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New Bitcoin ETF Trading Drives Excitement for Marshall Experts

SEC rules changes allow firms to trade Bitcoin ETFs, igniting newfound accessibility, legitimacy, and record-high trading.

by: Alexander Bernard

01.23.24

[iStock Photo]

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Eric Chung
- Research Program Director (Non-Clinical)
Nikhil Bhatia
- Adjunct Professor of Finance and Business Economics
Jan van Eck
Cynthia van Eck

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MARSHALL MONTHLY BRINGS YOU ESSENTIAL NEWS AND EVENTS FROM FACULTY, STUDENTS, AND ALUMNI.

It’s OFFICIAL: Bitcoin is on the stock exchange.

On January 10, the U.S. Securities and Exchange Commission (SEC) approved new regulations that allow investors to buy and sell bitcoin as they do in stocks and mutual funds in the form of Bitcoin exchange-traded funds (ETFs). Whereas before bitcoin was primarily purchased and stored on crypto exchanges like Coinbase, the ETFs allow investors to purchase shares in bitcoin through financial wrappers from firms that back the product’s credibility.

The SEC’s decision is a landmark moment for the cryptocurrency and its proponents. Anticipated by financial specialists for nearly a decade, the move has produced ripples throughout world markets, firm offices, investors’ bank accounts, and even here at USC Marshall and the VAN ECK DIGITAL ASSETS INITIATIVE (VEDA), where some of the nation’s top bitcoin experts are weighing in on the new financial reality.

“The introduction of a Bitcoin ETF marks a pivotal moment,” said ANTHONY BORQUEZ, professor of the practice in entrepreneurship and co-director of VEDA. “It symbolizes the transition of cryptocurrencies from niche speculative assets to legitimate, investable commodities, thus reshaping the tapestry of investment options for both retail and institutional investors.”

BEFORE, investors could buy into futures-based Bitcoin ETFs. Now, firms are required to actually purchase the currency from the exchanges. The move adds a layer of security, while also making bitcoin more broadly available than ever before, according to NIK BHATIA, adjunct professor of finance and business economics and author of Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies.

“The ETF is basically a modern-day version of a 100-year-old mutual fund but is equally as regulated and accessible to everybody with a brokerage account,” Bhatia explained.

The SEC decision didn’t surprise Marshall’s students, thanks in part to VEDA. Established in 2022, the initiative strives to remain on the digital cutting edge, serving as a hub for education and research into areas like blockchain and bitcoin. ERIC CHUNG, managing director of VEDA, explained that revolutionary business transformations are just business as usual for him and his team.

“Nothing changes on a day-to-day basis for what VEDA’s doing,” Chung said. “We expected [this news]. You could say it was kind of priced into our approach to our long-term goals.”

Understanding that fluency in digital assets just might shape the future of finance prompted the founding of VEDA — an initiative that wouldn’t exist if not for a transformative gift from Cynthia and Jan van Eck, CEO of the investment management firm VanEck. Through VEDA, Marshall aims to lead in this fast-moving sector, just as van Eck’s eponymous firm has led in the markets.

VanEck is one of the 11 asset managers the SEC approved to list Spot Bitcoin ETFs. Other firms include Grayscale, BlackRock, Fidelity, and ARK, among others. On January 12, these firms’ ETFs became available for trade.

Kyle DaCruz, director of digital assets product at VanEck, explained that the firm prepared for this day for years.

“It goes back to 2017, when Jan (van Eck) and the VanEck team identified that bitcoin could be a complement to gold,” DaCruz said. “If you look back at our history, part of our ethos is identifying forward-looking markets before they become in vogue.”

DaCruz referred to VanEck’s 1968 INVESTMENT IN GOLD right before the price of the commodity skyrocketed in the 1970s. DaCruz, like many other experts, likened bitcoin to “digital gold,” drawing comparisons between the two products’ limited supply and inherent immutability. Recognizing these connections, the VanEck firm pushed forward into the digital unknown, even when the technology wasn’t yet widely accepted.

Now it can just be another alternative investment that my aunt or uncle or parents or siblings can get exposure to via their retirement accounts, for example.

— Eric Chung

Managing Director, VEDA

“We were the first ETF issuer to file for a Bitcoin-linked ETF back in 2017,” DaCruz said. “And then, over the years, we continued to file for various bitcoin-linked products until we were able to bring a Bitcoin futures ETF to market in 2021.”

For Chung and his VEDA colleagues, this moment represents a transition for bitcoin from a currency rooted in abstract financial philosophy to a legitimate, accessible investment option for regular people.

“Now it can just be another alternative investment that my aunt or uncle or parents or siblings can get exposure to via their retirement accounts, for example,” Chung said. “It caters to a much larger group of people who want exposure.”

Considering the inherent volatility of cryptocurrency, including bitcoin, some skeptics might’ve thought it risky to found an entire initiative around its study. But the risk has paid off, in part because VEDA always has both eyes firmly set on the future.

“That’s part of VEDA’s job…to accelerate the level of thinking that our students and also people affiliated with USC can do,” Chung said.

In the week following the SEC’s decision, Spot Bitcoin ETFs exploded for over $10 BILLION in trading volumes. Compare that to the ETFs that opened in 2023, which combined for $450 million within the same time period this year. Altogether, bitcoin blew out the 2023 class by a 20 to 1 margin.

DaCruz believes this is just the tip of the iceberg. As more advisors, platforms, and investors gain access to the product, trading volumes may reach historic heights, possibly in the trillions of dollars. There’s no telling where the market (or the country at-large) will be in a generation or two.

“At some point, there’s an inflection point where this crazy technology that seems so far off and perhaps doesn’t have the use cases initially could very quickly become a part of our daily lives,” DaCruz said. “We and Jan have identified that these technologies can have a large impact on — not just finance — but on a lot of verticals and a lot of business. We as a firm feel we’re at the precipice of something really exciting.”

Van Eck is always looking toward the future, just as his initiative, VEDA, does at Marshall. The pioneering will continue for VEDA on March 20 when they host their annual Blockchain Conference, together with Blockchain@USC, one of the nation's top blockchain student organizations. Until then, the trickle down effects of the news will be felt for years to come, as the often volatile product grows in the public consciousness.

“Bitcoin is a world-changing technology giving financial empowerment to every single person on the planet with an internet connection,” Bhatia said. “It is an open network for money that has never existed before.”

Who can say what tomorrow will bring for bitcoin, its investors, and the firms that now sell the former to the latter? Some experts claim this is just another step on the long winding road to normalize crypto-spending. Perhaps, but for Chung the effects are as micro as they are macro.

“With the announcement, there was a sense of relief that my job is real,” Chung laughed. “On a more serious note, it’s great that the industry is finally seeing some signs of legitimacy being applied from traditional finance.”