“A Bitcoin ETF Could Soon Finally Launch, Opening the Doors to Mainstream Adoption. But what if it flops? Exploring the Potential Impact on the Cryptocurrency Market and Investor Sentiment.”
Investors have been eagerly anticipating the launch of a Bitcoin exchange-traded fund (ETF) for over a decade, and it seems that their wait might finally be coming to an end. The price of Bitcoin surged on Monday following reports that BlackRock, the world’s largest asset manager, was nearing approval from the U.S. Securities and Exchange Commission (SEC) for its Bitcoin ETF application. Analysts and experts in the crypto space believe that a crypto ETF could hit the market as early as January.
A Bitcoin ETF would track the price of Bitcoin, allowing investors to gain exposure to the cryptocurrency through shares, without the need for digital wallets or exchanges. This could potentially lead to a significant influx of capital into the Bitcoin market, as it removes the technical barriers that have deterred some investors.
However, not everyone is convinced that a Bitcoin ETF will live up to the hype. J.P. Morgan researchers have noted that spot crypto exchange-traded products in Canada and Europe have not yet generated significant investor interest or moved the markets. Bloomberg Intelligence analyst Eric Balchunas also cautioned that there could be a gap between the hype and the actual demand for a Bitcoin ETF initially. He pointed out that the first futures crypto ETF, which launched two years ago, broke records, but a spot market ETF might not perform as well.
A futures crypto ETF allows investors to buy shares that offer exposure to contracts betting on the future price of crypto, rather than the asset itself. The SEC approved the futures product during the peak of the bull market, despite rejecting spot market applications for years. Balchunas believes that a spot market Bitcoin ETF might underperform compared to the futures ETF, given the different market conditions at the time of their launches.
Since the launch of the ProShares Bitcoin Strategy ETF (BITO) in October 2021, the price of Bitcoin and other digital assets has plummeted, and the industry has been plagued by bankruptcies, hacks, and scams. This could deter potential Bitcoin ETF investors, especially those who have already incurred losses. Ethereum futures ETFs, which launched earlier this month, also had a slow start.
Experts also highlighted the liquidity constraints in today’s exchanges compared to 2021, which could pose challenges in attracting significant inflows to a Bitcoin ETF. The SEC currently has a long list of Bitcoin ETF applications to review, leading to speculation that they might all be approved simultaneously, resulting in dispersed investor interest.
However, experts agree that the long-term approval of a Bitcoin ETF would be beneficial for the cryptocurrency. Bloomberg Intelligence analyst James Seyyfart believes that more investors would be interested in a spot product rather than a futures product. Co-founder of crypto hedge fund Hunting Hill Digital, Adam Guren, sees the approval of a spot Bitcoin ETF as a significant milestone that would create a more favorable investment environment for cryptocurrencies in the United States.
While the launch of a Bitcoin ETF is still uncertain, the potential approval of such a product has generated excitement and speculation among investors. Only time will tell if a Bitcoin ETF can live up to the expectations and provide a new gateway for investors to enter the cryptocurrency market.