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Investors in the cryptocurrency market show increasing optimism regarding the imminent approval by the U.S. Securities and Exchange Commission of a Bitcoin (BTC-USD) exchange-traded fund (ETF). This sentiment has been reflected in the recent surge of nearly 35% in the price of the most prominent token, Bitcoin.
Nevertheless, there might be some individuals curious about the significance of this development. Advocates for the Spot Bitcoin (BTC-USD) ETF argue that its approval would expand Bitcoin investment to a broader spectrum of investors, thereby positioning it as a more widely accepted asset class.
According to a recent report by Coinbase Global (COIN), the largest crypto exchange in the US, the approval of this product could open the doors of the crypto market to participants from traditional finance, including registered investment advisors (RIAs), retirement funds, and other institutions. This asset class has historically been out of their reach.
Over time, the spot Bitcoin (BTC-USD) ETF could significantly increase the overall crypto market cap, which was at $1.38T on Thursday, as mentioned in Monday’s report. “Although it will take time, we anticipate that ETFs will establish the groundwork for a more regulated environment, wider inclusivity, and a substantial surge in demand,” the report stated.
But there’s more to it. “This opportunity has the potential to be much more far-reaching than just enabling new capital to enter the crypto market,” expressed David Duong, head of institutional research at Coinbase. “The ETF will ease constraints for large money managers and institutions to buy and hold Bitcoin, thereby enhancing liquidity and price discovery for all market participants.”
Furthermore, the regulatory nod for a Bitcoin (BTC-USD) ETF could pave the way for new products such as lending, futures, and options. If realized, this could enrich the existing crypto offerings for accredited investors and foster widespread adoption.
On the other hand, JPMorgan analyst Nikolaos Panigirtzoglou contended that the approval of a spot BTC ETF would not result in an influx of new capital. These ETFs are already listed in Europe and Canada and have garnered “minimal interest from investors since their inception,” he noted in a recent statement.
BlackRock (BLK) stands among the prominent Wall Street firms awaiting approval for a spot BTC ETF, which would enable investors to gain exposure to Bitcoin (BTC-USD) without directly holding the asset. In June, the company submitted an application for the iShares Bitcoin Trust, a move that elevated crypto prices as the traditional finance sector continues to venture into the crypto sphere. Other asset managers vying the product in the US include WisdomTree, Valkyrie, Ark Invest, and Invesco (IVZ).
Upon the introduction of the product in mid-June, Bitcoin’s (BTC-USD) price surged from approximately $26K to over $30K within days. The token is currently trading below $36K, underscoring the growing optimism among investors about a potential regulatory green light for the Spot BTC ETF.
Several industry heavyweights are anticipated to receive the initial approvals early this year. Coinbase (COIN) also posits that there is a strong possibility that at least one spot BTC ETF could secure approval before the year ends.
“Normally, the SEC stretches its decision period to the maximum extent allowed under its regulatory framework, which in this scenario would be the January 10, 2024, deadline for the ARK-21Shares Bitcoin ETF application,” Duong remarked.