The U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs, including applications from ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex, and Franklin Templeton at 20:00 UTC on January 10th, according to CoinEx’s Markets Feed.
In recent years, as the crypto market has gradually expanded, the value of cryptocurrencies has been steadily increasing, making them one of the hot assets in the eyes of investors. The flow of funds from traditional markets into the crypto market has been garnering increasing attention. As the crypto market matures over the past years, the approval of spot Bitcoin ETFs is a significant event with profound implications, possibly even heralding a bull market in the crypto market in 2024.
What is a Bitcoin ETF?
A Bitcoin ETF (Exchange-Traded Fund) is a type of exchange-traded fund with Bitcoin as its underlying asset, trading similarly to traditional stocks. This financial instrument aims to allow investors to buy and sell Bitcoin through stock exchanges, eliminating the cumbersome process of directly holding and managing crypto assets. Bitcoin ETFs may provide investors with a more convenient and transparent way to participate in the Bitcoin market, potentially driving its price further upward.
After the approval of Bitcoin ETFs, will the price of Bitcoin rise or fall?
According to CoinEx’s Market Overview, fueled by the sentiment of Bitcoin ETF approval, the price of Bitcoin has risen from $26,000 in October of the previous year to surpass $47,000 on January 9th, reaching a nearly 20-month high. The last time BTC traded above $46,000 was in April 2022.
Similar to the positive impact on gold prices after the approval of gold ETFs in history, the approval of spot Bitcoin ETFs in the U.S. is expected to attract incremental funds and likely have a positive impact on Bitcoin prices. Galaxy Digital previously conducted estimations using gold as a reference, predicting an increase in Bitcoin prices in the first year after the approval of spot ETFs. However, it's worth noting that gold and Bitcoin are still different, and the recognition of gold value is not solely due to ETF approval. Therefore, CryptoQuant analysts believe that after the approval of Bitcoin ETFs, the price of Bitcoin may experience a pullback to $32,000. It is evident that investors remain cautious toward BTC.
Bitcoin ETFs: A Driving Force for Traditional Investors
- Enhanced Convenience and Liquidity
It is well-known that cryptocurrency trading is more complex compared to traditional financial investments, requiring investors to possess certain technical knowledge and experience. The introduction of Bitcoin ETFs provides traditional investors with a more convenient and liquid investment method. By purchasing ETF shares on traditional exchanges, investors do not need to deal with issues such as private keys and secure storage associated with managing crypto assets, thereby reducing the entry barrier for cryptocurrency investment. The existence of Bitcoin ETFs simplifies the trading process, attracting more traditional financial investors to participate, expanding the participant base in the Bitcoin market, and increasing the overall liquidity of the Bitcoin market.
According to CoinEx’s Markets Feed, several spot Bitcoin ETF applicants lowered their ETF fees in the amended S-1 documents they submitted.
ETF fees are not only one of the investment costs for investors but also directly impact the return on investment, making them a key factor for investors when choosing investments. From the fee table below, we can see that both ARK 21Share and Bitwise planned to seize the market with a promotional strategy of 0 management fees initially. Meanwhile, Bitwise lowered its ETF fees to 0.20% , the lowest among all current products.
- Compliance and Regulation
The compliance of Bitcoin ETFs is expected to increase the confidence of traditional investors in the crypto asset market. Since ETFs are products regulated within the traditional financial system, their introduction may help dispel some traditional investors' concerns about inadequate regulation in the crypto market. Bitcoin ETFs may attract more institutional funds. Due to the characteristics of Bitcoin trading, such as anonymity and irreversibility, many traditional financial institutions have been cautious about the Bitcoin market. However, compared to existing Bitcoin investment products, spot ETFs may meet stricter compliance requirements set by regulatory bodies in terms of custody, monitoring, and bankruptcy protection. The introduction of Bitcoin ETFs provides institutional investors with a regulated and more transparent investment method, thereby boosting their confidence in participating in the Bitcoin market. The approval of Bitcoin ETFs will enhance the legitimacy of Bitcoin in traditional financial markets, subsequently increasing the confidence of traditional investors.
- Portfolio Diversification
Traditional investors typically seek to achieve diversity in their investment portfolios to reduce overall investment risk. The introduction of Bitcoin, as a crypto asset class, offers an opportunity for traditional investors to introduce a certain hedge effect into their investment portfolios. Bitcoin ETFs provide traditional investors with an opportunity to increase portfolio diversity.
Bitcoin ETF as a Key Factor for Bull Markets
The introduction of Bitcoin ETFs provides traditional investors with an easier and more familiar way to bring their funds into the cryptocurrency market by investing in Bitcoin ETFs. It can be said that Bitcoin ETFs are a key catalyst leading traditional investors into the cryptocurrency market.
In addition to the influx of new funds, Bitcoin ETFs also enhance the liquidity and transparency of the crypto market, while increasing the compliance of the crypto market, providing more confidence for a broader range of investors to participate in the crypto market. All in all, although Bitcoin ETFs still face some challenges, they are expected to bring more participants and vitality to the crypto market, playing a crucial role in propelling the crypto market towards a bull market.
The approval of Bitcoin ETFs this time marks a significant step towards the integration of the cryptocurrency market into the traditional financial system. The marginal benefits it brings may far exceed those of approved gold ETFs. With the improvement of convenience, compliance, and market transparency, Bitcoin ETFs are expected to open the door to the crypto world for more traditional investors. Looking at the historical starting points of bull markets in crypto, they are built on positive information, innovative applications, and incremental funds.
The approval of Bitcoin ETFs is a positive factor on the funding side, and the upcoming Bitcoin halving in April is a positive information factor. All of these indicate that 2024 may likely usher in a new round of crypto bull market. Let's look forward to it. It's important to note that investors still need to be cautious about the volatility of the crypto market and stay informed about crypto asset market trends, which can be checked through the CoinEx trading platform (https://www.coinex.com). The launch of Bitcoin ETFs is undoubtedly a noteworthy development in the crypto market, and we look forward to seeing its far-reaching impact on the entire crypto asset market.