Bitcoin Spot ETF: Status Quo on SEC Applications

Dr. Cam-Duc Au talks about the new introduction of Bitcoin Spot ETFs and why the primarily rejected Exchange Traded Fund might be approved in the future. Evaluating on the risks connected to cryptocurrency but also the opportunities it holds within, Dr. Au sheds light upon the complex, intangible and decentralised construct that is known as Bitcoin.
20. Juli 2023

What is a Bitcoin Spot ETF?

Bitcoin is currently back in the headlines in connection with the introduction of so-called Bitcoin Spot ETFs. Such an Exchange Traded Fund is an investment fund that aims to offer investors an opportunity to invest in Bitcoin without having to buy the digital currency directly and keep it in a wallet [1,2]. Unlike traditional ETFs, which typically invest in stocks or bonds, a Bitcoin Spot ETF is designed to replicate the price and performance of Bitcoin. The term „spot“ refers to the current market price of the digital currency. A bitcoin spot ETF intends to track the value of a bitcoin directly, rather than using derivative financial instruments as would be the case with bitcoin futures or options. A bitcoin futures ETF has already been approved in 2021. A Bitcoin Spot ETF owns actual Bitcoin and they are managed on behalf of the investors. The purpose is to provide investors with easy and regulated access to the Bitcoin market without having to buy Bitcoin themselves, store it or take care of safekeeping. Investors can buy and sell shares in a Bitcoin Spot ETF, similar to conventional ETFs, and thus participate in a possible performance without having to consider the technical or security challenges of direct Bitcoin ownership, which in particular involves the custody of private keys concerned arrived. ETF applications, submitted by Blackrock and Fidelity, for example, have now been rejected by the American supervisory authority „Securities and Exchange Commission“ (SEC). [3,4,5,6]

What is Bitcoin?

Bitcoin is a digital or virtual currency that was created in 2009 by an anonymous person or group of people using the pseudonym Satoshi Nakamoto. It is the first and most well-known cryptocurrency, operating on a decentralized network, the blockchain. At its core, Bitcoin is a form of digital money that allows users to send and receive payments directly, peer-to-peer, without the need for intermediaries such as banks or payment processors. Transactions are recorded on a public ledger, which is maintained by a network of computers (nodes) spread across the globe. Bitcoin is based on cryptographic principles, using advanced algorithms to secure transactions and control the creation of new units. The process by which new bitcoins are generated is called mining. Miners use powerful computers to solve complex mathematical problems, and when they succeed, they are rewarded with newly created bitcoins [7].

One of the key features of Bitcoin is its decentralized nature. It is not controlled by any central authority or government, which means it is not subject to the regulations or policies of a particular country. Instead, the network is governed by a consensus mechanism where participants agree on the validity of transactions and the overall state of the blockchain.

Why is Bitcoin interesting for investors?

The hype around Bitcoin is often referred to its investment opportunities. In the following, some key facts are stated [8, 9]:

  1. High possible returns: Bitcoin has shown significant price appreciation since its inception, which has attracted investors seeking potentially high returns. Some individuals have witnessed substantial profits by buying Bitcoin at lower prices and selling it at higher prices during periods of price volatility.
  2. Limited Supply: Bitcoin has a capped supply of 21 million coins. This limited supply, combined with increasing global demand, has led some investors to view Bitcoin as a store of value (or “digital gold”) that may hold its worth or increase over time, particularly as traditional fiat currencies face concerns about inflation or stagflation.
  3. Decentralization: Bitcoin operates on a decentralized network, independent of any central authority or government control (known as of now). This feature can be appealing to investors who value financial systems that are not subject to political or regulatory interference.
  4. Portfolio diversification: Bitcoin states an alternative asset class, crypto or digital assets, that can diversify an investment portfolio. Traditional portfolios often consist of stocks, bonds, and other conventional assets. Adding Bitcoin to a diversified portfolio may potentially reduce overall risk by providing exposure to a different asset class.

Besides the stated investment opportunities, Bitcoin and other cryptocurrencies are subject to manifold investment risks, like conventional investments. In the following, some exemplary facts are given [8,9]:

  1. High Volatility: Bitcoin’s price has exhibited significant volatility throughout its history, which can lead to substantial gains or losses in a short period. The high volatility makes Bitcoin a relatively risky investment and requires careful consideration and risk management.
  2. Regulatory uncertainty: Regulatory frameworks surrounding cryptocurrencies are still evolving in many jurisdictions. Regulatory changes or restrictions can impact the adoption and value of Bitcoin, making it important for investors to stay informed about the legal and regulatory landscape.
  3. Lack of traditional valuation metrics: Bitcoin does not have traditional valuation metrics like earnings or dividends, making it challenging to determine its intrinsic value. The price of Bitcoin is primarily driven by market demand and sentiment, which can be influenced by various factors, including media coverage, investor sentiment, and macroeconomic events.
  4. Technical complexity: Investing in Bitcoin requires a certain level of understanding of blockchain technology, digital wallets, and security practices. Investors need to educate themselves about the risks, potential rewards, and best practices associated with owning and storing cryptocurrencies.

Regulation: Curse or Blessing?

The Securities and Exchange Commission (SEC) is an independent US agency responsible for regulating and supervising the securities industry. Its main task is, among other things, to ensure the protection of investors and to ensure the integrity of the markets. The SEC works closely with other US regulators such as the Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA) to ensure the integrity of the financial system. Established by the Securities Exchange Act in 1934, the SEC has extensive powers to achieve its objectives. [10]

One of the main tasks includes investor protection, primarily to promote transparency and fairness in the markets, which is now reflected in the rejection of the Bitcoin Spot ETF applications. The main criticism from the SEC sometimes includes the lack of transparency with regard to the choice of crypto exchange, which was not specified in the filings. Blackrock and Co. gave no insight into where the bitcoins should be bought in the future. Furthermore, no details could be found regarding the joint monitoring between the selected exchanges and the Spot Exchange. Without this information on monitoring agreements, no control measures can be taken, for example to understand the actual purchase of bitcoins and to ensure the transaction. The SEC’s rejection is not final but leaves room for re-filing after thorough revision. The American asset managers can therefore address the outstanding issues and make specifications in the applications [11].

Conclusion: Applications likely to be granted

If you look at the global developments relating to digital assets, it becomes evident that not only FinTechs, but also established financial companies in particular can present a strategic agenda for blockchain-based assets. The fact that the industry leader Blackrock, as the world’s largest asset manager, would like to make a corresponding Bitcoin ETF offer shows the great importance of the digital currency and confirms its right to exist. An approved Bitcoin Spot ETF would send a positive signal to the crypto community and give renewed impetus to the financial markets. It could also be the starting signal for other major cryptocurrencies into the ETF business (e.g., Ether, ADA, XRP). From an investor’s point of view, the preliminary rejection of the Bitcoin Spot ETF applications can be perceived as good news, since the open questions about transparency must be rightly criticized and revised. It now remains to be seen how American asset managers will react to the criticisms. However, if you look at Blackrock’s success rate with ETF applications so far, nothing should stand in the way of a vote in favor of a Bitcoin Spot ETF.


[1] Wirtschaftswoche (2023): Bitcoin startet oberhalb der 30.000-Dollar-Marke in die neue Woche, accessed on 10th July 2023,

[2] Business Insider Deutschland (2023): Bitcoin ETF: Neue Runde, neues Glück – so reagieren die Vermögensverwalter auf die SEC-Entscheidung, accessed on 10th July 2023,

[3] Bloomberg (2023): BlackRock’s Bitcoin ETF Application Is Refiled by Nasdaq to SEC, accssed on 10th July 2023,

[4] Reuters (2023): Fidelity spot bitcoin ETF application refiled with U.S. SEC, accessed on 10th July 2023,

[5] Forbes (2023): SEC’s Feedback On Bitcoin Spot ETFs Is More Speed Bump Than Stop Sign, accessed on 10th July 2023,

[6] Crypto Valley Journal (2023): Fidelity prepares for renewed spot bitcoin ETF application, accessed on 10th July 2023,

[7] (2023): Bitcoin: A Peer-to-Peer Electronic Cash System, accessed on 10th July 2023,

[8] Forbes Advisor (2023): Advantages and Disadvantages of Cryptocurrency in 2023, accessed on 10th July 2023,

[9] Fidelity (2023): Risks and benefits of cryptocurrency, accessed on 10th July 2023,

[10] Securities Exchange Commission (2023): What we do, accessed on 10th July 2023,

[11] Bitcoin Magazine (2023): Report: SEC Demand Clarity and Comprehensive Information For Spot Bitcoin ETF Filings, accessed on 10th July

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