The U.S. Securities and Exchange Commission (SEC) has approved the first-ever exchange-traded funds (ETFs) combining Bitcoin and Ethereum, marking a significant milestone in the integration of cryptocurrency with traditional finance. This approval grants institutional investors easier access to the two largest digital assets through spot-based investment vehicles.
Hashdex and Franklin Templeton are the pioneers behind these ETFs, which include the Franklin Templeton Crypto Index ETF and the Hashdex Nasdaq Crypto Index US ETF. Franklin Templeton’s approval came quicker than anticipated, aligning with commodity-based trust standards and supported by Nasdaq and Cboe BZX rule adjustments. Initially, Hashdex’s ETF will focus solely on Bitcoin and Ethereum, but future expansions may include assets like XRP.
The SEC’s decision follows months of delays, including two postponements of Hashdex’s filing from June 2023. Analysts speculate that anticipated leadership changes within the SEC influenced the timing of these approvals. Launches are expected in January 2024, with market-cap-weighted portfolios allocating approximately 80% to Bitcoin and 20% to Ethereum. ETF analyst Eric Balchunas emphasized the significance of this development for both Franklin Templeton and Hashdex.
Market Volatility: Liquidation On The High Side
While the approval is a positive step, crypto markets remain volatile. Bitcoin recently fell over 8%, dropping from $105,000 to below $96,000, triggering more than $1 billion in liquidations. Despite this, the ETFs reflect increasing mainstream acceptance and regulatory progress for digital assets.
Litecoin ETFs may be next in line for approval due to their alignment with regulatory standards. However, demand from institutional investors might remain limited. ETFs for other cryptocurrencies, such as Solana and XRP, may face additional delays due to regulatory uncertainties.
The SEC’s changing stance on cryptocurrency appears tied to shifts in leadership. Commissioner Caroline Crenshaw, a staunch supporter of SEC Chair Gary Gensler’s anti-crypto agenda, will leave in January 2024. With Paul Atkins stepping into a leadership role, the SEC may adopt a more crypto-friendly outlook.
This landmark approval underscores the growing convergence of traditional finance and cryptocurrency, paving the way for broader adoption despite market volatility and regulatory challenges. The dual Bitcoin-Ethereum ETFs represent a significant step toward legitimizing digital assets in mainstream investment.
