The SEC Approves Spot Bitcoin ETFs After a Thoroughly Embarrassing Hacking Incident That Has Unleashed Calls for Congressional Involvement

Veloz Lamma

The SEC Approves Spot Bitcoin ETFs After a Thoroughly Embarrassing Hacking Incident That Has Unleashed Calls for Congressional Involvement

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

After its anti-crypto stance failed to withstand scrutiny in courts, forcing the apex US financial regulator to resort to a hefty dose of inertia – more appropriately described as dragging one’s feet – presumably in a last-ditch effort to create as many legally tenable hurdles as possible, the SEC has finally approved some of the first spot Bitcoin ETFs for trading on eligible American exchanges. This much-expected capitulation of sorts, however, has been overshadowed by yesterday’s dramatic events, replete with a Hollywood-like caricature hacking incident.

To wit, the SEC has now officially approved all outstanding applications for spot Bitcoin ETFs. Trading in these investment vehicles is now expected to commence on Thursday.

As we noted in a dedicated post on Tuesday, an unauthorized third party was able to gain access to the SEC’s X account for a brief moment to declare that the apex US financial watchdog had approved spot Bitcoin ETFs for listing on all eligible exchanges. Just moments thereafter, the SEC’s chair Gary Gensler clarified that no such approval had been accorded as yet.

A formal investigation by X then revealed that the unauthorized party was able to take control of the SEC’s account via the associated phone number. To make matters worse, the SEC’s official X account lacked the two-factor authentication that would have rendered such a feat quite difficult.

In the online roasting that followed, people were quick to identify the SEC’s apparent lack of willingness to follow its own advice regarding basic security features like two-factor authentication.

Of course, given the grave ramifications, at least two US Senators – J.D. Vance and Thom Tillis – have now called on Gensler to provide a formal explanation.

Meanwhile, as we detailed in another related post, Wall Street has entered into a full-fledged price war mode over these spot Bitcoin ETFs. Today, the investment titan BlackRock cut its fees to just 0.25 percent. What’s even more shocking, BlackRock will now charge just 0.12 percent in annual fees until it earns $5 billion in revenue. According to most analysts, the expense ratio on these ETFs, given the custody costs involved, is likely in the range of mid-teen percent. Moreover, the ETF industry generally does not raise its fees. This means that we are about to witness a classic dog-eat-dog scenario, and only the fittest will survive the oncoming onslaught.

For the benefit of those confused over all of the brouhaha surrounding the launch of these spot Bitcoin ETFs, do note that Bitcoin’s futures-based ETFs suffer from material underperformance since the contracts for the months ahead are usually priced at a premium to the spot price in what is known as contango, leading to progressively expensive roll-overs as the front-month contract expires and the next one takes its place. Spot Bitcoin ETFs, on the other hand, sidestep this major bottleneck entirely, leading to elevated investment inflow expectations.

Wealth managers in the US currently manage assets worth around $48 trillion. If just 1 percent of these assets are redeployed within the Bitcoin ecosystem courtesy of the upcoming spot ETFs, it would result in an investment inflow of nearly $500 billion! For context, Bitcoin’s entire market capitalization is just around $900 billion at the moment.

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