The cryptocurrency world is buzzing with anticipation as the possibility of a Bitcoin Exchange-Traded Fund (ETF) approval looms large. An ETF for Bitcoin could be a game-changer for the crypto market, and here’s why it’s a “buy the rumor, buy the news” moment.
1. ETF Approval Speed:
The recent launch of the Ethereum (ETH) Futures ETF provides a glimpse of how quickly an ETF can start trading after approval. It took just five days from approval to formal trading. This rapid transition from anticipation to trading is a crucial factor.
2. Demand is Key:
While speedy approval is significant, the real game-changer is demand. If nobody buys the ETF, it won’t have the desired impact. To understand the potential, we can look at a historical parallel – Gold ETFs.
a. The Gold Fractal: Only two ETFs in history reached $1 billion in capital within their first three trading days – Gold in 2004 and Bitcoin Futures in 2021. Gold’s spot ETF launch led to a 500% rally over the following five years, showcasing the importance of spot ETFs.
In March 2003, the first #gold ETF appeared, and the price of the yellow metal skyrocketed 420% as trading became more liquid and streamlined. Could the same happen for #bitcoin if a #BitcoinETF launches? pic.twitter.com/z29c7kDyBU
— Web3 Buzz (@web3buzztweets) October 23, 2023
b. The Global Reach: What makes this ETF special is that it offers meaningful exposure to spot Bitcoin in a regulated manner globally. This overcomes various barriers, such as Know Your Customer (KYC) requirements, custody challenges, and regulations that have been limiting investment.
c. Spot Demand: An ETF’s impact depends on demand. If there’s a sudden surge in interest, it could significantly affect the BTC spot market. Current order books are relatively thin, and moving the BTC spot market by 10% would require around $100 million.
3. Incentivized ETF Providers:
ETF providers have strong incentives to promote and sell this product. In 2022, over $100 billion in ETF fee revenue was collected, with an average expense ratio of 0.37%. The total ETF assets under management (AUM) reached approximately $7 trillion.
The potential approval of a Bitcoin ETF could be a watershed moment in the crypto world. It has the potential to attract a substantial amount of investment and significantly impact Bitcoin’s price. As investors and institutions alike eagerly await the decision, the “buy the rumor, buy the news” mentality prevails, with all eyes on the evolving cryptocurrency landscape.
