Bitcoin continues to trade above $37,000, and analysts believe that the introduction of a spot Bitcoin ETF (Exchange Traded Fund) will bring new capital into the market. It is expected that the U.S. Securities and Exchange Commission (SEC) will approve at least one ETF by January 2024. Analysts are divided on whether a Bitcoin ETF will trigger potential capital inflows into the market or simply create a selling activity.
The history of spot gold ETFs sheds light on the potential impact of the upcoming spot Bitcoin ETF on underlying assets. The launch of the first spot gold ETFs in 2003 was a significant turning point in the financial sector and led to a substantial increase in gold prices. Within a decade, the value of an ounce of gold rose from around $350 to $1,815 in 2012.
This historical example presents an optimistic view of the potential impact of the first spot Bitcoin ETF on the Bitcoin market. If Bitcoin follows a similar pattern to gold after the approval of the first spot gold ETF, a significant increase in prices could be observed.
In the context of Bitcoin, the expectation surrounding the launch of a spot Bitcoin ETF has created a similar excitement. However, some analysts express concerns about the actual market size of Bitcoin ETFs and highlight that existing products, such as Grayscale’s Bitcoin Trust (GBTC) or MicroStrategy’s shares, represent less than 7% of the total Bitcoin supply.
The introduction of a spot Bitcoin ETF will provide a more direct and regulated investment vehicle for Bitcoin, addressing all these limitations and issues. It is expected to attract significant new capital from institutional investors who are interested in investing in Bitcoin through a traditional and regulated method.
Despite the abundance of optimism, critics argue that the release of the ETF may only lead to a redistribution of funds, particularly if it transitions to the GBTC ETF format and allows for redemptions. Therefore, evaluating alternative demand indicators entering the Bitcoin market after ETF approval is crucial.