Bitcoin is now making its way into the heart of the financial establishment. The latest development? Exchange-traded funds (ETFs) are designed to track Bitcoin’s price. The world’s largest cryptocurrency experienced a 28% surge in its value during October. It is a clear indication of investors betting on the approval of spot Bitcoin ETF by US regulators. However, Bitcoin aims to secure a place within mainstream financial markets. Therefore, the looming question is whether these ETFs will strike gold.
The Great Expectations: Predictions and Potential
The anticipation surrounding spot Bitcoin ETFs has generated a whirlwind of predictions. Market players have estimated the potential cash influx into these funds, offering a wide array of figures. Those range from a modest $3 billion on their first day to a staggering $55 billion over a span of five years. Besides, the option to buy Bitcoin spreads interest in the market.
Parallels with the Gold Market
Some analysts draw parallels with the gold market, highlighting how the approval of spot ETFs transformed the way gold is traded and invested. Dave Mazza, the Chief Strategy Officer at ETF provider Roundhill Investments, predicts that the initial spot Bitcoin ETFs to hit the market could trigger a “wave of buying.” This sentiment echoes the launch of the first-ever gold ETF in the US back in 2006 and the introduction of the Bitcoin futures ETF in 2021.
Big Players Enter the Fray
Both mainstream investment giants like BlackRock and Fidelity and crypto-focused firms, such as Grayscale, have filed applications for spot Bitcoin ETFs. The US Securities and Exchange Commission (SEC) is now examining between eight to ten filings for new spot Bitcoin products. However, the regulator hasn’t disclosed the timing of its decisions.
Not Everyone’s Enthusiastic
Despite the buzz around spot Bitcoin ETFs, there are still traditional investors who remain cautious about cryptocurrencies. George Gagliardi, an investment advisor at Coromandel Wealth Management, expresses his scepticism. He firmly states, “Not a penny of my client’s money will find its way into these misbegotten so-called investments.” He believes cryptocurrencies have “no underlying intrinsic value.”
Fueling Bitcoin Profit
Regardless of the sceptics, the prospect of an ETF that offers investors direct exposure to Bitcoin has significantly boosted the cryptocurrency’s price. In recent weeks, Bitcoin reached $35,198, marking its highest level since May 2022.
The Enigma of Predicting Bitcoin Bull Run
Estimates for the potential demand of spot Bitcoin ETFs vary due to factors such as the size of the gold ETF market, demand for existing products, and the unique characteristics of Bitcoin markets. The inherent opacity of Bitcoin markets, driven primarily by investor sentiment, further complicates predictions.
Bitcoin Revival: NYDIG’s Estimate
US crypto firm NYDIG offers one perspective, estimating that demand for a spot Bitcoin ETF could reach approximately $30 billion. Their calculation entails comparing the sizes of the gold and Bitcoin ETF markets, which amount to $210 billion and $28.8 billion, respectively, while also accounting for their relative volatility.
Complex Terrain
The introduction of spot Bitcoin ETF adds complexity to the already competitive ETF market. Their performance hinges on how well they attract investors and navigate the volatility of the crypto market. While the long-term impact of these ETFs remains uncertain, they represent a significant step in Bitcoin’s journey towards mainstream acceptance. As the crypto market eagerly awaits the verdict on spot Bitcoin ETFs, the cryptocurrency stands at a crossroads, with the potential to make its mark on traditional finance or face scepticism from more conventional investors. Only time will tell if these ETFs will indeed become the gold standard for Bitcoin.
