Bitcoin Briefly Surpasses $47,000: What Happens if the BTC ETF is Approved?
Recently, Bitcoin’s price momentarily surged past $47,000, drawing widespread attention in the market. One key driver behind this phenomenon could be the anticipation of a Bitcoin spot Exchange-Traded Fund (ETF). The Bitcoin spot ETF, serving as a regulated investment vehicle based on Bitcoin spot prices, not only offers traditional capital market investors a compliant way to invest in Bitcoin but also signals an accelerated integration of cryptocurrency with traditional financial markets.
History and Development of Bitcoin Spot ETF
Over the past decade, Bitcoin spot ETF proposals have faced multiple rejections in the U.S. market, mainly due to regulatory reservations about cryptocurrency risk management and market maturity. However, as the cryptocurrency market grows and gains recognition in traditional capital markets, the likelihood of approval for spot ETFs has been increasing. Moreover, the existence of Bitcoin spot ETFs in other global markets and Bitcoin futures ETFs in the U.S. have paved the way for the approval of spot ETFs.
Structure and Function of Bitcoin Spot ETF
A Bitcoin spot ETF is a type of exchange-traded fund based on Bitcoin as its underlying asset, categorized as an index fund. It enables investors to gain exposure to Bitcoin and related assets without directly engaging in research, purchasing, or storing actual cryptocurrencies. This type of ETF offers significant convenience to a broader market of investors in terms of compliance, costs, liquidity, and management expenses.
Comparison Between Bitcoin Spot ETF and Futures ETF
In terms of underlying assets, Bitcoin futures ETFs are based on Bitcoin futures contracts, while spot ETFs directly use Bitcoin. Although both are quite similar in price volatility and aim to accurately track BTC prices, they differ in terms of costs and operational complexity. Generally, futures ETFs incur higher expenses due to their involvement in more complex futures contract operations.
Probability and Market Expectations of Bitcoin Spot ETF Approval
As the final approval date by the U.S. Securities and Exchange Commission (SEC) for Bitcoin spot ETFs approaches, the market’s focus on this outcome intensifies. The approval of Bitcoin spot ETFs in the U.S. would not only signify regulatory recognition of the cryptocurrency market’s maturity but could also introduce a larger mainstream investor base and substantial capital to Bitcoin.
Analogy between Gold ETFs and Bitcoin Spot ETFs
The launch of gold ETFs brought significant liquidity and increased algorithmic trading to the gold market, subsequently driving up the price of gold. After the introduction of gold spot ETFs in 2004, the price of gold rose by 420% in the following years. This historical precedent demonstrates that the introduction of spot ETFs can have profound and significant impacts on the related asset markets. Similarly, the launch of a Bitcoin spot ETF is expected to bring greater liquidity and wider investor participation to the Bitcoin market, potentially driving further price increases for Bitcoin.
Long-Term Impact of Bitcoin Spot ETF
The approval of Bitcoin spot ETFs in the U.S. would be more than a milestone in the cryptocurrency market; it would signify the traditional financial world’s recognition of Bitcoin and the broader Web3.0 world. Such recognition would facilitate the integration of traditional finance and cryptocurrency markets, accelerating the development of new technologies and asset classes. Notably, unlike gold, the total quantity of Bitcoin is fixed, a characteristic that may have a unique impact on its price and market supply and demand after the launch of a spot ETF.
Conclusion
The approval of a Bitcoin spot ETF in the U.S. would mark a significant turning point. It could lead to substantial capital inflows and symbolize the maturation and mainstreaming of the cryptocurrency market. According to estimates by GalaxyDigital, Bitcoin is projected to rise by 74% in the first year following the approval of a spot ETF, and in the long term, the potential capital inflow into Bitcoin products could range between $125 billion and $450 billion. Therefore, the future development of the Bitcoin spot ETF is of great interest to both cryptocurrency enthusiasts and traditional financial market participants.
