The new Exchange Traded Funds have been good for the price of Bitcoin. After a multi-year legal fight, ETF providers prevailed in 2023. A federal appeals court said the Securities and Exchange Commission (SEC) didn’t have a good reason to prohibit proposed ETFs that owned Bitcoin. A new development could fuel further gains, notes Bob Carlson, editor of Retirement Watch.

The SEC had already permitted ETFs that own Bitcoin futures contracts. Then on Jan. 11, the SEC sanctioned 10 ETFs for roll out that quickly attracted billions of dollars. Investor interest lagged briefly after the first week of the roll out. But the lag didn’t last.

Bitcoin ETFs are proving to be a successful new class of funds. BlackRock’s (BLK) Bitcoin ETF reached $10 billion in assets faster than any other ETF. The Bitcoin ETFs in aggregate recently passed $50 billion in assets. It is estimated that about 4% of the total Bitcoin supply now is in the ETFs.

A graph showing a line  Description automatically generated with medium confidence
Source: Yahoo Finance

The flow of money into the ETFs boosted the price of Bitcoin, which has a strict supply limit. Bitcoin ended 2023 at around $40,000. It hit a new record of over $69,000 in March, then quickly tumbled almost 14% to less than $60,000 the same day.

But the upward move resumed. Bitcoin topped $72,800 intraday on Tuesday and recently closed at just under $71,500.

The new ETFs aren’t the only reason for the price surge. Bitcoin generally has increased with the stock indexes, and stocks have been doing well since the end of October. Bitcoin tends to rally when other speculative assets are rising, and this time is no different. Gold, small company stocks and other assets have had substantial price increases.

The major brokerage and investment management firms still haven’t approved the Bitcoin ETFs for the accounts they supervise. They’re studying the issue. Most are likely to approve the ETFs at some point. When that happens, another price surge is likely.

Subscribe to Retirement Watch here…