Can Bitcoin ETFs live up to the hype?

Authors: Mat Di Salvo, Decrypt; Compiler: Guan, TechubNews Bitcoin ETF Photo: Shutterstock

Investors’ Hopes

Investors have been waiting for a Bitcoin spot ETF for almost a decade, and now it looks like it’s just around the corner.

Bitcoin prices rose sharply on Monday after rumors spread that “BlackRock’s Bitcoin ETF application is about to be approved by the U.S. Securities and Exchange Commission.”

**Analysts and experts in the field say crypto ETFs (exchange-traded funds) are likely to hit the market in January or earlier. However, it is not entirely certain whether the ETF will be listed, as the SEC has been reluctant to approve the product in the past.

ETFs will track the price of Bitcoin, allowing investors to gain exposure by buying shares without having to deal with digital wallets, exchanges, or private keys. Since ETFs will remove technical barriers, some analysts and Bitcoin evangelists say that such a fund could lead to an influx of money into the Bitcoin market.

Can ETFs achieve hype?

The answer is: not everyone thinks so. JPMorgan Chase researchers noted back in July that products traded on spot crypto exchanges in Canada and Europe have not yet garnered significant investor interest. **

Eric Balchunas, an analyst at Bloomberg Intelligence, said, “There may be some gap between the early hype and the actual demand,” adding, “When a Bitcoin ETF finally starts trading on stock exchanges, it may not perform as well.” Even when it was launched two years ago, the first futures crypto ETF broke records. ”

Futures crypto ETFs differ from spot market ETFs in that the shares investors buy provide exposure to bet on the cryptocurrency’s future price, rather than the asset itself. Despite years of denying cash market applications, the SEC approved the futures product at the height of the bull market.

“I wouldn’t be surprised if the spot market Bitcoin ETF is far behind the BITO (ProShares Bitcoin Strategy ETF) in terms of traffic, because BITO was launched at the peak of the frenzy,” the expert said. “I’m preparing something much gentler than BITO, but I think in three years, five years, it’s going to be very successful.”

BITO began trading in October 2021 when Bitcoin was selling for $64,000 per coin. At the time, there was a huge demand for all cryptocurrencies – the product traded $280 million worth of shares in the first 20 minutes. By the close of the first day, nearly $1 billion in stock had changed hands.

But since then, the prices of all digital assets have plummeted, and the industry has been plagued by bankruptcies, hacks, and scams, which could scare away potential Bitcoin ETF investors, especially those who have already suffered losses.

ETF development still has a long way to go

Baljunas added: "The Ethereum futures ETF launched earlier this month got off to a slow start. "There’s a lot going on and a lot of burdens. Although Bitcoin has made a comeback this year, I think it will weaken somewhat. ”

Adam Guren, co-founder of crypto hedge fund Hunting Hill Digital, said: "Liquidity constraints on exchanges today compared to 2021 are also something to consider. He also pointed to the challenge that “even if the inflow reached $500 million on the first day, it would be noteworthy.”

Experts note that the SEC currently has a long list of Bitcoin ETF applications that need to be approved. There has been speculation that they may be approved at the same time, which will lead to a split of interests. But experts agree that the approval of such a product is beneficial for Bitcoin in the long run.

James Seyyfart, analyst at Bloomberg Information, said: "More and more investors will be more interested in spot products than in futures products. “Looking at the one-year time frame, I think spot ETFs will outpace demand for futures ETFs.”

Guren added, “The approval of the spot Bitcoin ETF will represent a significant milestone and will pave the way for a more conducive environment for crypto investment in the United States.” ”