Coinbase Extension: World Of Crypto

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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.

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.