Source: Decrypt

Author: Mat Di Salvo

Translation: Guan

Bitcoin ETF Image: Shutterstock

Investor's Hope

Investors have been waiting for a Bitcoin spot ETF for nearly a decade, and it now seems within reach.

Rumors of "BlackRock, the world's largest asset management company, about to get approval for a Bitcoin ETF from the U.S. Securities and Exchange Commission" caused a significant surge in Bitcoin's price on Monday.

Analysts and experts in the field suggest that a cryptocurrency ETF (exchange-traded fund) could be listed as early as January. However, the listing of the ETF is not entirely certain, as the SEC has been reluctant to approve such a product in the past.

The ETF would track the price of Bitcoin, allowing investors to gain exposure to the risk by purchasing shares without dealing with digital wallets, exchanges, or private keys. Due to the elimination of technical barriers, some analysts and Bitcoin evangelists suggest that such funds could lead to an influx of funds into the Bitcoin market.

Can ETF Achieve Speculative Effect?

The answer is: not everyone thinks so. Researchers at JPMorgan pointed out as early as July that trading products on spot cryptocurrency exchanges in Canada and Europe had not sparked strong interest from investors.

Bloomberg Intelligence analyst Eric Balchunas stated, "There may be a gap between early speculation and actual demand," adding, "When a Bitcoin ETF finally starts trading on a stock exchange, its performance may not be as good. Even the first futures-based cryptocurrency ETF launched two years ago broke records."

The difference between futures-based cryptocurrency ETFs and spot market ETFs is that the shares purchased by investors provide exposure to contracts betting on the future price of cryptocurrencies (rather than the assets themselves). Despite the SEC's years-long refusal of spot market applications, the commission approved the futures product at the peak of the bull market.

Experts said, "I wouldn't be surprised if the performance of a spot market Bitcoin ETF lags far behind that of the BITO (ProShares Bitcoin Strategy ETF) in terms of volume, as BITO was launched at the peak of the frenzy." "I'm preparing for something much milder than BITO, but I think it will be very successful in three to five years."

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

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

ETF Development Still a Long Way Off

Balchunas added, "The launch of the Ethereum futures ETF earlier this month got off to a slow start." "A lot has happened, and it has also borne a lot of burden. Although Bitcoin has made a comeback this year, I think it will still weaken."

Adam Guren, co-founder of the cryptocurrency hedge fund Hunting Hill Digital, said, "Liquidity constraints on today's exchanges are also worth considering compared to 2021." He pointed out the challenge of "even if the inflow on the first day reaches $500 million, it's still noteworthy."

Experts noted that the SEC currently has a long list of Bitcoin ETF applications awaiting approval. Some speculate that they may be approved simultaneously, leading to a diversification of interests. However, experts unanimously believe that the approval of such products will be beneficial for Bitcoin in the long run.

James Seyyfart, an analyst at Bloomberg Intelligence, said, "Interest in spot products is likely to surpass interest in futures products." "Over a one-year time frame, I think the demand for spot ETFs will exceed that of futures ETFs."

Guren added, "The approval of a spot Bitcoin ETF will represent a significant milestone and pave the way for a more favorable environment for cryptocurrency investment in the United States."

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