FX168 Financial News Agency (Asia Pacific) reported that the U.S. Securities and Exchange Commission (SEC) issued a blockbuster announcement, marking Bitcoin (BTC) and Ethereum (ETH) as highly speculative, and warned that there are risks in investing in Bitcoin and Ethereum ETPs, urging investors to consider potential issues such as price volatility, fraud and lack of supervision. The Spot Bitcoin ETF (IBIT) under BlackRock, a Wall Street asset management giant that manages $10 trillion, reported a third day of outflows, with an outflow of $9 million on Monday (September 9).
According to the SEC's Office of Investor Education and Advocacy's announcement on Monday, investors are urged to consider the risks associated with Bitcoin and Ethereum exchange-traded products (ETPs), including exchange-traded funds (ETFs).
Source: SEC
The SEC noted: "Investors should understand that Bitcoin and Ethereum are highly speculative investments, including exposure obtained through ETPs, and investors should consider the volatility of Bitcoin and Ethereum prices."
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The regulator explained that Bitcoin and Ethereum are digital assets transferred through blockchain technology, and their value fluctuates significantly. Two types of ETPs provide exposure to these assets: Bitcoin and Ethereum futures ETPs, which hold futures contracts, and spot ETPs, which hold the assets directly.
Source: SEC
The SEC warns that spot Bitcoin and Ethereum ETPs are subject to risks such as price volatility and potential fraud, especially in unregulated markets. The securities regulator stressed that “spot Bitcoin and Ethereum ETPs are not registered as investment companies under the Investment Company Act of 1940.”
As such, they lack the asset custody and valuation protections that apply to ETFs and mutual funds.
The SEC also outlined potential risks of spot ETPs, such as price deviations between ETP shares and the underlying crypto assets, lack of regulatory oversight, and sponsorship fees that reduce the value of shares.
“Spot Bitcoin or Ethereum ETPs may have unique characteristics and a high degree of risk relative to other investments,” the regulator stressed, advising that before investing, it is important to consider how any investment fits into an overall investment plan.
The SEC stressed the importance of reviewing disclosure documents to fully understand the risks involved.
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On Monday, BlackRock's IBIT saw net outflows of about $9 million, the third time it has seen outflows since its launch in January.
Source: Farside Investors
However, according to Farside Investors data, net inflows into U.S. spot Bitcoin ETFs turned positive, reversing the outflow trend of the past eight trading days.
Before IBIT's losses at the beginning of the week, it saw a second outflow on August 29, followed by a brief period of zero outflows in early September.
The BlackRock fund has attracted consistent inflows overall, with a total of nearly $21 billion in cumulative funds and holdings of more than 350,000 Bitcoins. IBIT reported its first outflow of $37 million on May 1, which coincided with the largest single-day outflow of U.S. spot Bitcoin ETFs.
Although BlackRock still recorded a "third day of outflows", overall, U.S. spot Bitcoin ETFs saw net inflows of more than $28 million at the end of Monday.
Bitwise CIO Matt Hougan said that investment advisors are integrating spot Bitcoin ETFs into their portfolios faster than any other ETF in history, responding to recent criticism from researcher Jim Bianco, who noted that only 10% of the AUM of spot Bitcoin ETFs traded in the United States comes from advisors.
Analyzing BlackRock’s iShares Bitcoin Trust (IBIT), Hogan noted that $1.45 billion in net inflows from advisors makes IBIT the second-fastest growing ETF among the more than 300 funds launched on Wall Street by 2024.
Bloomberg ETF analyst Eric Balchunas made a similar point to Hougan, saying that the net flows from advisor allocations do represent more organic inflows than any other ETF launched this year. He added that after just two 13F reporting periods, there are now more than 1,000 institutions holding Bitcoin ETFs, a record he called “unprecedented.”
The analyst expects institutional holdings of IBIT shares to double next year.
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