The era of cryptocurrency ETFs begins | Investment opportunities and challenges of Bitcoin spot ETFs in Taiwan

U.S. Approves Bitcoin Spot ETF—A Turning Point in Cryptocurrency Legitimization

After years of regulatory battles, the U.S. Securities and Exchange Commission (SEC) made a milestone decision on January 11, 2024: approving the listing of 11 Bitcoin spot ETFs for the first time. This moment marks the official entry of virtual currencies into the traditional financial system from the fringe, transforming the entire market landscape.

According to regulatory data, the total assets of the first 11 approved Bitcoin spot ETFs reach up to $1.7 trillion, managed by top global asset management firms such as BlackRock, Fidelity, and Invesco. This not only signifies Bitcoin’s legal recognition but also indicates that global institutional capital is about to flood into the cryptocurrency space.

What is a Bitcoin Spot ETF? An Operational Breakdown

A Bitcoin spot ETF is a fund product traded on traditional stock markets. Investors can buy and sell ETF shares directly on stock exchanges just like stocks, without needing to interact with blockchain technology or open a crypto wallet.

Fund management companies raise funds to purchase and custody actual Bitcoin assets, with the ETF’s net asset value closely tracking the spot Bitcoin price. Through creation and redemption mechanisms, the ETF’s price remains tightly aligned with the underlying asset value, ensuring investors get the most authentic Bitcoin exposure.

This innovative product solves key pain points for traditional investors: it allows participation in cryptocurrency gains while avoiding the technical risks and security concerns associated with self-custody of digital assets.

Overview of the First 11 Approved Bitcoin Spot ETFs

Compared to previous futures-based ETFs, the management fees for spot ETFs have significantly decreased. Most new products initially offer zero commission promotions, with subsequent fees limited to 0.2%-0.5%, far lower than Grayscale’s early 2% or futures ETF near 1% fee levels.

Core Advantages of Investing in Bitcoin Spot ETFs

1. Lower Investment Threshold
Traditional crypto exchanges require investors to buy at least 0.01 Bitcoin, costing hundreds of dollars. Most spot ETF prices are below $100, with some products starting at just $50, greatly lowering the barrier to entry.

2. Solving Custody Challenges
Investors no longer need to manage private keys, worry about exchange risks, or face theft. Assets are managed by qualified fund companies, with a more robust regulatory framework.

3. Enhanced Trading Flexibility
Spot ETFs can be traded in real-time on stock markets, supporting day trading, with liquidity far superior to traditional futures contracts. Investors can enter and exit positions anytime without concerns about rollover risks or forced liquidation.

4. Institutional Compliance Pathways
Many financial institutions and pension funds, constrained by regulations, previously couldn’t invest directly in cryptocurrencies. The listing of Bitcoin spot ETFs opens compliant investment channels for these entities, potentially bringing in an incremental capital of $50 billion to $100 billion.

5. Regulatory Safeguards
ETF products must register with the SEC and undergo strict regulation, with funds held in segregated accounts, trading transparency, and effective systemic risk reduction.

Two Main Investment Routes for Taiwanese Investors

Path 1: Custodian-Agency Channel

Open a securities account with domestic brokerages (such as Cathay, Fubon, Yuanta, etc.), activate the agency trading function, and delegate domestic brokers to buy and sell US stocks or ETFs. The advantage is avoiding international remittance fees; the downside is higher transaction fees (ranging from 0.1% to 1%).

Path 2: Overseas Broker Account

Open accounts with foreign brokers like Firstrade, Interactive Brokers, or Charles Schwab, and conduct international remittances for direct trading. The advantage is lower fees and user-friendly interfaces; the downside involves exchange rate risks and cross-border tax issues.

Comprehensive Comparison: Bitcoin Spot ETF vs. Other Investment Methods

The three approaches differ significantly in suitable scenarios:

For conservative investors aiming for long-term holding, dollar-cost averaging, and stable returns, Bitcoin spot ETFs are the ideal choice. They feature low investment thresholds, transparent costs, manageable risks, and no need for technical crypto knowledge.

Active traders seeking short-term trading, swing operations, or flexible shorting may prefer crypto CFDs, which support two-way trading, high leverage, and no holding costs.

In-Depth Review: A Decade of Bitcoin ETF Applications

Chapter 1: From Gaming Assets to Financial Dilemmas

In early Bitcoin days, it was widely regarded as a virtual item in electronic games, with no connection to the real financial system. It wasn’t until 2010, when the world’s first Bitcoin trading platform launched, that a public pricing mechanism emerged.

However, these platforms lacked strict capital regulation and KYC procedures, quickly becoming hotbeds for money laundering and terrorist financing. Bitcoin’s anonymity, speculative price swings, and regulatory vacuum drew deep concern from governments worldwide. Many countries introduced controls, ranging from strict regulation to outright bans.

Chapter 2: Crypto Industry’s Compromise with Traditional Finance

Faced with pervasive regulatory pressure, the crypto community shifted strategy: instead of confrontation, they chose integration. Leaders began lobbying governments to redefine Bitcoin as a financial asset rather than a currency.

In 2013, Barry Silbert of SecondMarket saw an opportunity, convincing the firm to invest $3 million in Bitcoin, followed by launching a private fund. Silbert eventually founded Grayscale Investments, becoming a pioneer in crypto asset management.

Although Grayscale’s fund was successful in listing, it was an active fund and did not meet SEC’s passive ETF criteria. Multiple applications for ETF approval were rejected.

Chapter 3: Breakthroughs in Futures and the Final Victory of Spot

Recognizing the difficulty of directly applying for a spot ETF, the industry adopted a workaround: first applying for Bitcoin futures. Since futures are regulated under a much lower threshold than direct spot ETFs, this step succeeded in 2017. After futures launched, CFD platforms also quickly followed.

In 2021, the SEC approved the first Bitcoin futures ETF (BITO), paving the way for spot ETFs. Grayscale then reapplied for a spot ETF, which was imminent. However, in 2022, the crypto market faced a winter: FTX collapsed, scandals of fund theft emerged, and prices plummeted, shattering confidence. Grayscale withdrew its application proactively to avoid rejection and difficulty re-entering the market.

By 2023, market confidence gradually recovered. Global asset management giant BlackRock sensed the opportunity and submitted multiple Bitcoin spot ETF applications. Meanwhile, the world’s largest exchange Binance and founder Zhao Changpeng admitted to violating AML regulations, which accelerated regulatory compromise.

On January 11, 2024, the SEC finally approved 11 Bitcoin spot ETFs for listing, and Grayscale successfully converted its OTC products from futures to spot.

Market Outlook: The Chain Reaction of Institutional Capital Influx

Standard Chartered predicts that the launch of cryptocurrency ETFs will attract between $50 billion and $100 billion in institutional capital, enough to push Bitcoin prices to $200,000 by the end of 2025. For Taiwanese investors, this is both an opportunity to participate in global asset allocation and the best moment to understand the logic behind crypto ETF investments.

Whether through custodian-agency channels or overseas brokers, Taiwanese investors now have legitimate and convenient avenues to participate in this asset revolution. The key is to choose suitable tools and strategies based on individual risk tolerance and investment horizon.