The financial titans seeking crypto exposure
A cast of powerful asset managers have set their sights on launching a Bitcoin exchange-traded fund (ETF). These include BlackRock, the world’s largest asset manager with $10 trillion in assets, Fidelity ($4.5 trillion), Franklin Templeton ($1.5 trillion), Invesco ($1.5 trillion), WisdomTree ($87 billion), VanEck ($61 billion), Global X ($40 billion), ARK Invest ($14 billion), Bitwise ($1 billion), and Valkyrie ($1 billion).
In total, these firms manage nearly $18 trillion in assets. Even a tiny allocation to Bitcoin could absorb all the supply on exchanges. This highlights the staggering amount of potential demand waiting on the sidelines.
The context behind the SEC’s decision-making
The SEC continues to evaluate a growing list of ETF applications. A recent court victory for Grayscale could influence the process. The judge ruled that the data and surveillance standards for a spot Bitcoin ETF are no different than those already deemed acceptable for Bitcoin futures ETFs.
This undermines the SEC’s common rationale for rejecting spot ETFs thus far. With its legal footing eroded, the SEC may be left arguing that proper custody solutions for Bitcoin still don’t exist. However, trusted names like Coinbase, Nasdaq, and JP Morgan have made major strides in institutional-grade crypto custody.
The next major SEC decision deadlines are October 17th and mid-March 2023. While delays remain likely, the SEC is running out of reasons to deny spot ETFs.
Why a spot ETF matters
A spot Bitcoin ETF would provide simplified, tax-advantaged Bitcoin exposure to the masses. Retail investors could buy Bitcoin through existing brokerage accounts, bypassing the need to directly custody coins. The convenience factor cannot be overstated.
By lowering entry barriers, spot ETFs could bring an estimated $30 billion of fresh capital into Bitcoin – enough to absorb half the supply on exchanges. This liquidity boost would likely send prices higher.
Additionally, a Bitcoin spot ETF would allow other ETFs to take Bitcoin exposure by investing in the spot ETF. For example, a Web3 ETF could hold shares of a Bitcoin ETF, Coinbase, and other crypto assets. This creates opportunities for further inflows.
How much could a spot ETF impact Bitcoin’s price?
When gold received a spot ETF in 2004, it kicked off a more than 300% rally over the following years. And gold was not nearly as scarce nor as digitally native as Bitcoin.
Given today’s hyper-liquid markets and Bitcoin’s appeal to younger generations, a 300% Bitcoin price surge could easily happen within 1-2 years of a spot ETF approval, not the 5+ years it took gold.
A new chapter for Bitcoin
While self-custody remains the ethos for many Bitcoiners, an ETF opens the floodgates to an entirely new breed of investors. The signal it sends about Bitcoin’s legitimacy cannot be understated.
Institutions are clearly hungry for the digital gold. One way or another, they will get their fill.
Disclaimer: Content provided for informational purposes only and does not constitute investment advice. Past performance does not guarantee future returns.
Thank you for reading “The Unfolding Saga of the Bitcoin ETF“.
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Sources:
- Forbes: BlackRock Files To Offer Bitcoin Futures ETF
- Coindesk: Franklin Templeton Seeks to Join Bitcoin ETF Race
- Coindesk: Crypto Custody: A Technical Deep Dive
- Bloomberg: Bitcoin Spot ETF Approval Could See up to $50 Billion in Inflows, NYDIG Says
- Cointelegraph: What a Spot Bitcoin ETF Approval Means for Bitcoin
We stand at the precipice of a new financial epoch. While the road may be long, Bitcoin’s ascent appears all but inevitable. Patience and prudence remain the watchwords for navigating these uncharted waters. The future remains ours to write.
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