, Bitcoin futures ETFs invest in Bitcoin futures contracts linked to the price of the coin.
Ethereum ETF Approval: A Surprising Win for the Crypto Sector
The SEC’s decision on Bitcoin ETFs has captured widespread attention, yet the agency’s stance on Ethereum ETFs has also generated significant interest within the crypto community. Leading up to the May 2024 deadline, the SEC received several applications for Ether-based products from industry giants like BlackRock, Fidelity, and ARK.
On May 23, the SEC surprised the public by approving eight spot Ether ETFs for listing and trading on US exchanges. The move has caught many industry experts off guard, as the SEC had been known for its cautious approach towards virtual currencies. The decision legitimised crypto assets further and provided a substantial boost to the price of Ethereum, the second-largest digital currency after Bitcoin.
Andrew Jacobson, vice president and head of legal at 21Shares—one of the ETF issuers aiming to launch an Ethereum spot ETF—remarked that this decision is “a significant step” towards getting these products trading, marking an exciting moment for the market as a whole.
How Bitcoin and Ethereum ETFs Benefit Merchants
So, why is a Bitcoin ETF important? The following are a few ways in which crypto exchange-traded fund products are beneficial for merchants and consumers:
Better Liquidity and Market Depth
Bitcoin and Ethereum ETFs can greatly augment digital assets’ liquidity and market depth, ensuring more efficient and cost-effective transactions for crypto merchants. The increased trading volume and market activity of both spot and Bitcoin futures ETF products can also help stabilise cryptocurrency prices in the long run, making them a more attractive and viable option for a wider range of customers.
Increased Adoption by Merchants and Consumers
Institutional investors’ entry into the cryptocurrency industry through ETF shares can motivate new companies to accept digital asset payments, leading to increased acceptance of crypto-based transactions. Potentially, more businesses will be eager to offer cryptocurrency payment options, ultimately expanding the crypto merchant ecosystem.
Enhanced Institutional Participation and Trust-Building
The SEC’s approval of ETFs signals growing institutional acceptance of digital assets, which could potentially result in a significant influx of capital into the crypto ecosystem, boosting market confidence and helping build trust among merchants and consumers.
Regulatory Clarity and Compliance
The approval of spot Ether ETFs provides regulatory clarity and compliance standards to the cryptocurrency industry. It could assist crypto merchants in reducing legal risk and aligning their practices with the evolving regulatory landscape, ultimately promoting a more sustainable and secure environment for digital asset transactions.
Mitigating Fraudulent Practices
The crypto industry has often been troubled by fraudulent activities, including scams, Ponzi structures, and crypto market manipulation. However, the sanction of spot Bitcoin ETF filings implies an added level of regulatory scrutiny for the industry.
Cryptocurrency ETFs face rigorous reporting demands and must comply with stringent standards set by regulatory authorities like the SEC. The involvement of institutional investors, known for conducting detailed due diligence, can further sift out potential fraudsters, ensuring only trustworthy and dependable entities prosper in the crypto space.
Correlation Between Crypto Prices and Spending
When prices surge, as seen following the SEC’s announcement, crypto-savvy consumers are more likely to spend their digital assets. As a result, merchants have an excellent opportunity to capitalise on the heightened appetite to use cryptocurrencies.
The Halving Factor
Bitcoin halving, which took place in April 2024, is another positive signal for crypto-enabled merchants. Halving is a programmed event that happens every four years. It reduces the rate at which new coins are created, typically resulting in increased scarcity and the price of Bitcoin rising. This cycle has historically been favourable for merchants who accept digital assets, as it often leads to a surge in crypto spending and Bitcoin adoption.
The combination of Bitcoin and Ethereum ETF approvals and the halving event creates an ideal opportunity for merchants to embrace Bitcoin payment trends in their operations.
How to Start Accepting Crypto?
With the introduction of spot crypto ETFs, the market is set to see significant growth and more mainstream acceptance in the coming years. As a merchant or business owner, now is the time to consider implementing cryptocurrency into your operations. Here are some key steps you can follow:
- Choose a Reliable Payment Processing Solution: Prick a payment processor that offers crypto integration services, has a good track record, and aligns with your business needs and goals. There are a number of convenient options, including B2BinPay, BitPay and Coingate, and others.
- Communicate With Customers: Inform your customers about the option to pay with cryptocurrencies and educate them on how it works.
- Stay Updated on Regulations: Keep up-to-date with new regulations or guidelines regarding cryptocurrency payments in your region or industry. Stay compliant with regulatory requirements to avoid penalties or legal issues.
Closing Thoughts
The approval of Bitcoin and Ethereum ETFs is a monumental achievement for the digital currency industry and sets the stage for further growth and adoption. It presents a unique opportunity for crypto-enabled merchants to capitalise on the growing demand for virtual currency payments and position their businesses for long-term success.
