The upcoming Bitcoin ETF stirs excitement but faces challenges like market volatility and lukewarm investor interest in the short term.
For years, the investment community has been buzzing about the potential for a Bitcoin exchange-traded fund (ETF). This chatter reached a fever pitch recently when BlackRock, the world’s largest asset manager, came closer to receiving approval from the U.S. Securities and Exchange Commission (SEC) for its Bitcoin ETF application. This approval could come as early as January, according to crypto industry experts and analysts. The news boosted Bitcoin’s price, but the question remains: will the ETF meet the sky-high expectations, or will it fizzle out?
A Bitcoin ETF would make investing in Bitcoin easier by eliminating the need for investors to manage digital wallets, exchanges, and private keys. This simplified process could attract more capital into Bitcoin, further legitimizing the cryptocurrency as an asset class.
Mismatch Between Hype and Actual Demand
However, not everyone is convinced that a Bitcoin ETF will shake the markets. In July, researchers at J.P. Morgan noted that similar crypto exchange-traded products in Europe and Canada haven’t garnered significant investor interest. Eric Balchunas, an analyst at Bloomberg Intelligence, also suggested that the actual demand for a Bitcoin ETF might fall short of the hype, at least initially. The first futures-based crypto ETF broke records when it launched two years ago, but Balchunas warns that a spot market Bitcoin ETF might experience a milder reception.
Why? Timing could play a significant role. The futures crypto ETF launched when Bitcoin was at its peak, trading for $64,000 per BTC. At that time, the appetite for crypto was immense, with the product trading $280 million in shares within the first 20 minutes. By the end of the day, nearly $1 billion in shares had exchanged hands.
Market Volatility and Investor Caution
Since then, the digital asset landscape has seen its share of troubles, including market crashes, bankruptcies, hacks, and scams. These factors could deter potential Bitcoin ETF investors, particularly those who have already incurred losses in the crypto market. Recent launches of Ethereum futures ETFs have also had a lukewarm reception, reinforcing the notion that the initial buzz for a spot Bitcoin ETF may be more subdued.
On top of these concerns, the SEC has a growing backlog of Bitcoin ETF applications. Some experts even speculate that the SEC might approve multiple applications simultaneously, potentially diluting initial interest in any single product.
Despite these short-term uncertainties, most experts believe the long-term impact of a Bitcoin ETF approval would be positive. A spot Bitcoin ETF would likely attract more interest than its futures-based counterparts in the long run, according to James Seyyfart, another Bloomberg Intelligence analyst. Adam Guren, co-founder of the crypto hedge fund Hunting Hill Digital, also sees the potential approval as a “momentous milestone,” one that could create a more favorable investment climate for cryptocurrencies in the United States.
While the imminent launch of a spot Bitcoin ETF brings much excitement, there are valid reasons to temper expectations, at least in the short term. Nonetheless, the potential approval of such a financial product is a significant step forward for Bitcoin and the wider crypto industry, promising to boost long-term interest and investment.