Momentous approvals: spot ETFs to usher in crypto's next chapter and diversified long-term growth
This article was updated on July 22, 2024 following the SEC decision to approve 9 spot ETH ETFs.
TL;DR: Spot crypto ETFs have arrived in the US — reaffirming that the future of money is here. The SEC’s approval of 9 spot ETH ETFs in July is another important milestone for the expansion of the crypto economy. As the launch and success of spot bitcoin ETFs demonstrated, spot crypto ETFs will continue to unlock diversified pools of new investors to spur long-term growth and product innovation. At Coinbase, we’ve focused on building the most trusted products in crypto to prepare for moments like this that expand access to crypto and help drive an updated financial system.
Today, the SEC approved 9 spot ETH ETF applications.
Following the approval of bitcoin ETFs this January, spot ETH ETF approval marks another important milestone for crypto, reflecting continued innovation and a maturing regulatory landscape around crypto assets.
Broadly, ETFs provide investors access to spot crypto in a familiar, regulated product. In a short time, spot bitcoin ETFs have shown that access is critical to ushering in a new wave of crypto adoption. To date, spot bitcoin ETFs have unlocked demand and led to $17 billion in net inflows — becoming the fastest-growing ETFs of all time in the process.
For investors, spot ETH ETFs provide access to a differentiated crypto asset with unique return characteristics. The Ethereum ecosystem is both robust, with 15+ million monthly active addresses, and expanding rapidly, with 300% growth in smart contracts deployed in 2023. By increasing usage of Ethereum, spot ETH ETF investors will help advance ether’s utility and contribute to the development of the overall crypto ecosystem.
Coinbase is proud to be a trusted partner and custodian powering 9 of 11 spot bitcoin ETFs and 8 of the 9 newly approved ETH ETFs. With a track record of 12+ years safekeeping digital assets at scale, we have developed the leading institutional-grade custody solution and will continue to maintain our company-wide approach to being the safest, easiest, and most trusted bridge to the cryptoeconomy.
Original article from January 10, 2024 below:
Today, the SEC approved 11 spot bitcoin ETF applications from both traditional financial and crypto-forward financial providers. Approval of spot ether ETF applications could soon follow. Not only will these ETFs give investors access to spot crypto in a familiar, regulated product – they will also usher in a new wave of crypto adoption, powered by the world's largest asset managers.
Play
Excitement for spot bitcoin ETFs has been building among institutional and retail investors in anticipation of approvals. Even before today’s news, crypto’s role as an asset class was irrefutable. More than 5% of the world – about 425 million people – own crypto. In the US, 52 million Americans do. Today’s approval is the latest step in a global shift toward digital assets that is helping drive updates to the financial system itself.
Crypto is here to stay, and spot bitcoin ETFs will further expand crypto adoption.
Introducing a diversified pool of investors
US households hold more than $154 trillion of wealth, of which more than one-third, approximately $58 trillion, is managed by financial advisors, banks, and broker-dealers. Until today, most of that pool of capital has lacked a direct path to invest in spot crypto, despite demand by investors including financial advisors.
According to the Digital Assets Council of Financial Professionals (DACFP), nearly half of US financial advisors own bitcoin personally, yet only 12% recommend it to their clients – the main reason being lack of an ETF.
Bearing the trust of the world’s largest asset managers
As bitcoin has evolved over its 15 years of existence, traditional financial institutions have embraced crypto-based innovations from blockchain technology to tokenization. Spot ETFs are large asset managers’ biggest endorsement of crypto yet.
The 11 institutions that were granted approval to provide spot bitcoin ETFs are entrusted with more than $16 trillion in assets. They see a variety of ways that crypto can benefit their clients, from serving as a safe haven when turmoil hits traditional financial markets, to providing portfolio diversification, to countering the effects of expansionary fiscal and monetary policy.
By giving investors a convenient and familiar way to access spot crypto, ETFs will make crypto available to millions of new investors and further cement it as a mainstream asset.
Spurring innovation and growing the pie
Spot ETFs will help catalyze further growth and innovation and expand the size and breadth of crypto markets. ETF markets don’t operate in isolation. Every time a spot ETF is bought or sold, market makers need to transact in the underlying asset, meaning spot bitcoin ETFs will increase trading and liquidity in bitcoin itself. With increased liquidity comes increased attractiveness to investors, which can generate even more liquidity. It’s a virtuous circle.
The prevalence of ETFs in client portfolios should help inspire innovative new financial products, such as lending and derivatives, that can use regulated ETFs as building blocks.
Validating our approach
In crypto, we often talk about “gradually, then suddenly” moments. Coinbase is squarely focused on the “gradually” – knowing that the “suddenly” will come. For 12+ years, we’ve gradually been building the most trusted, easiest-to-use products in crypto. “Suddenly,” we are the custodian of choice for many of the approved spot bitcoin ETFs. We’re proud to have been selected by the world’s leading traditional and crypto-forward financial institutions to support the growth of their spot bitcoin ETFs.
In a world that’s used to moving at the speed of crypto, it’s important to remember that some of these efforts will take time to bear fruit. Good things often do. Spot bitcoin ETFs represent the culmination of years of effort from a broad cross section of industry players leveraging new technology and infrastructure. The impacts on markets and the financial system will take time to materialize. But we have no doubt that, in a few years’ time, January 10, 2024 will come to be viewed as both a pivotal moment in the evolution of Coinbase and as the start of a giant leap forward for the cryptoeconomy.
We’re excited about this next phase of growth and actively building for it. Crypto and Coinbase are only just getting started.
Image Footnotes:
CoinMarketCap (July 22, 2024)
SmashFi Bitcoin ETF Fund Flows (July 22, 2024)
Coinbase
Statista (calculated from June 2023 to June 2024)
The Block (for the month of June 2024)
Disclaimer
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About Greg Tusar and Brett Tejpaul
Greg Tusar serves as VP, Institutional Product for Coinbase, leading the firm’s efforts in areas like Prime Brokerage and Custody, Financing, and Coinbase Exchange. Greg joined Coinbase when the company acquired Tagomi Systems, where he was co-founder and CTO. Before Tagomi, Greg was Head of Global Execution Services and Platforms at KCG Holdings, and spent 13 years at Goldman Sachs, most recently as a Partner and global head of the firm’s equities electronic trading business.
Brett Tejpaul serves as Head of Coinbase Institutional, where he is in charge of expanding Coinbase’s institutional client base, introducing new features and services that institutional investors expect, and continuing to educate the institutional community about crypto. Prior to Coinbase, Brett served as the Global Head of Sales at Barclays and held leadership roles at JP Morgan. Brett received his Bachelor of Science degree from Boston College.
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