U.S. regulatory agencies may approve spot Bitcoin ETFs, which could increase the accessibility, liquidity, demand, and price of BTC, and promote wider adoption, credibility, innovation, and regularity, but also carry risks. The approval of ETFs heralds an exciting new era, legitimizing Bitcoin.

Original Title: "Spot Bitcoin ETFs: Exploring Potential Impacts on the Crypto Landscape"

Author: Binance

Translation: Yvonne, Mars Finance

Key Points

• Bitcoin exchange-traded funds (ETFs) allow investors to safely access cryptocurrencies without directly dealing with digital assets. In recent months, U.S. regulatory agencies may approve spot Bitcoin ETFs, sparking increasing optimism.
• U.S.-regulated spot Bitcoin ETFs could increase the accessibility, liquidity, demand, and price of BTC. However, this innovation also comes with costs.
• In the best-case scenario, direct BTC investments will coexist with various regulated instruments, enabling diversified strategies to meet the needs of different investors.
• Bitcoin exchange-traded funds (ETFs) are financial instruments that provide secure, regulated access to cryptocurrencies without the hassle of directly handling BTC. Similar products already exist in Canada and Europe, and U.S. investors have been able to purchase ETFs tracking Bitcoin futures prices since 2021. However, there is a view that the issuance of a regulated ETF holding "physical" Bitcoin (commonly referred to as spot Bitcoin ETF) in the U.S. could truly change the game for the Bitcoin industry.
• From a narrative perspective, encouraging developments in U.S. regulation in recent months have fueled investor optimism. As many observers believe a turning point is imminent, cryptocurrency investors should solidly understand the key narratives and potential scenarios that the emergence of regulated spot Bitcoin ETFs may trigger.

Main Definitions

ETFs are financial products that track specific asset, index, or basket of asset prices and are traded on stock exchanges. Generally, ETFs provide a way to invest in various assets while allowing for flexible trading on exchanges. Therefore, they are often practical tools for diversifying market risks.

With the emergence of cryptocurrencies, two major types of Bitcoin ETFs have appeared: futures and spot. Futures-based Bitcoin ETFs invest in contracts betting on the future price of BTC, providing exposure to its price movements without holding cryptocurrencies. Spot Bitcoin ETFs must hold the underlying assets, more directly reflecting their prices, making holding their shares more similar to holding BTC itself.

Bitcoin trusts are another similar tool but differ in structure and operation. Trust funds are more like traditional investment funds, holding actual Bitcoin. The shares owned by investors represent a portion of the pool of digital assets held by the trust fund. However, unlike ETFs, trust funds are affected by premiums or discounts, meaning that the price of shares may differ significantly from the value of the underlying BTC.

As of early December 2023, the U.S. Securities and Exchange Commission (SEC) is reviewing Grayscale's application to convert GBTC to a spot ETF. In October 2021, the first Bitcoin futures ETF was launched on the New York Stock Exchange Arca. Now, U.S. investors can purchase several such products. Of all the tools introduced in this section, only spot Bitcoin ETFs remain out of reach, but many believe this situation will change soon.

Seeking Approval from the U.S. Securities and Exchange Commission

In 2013, the U.S. Securities and Exchange Commission received the first application for a spot Bitcoin ETF, followed by many approved applications. The SEC initially emphasized several prerequisites for approval, including well-regulated Bitcoin-related markets and surveillance-sharing agreements to prevent fraud and market manipulation. In the following years, several companies submitted revised applications. Unfortunately, these attempts all faced similar outcomes: rejection due to ongoing concerns or withdrawal due to anticipated rejection.

However, in 2023, the situation began to change. Many were puzzled by the SEC's decisions, as it was unclear why they allowed Bitcoin futures ETFs but not spot ETFs. In August of this year, a U.S. court seemed to support this view, as the judge presiding over Grayscale's case against the SEC made a ruling in favor of Grayscale, requiring the SEC to reconsider its decision to reject the conversion of GBTC to a spot ETF and ruling that this differential treatment was "arbitrary and capricious."

Another milestone occurred in June when the world's largest asset management company, Blackrock, submitted an application for a spot Bitcoin ETF. The proposal included surveillance-sharing agreements to prevent fraud and market manipulation, which could alleviate the SEC's main concerns. Coupled with Blackrock's excellent track record in ETF approval, this move encouraged other companies to follow suit.

These developments collectively fueled market optimism in the fall of 2023, prompting numerous companies to resubmit previously rejected applications. The anticipated deflationary pressure, expected to occur in 2024, further bolstered positive prospects. With the unfolding of these events, the market is closely watching for signs of a breakthrough.

Potential Impacts

Many investors are curious about the potential impacts of future U.S. spot Bitcoin ETFs on traditional and crypto financial markets and the entire blockchain industry. While it is difficult to draw definitive conclusions, this innovation could have significant effects on Bitcoin prices, digital asset demand, liquidity, and adoption. Optimists believe that the legalization and accessibility of ETFs will attract a broader potential base of cryptocurrency investors, further encouraging adoption and innovation in the field. While these impacts are possible, their scale and scope are challenging to predict.

In this scenario, the historical case of gold ETFs is worth studying, although spot BTC ETFs are unlikely to produce similar effects. Like Bitcoin, gold is relatively inaccessible to the general public, requiring special effort and resources to purchase and store directly. In 2004, the largest gold ETF by managed assets, SPDR Gold Shares (GLD), was launched and quickly amassed over $10 billion in total assets. By 2010, its total assets exceeded $500 billion.

While ETFs relinquish direct ownership of the underlying assets, this sacrifice makes them more accessible. Therefore, a wider range of investors can gain exposure, prompting increased demand and liquidity for the asset. The rise of gold ETFs signaled a significant shift in the trading dynamics of the asset, with increased accessibility leading to higher market trading volumes and liquidity.

U.S. spot Bitcoin ETFs could bring similar benefits, potentially ushering in a new era of adoption and innovation. Although Bitcoin is often seen as "digital gold," we cannot predict the future of one asset based on the history of another. Nevertheless, we can gain insight into potential impacts through similarities. Let's delve into the pros and cons of U.S. spot Bitcoin ETFs.

Like gold ETFs, the high accessibility of Bitcoin ETFs could bring about a new wave of adoption, potentially increasing the price, demand, and liquidity of Bitcoin. Additionally, enhanced liquidity and diversified investor base contribute to stabilizing Bitcoin's price volatility, thereby increasing market liquidity, predictability, and investor confidence.

Apart from the dynamics of the BTC market, the approval of a spot Bitcoin ETF in the United States can also serve as a symbol of legitimization for the cryptocurrency industry, indicating that acceptance, credibility, and maturity have reached a new level, thereby encouraging further innovation and adoption.

Spot ETFs will bring more regulatory supervision and transparency through standardized reporting, thereby enhancing security and reducing the risk of fraud or theft. This will increase the credibility of the cryptocurrency industry in the broader financial sector, expanding the trust base for a wider audience.

Disadvantages and Risks

While there is generally positive sentiment surrounding the expected approval of a spot Bitcoin ETF in the United States, there are also significant risks and drawbacks to consider. First, relinquishing direct ownership of Bitcoin means that investors cannot participate in the BTC ecosystem and cannot enjoy the benefits of owning decentralized digital assets.

Additionally, ETFs may bring additional costs to cryptocurrency investments, as the management fees they typically charge may exceed the cost of directly holding Bitcoin. However, considering the peace of mind that ETFs provide, many investors should be willing to accept this situation.

Compared to more traditional financial markets, the predictability of the broader cryptocurrency market is still relatively low. As the purpose of ETFs is to track the price movements of their underlying assets, this volatility will also be reflected in the price of spot Bitcoin ETFs. Furthermore, due to market forces or management issues, the price of ETFs may deviate from the price of Bitcoin. This could lead to the ETF being overpriced or underpriced relative to Bitcoin.

Finally, the introduction of spot Bitcoin ETFs will more closely link BTC to regulation, making the market more sensitive to policy decisions. Adverse regulatory actions could have a negative impact on the value of the ETF, which in turn could lower the price of Bitcoin.

Conclusion

U.S.-regulated spot Bitcoin ETFs could have a significant impact on the cryptocurrency industry and the broader financial sector, potentially promoting wider adoption, credibility, innovation, and regularity. Such developments will simplify the process of entering the cryptocurrency market, allowing investors who are not very tech-savvy to access the price fluctuations of Bitcoin without managing the complexity of cryptocurrencies themselves. However, like any emerging investment tool, we cannot ignore the potential drawbacks and risks.

In the most ideal scenario, spot Bitcoin ETFs will have a place in the existing channels for cryptocurrency investments. Direct investments in BTC and various regulated instruments may coexist, enabling diversified investment strategies to meet various risk characteristics and preferences. The emergence of U.S.-regulated spot Bitcoin ETFs will herald an exciting new era, not only for Bitcoin but also for the broader cryptocurrency space, leading to its adoption and legitimization.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。