What Is A Spot Bitcoin ETF?
A Bitcoin spot ETF (Exchange Traded Fund) is a financial product that aims to track the price of Bitcoin. This differs from existing Bitcoin ETFs, which are typically futures-based. A spot ETF, traded on stock exchanges, holds bitcoin as its primary asset, unlike futures ETFs that rely on future bitcoin contracts. Spot ETFs offer investors exposure to its price movements without owning the asset directly.
This idea has been brewing for years, and now giants like BlackRock and Fidelity are lining up, eager to offer Bitcoin exposure to their institutional clients.
Over the past decade, the SEC has consistently denied approval for spot ETF applications. However, there’s growing speculation that the regulatory body might approve the ETF proposals today.
Approval And Timing
The long-awaited U.S. approval of spot Bitcoin ETFs might be just around the corner. Nate Geraci, President at The ETF Store, dropped the hint that the SEC could give these ETFs the green light soon, after asking for some minor tweaks and potentially scheduling a vote among the Commissioners.
Even Cboe BZX Exchange has confirmed the authorization of securities listings for several asset managers’ spot Bitcoin exchange-traded fund (ETF) offerings. This announcement suggests that trading will likely commence once the US SEC approves the ETF proposals from various asset managers.
Cboe revealed that they have verified listing certificates for spot BTC ETFs offered by ARK 21Shares, Invesco Galaxy, Fidelity, VanEck, WisdomTree, and Franklin Templeton.
Impact On Bitcoin Price
A U.S. spot ETF’s arrival could be the launch fuel for the crypto market. Easier access and more trading liquidity thanks to the ETF, combined with Bitcoin’s limited supply, are a recipe for potentially skyrocketing prices.
Think of it this way: more folks can now ride the Bitcoin wave through these ETFs, boosting demand like crazy. And guess what? But the catch is Bitcoin has a limited supply of 21 million Bitcoins. So, when demand shoots up, the price could follow suit.
According to Coinmarketcap data, Bitcoin prices have surged by more than 60% since October, largely driven by expectations that the SEC will approve one or multiple spot ETFs in the early months of 2024.
Predictions are flying faster than a digital hummingbird, with some experts expecting price fluctuations between $42,000 to $1,00,000. Some other influencers like Samson Mow (JAN3 CEO) dream of $160,000 or even a million-dollar Bitcoin! Anthony Scaramucci is also bullish, picturing Bitcoin price at $330,000 after the ETF launch.
There are expectations that once a spot-bitcoin ETF is given a green signal, the regulator might approve Ethereum ETF as well. This speculation led ‘ether’ to surge by 5 percent in the past 24 hours, trading around $2,400.
Of course, this is all crystal ball gazing. But one thing’s for sure: Bitcoin’s gonna be in the spotlight, and things could get exciting (and maybe a little volatile) once that ETF gets the green light.
Supply and Demand
Spot Bitcoin ETFs would act like a bridge between the familiar world of stock exchanges and the exciting (and often confusing) land of Bitcoin. Investors who wouldn’t normally dip their toes in crypto can now get a piece of the action, simply by buying shares of this ETF. And when more people want something, the price usually goes up, right?
That’s where the “supply squeeze” comes in. Bitcoin’s supply is capped at 21 million, so if demand suddenly surges thanks to new investors, there might not be enough Bitcoin to go around. Boom! The price starts to climb, potentially rewarding those who hopped on the ETF bandwagon early.
According to the PwC report, global assets under management now total approximately $115 trillion. With bitcoin’s increased accessibility on stock exchanges, this could lead to large market inflows. Standard Chartered, in a client advisory, anticipates a range of $50 to $100 billion in potential inflows into bitcoin ETFs in 2024.
While some ;long-term bitcoin investors might sell on high prices, HODLers will opt to retain their bitcoin despite market ups and downs. To these investors, bitcoin embodies a financial revolution, reflecting opposition to central banking and advocating for financial independence.
This steadfast holding behavior might contribute to a scarcity of supply. Combined with bitcoin’s finite supply of 21 million coins, it could amplify the scarcity challenge amidst rising demand, thereby pushing the price of bitcoin higher.
An approval of a spot bitcoin ETF could attract both individual and institutional investors. Regulatory approval from the SEC for these ETFs would offer a sense of assurance to investors pursuing institutional support, potentially fostering wider acceptance of bitcoin.
Fees of the Spot Bitcoin ETFs
Amidst the fierce competition among almost a dozen ETFs vying for interest in Bitcoin, buyers are expected to be highly price-sensitive. Issuers have already begun a modest price war, exemplified by Cathie Wood’s ARK Invest collaborating with 21Shares for a Bitcoin ETF, initially setting a 0.8% fee but recently announcing a fee waiver for the first six months.
In a similar vein, other issuers such as Bitwise, ARK, and Invesco are also slashing their prices significantly, with some offering a 0% fee for the initial six months.
Below is the list of fees of some well known Bitcoin ETF issuers:
- Bitwise (BITB) 0.0% (after first six months: 0.2%)
- ARK Invest/21Shares (ARKB): 0.0% (after first six months: 0.21%)
- Invesco Galaxy Bitcoin ETF (BTCO) 0.0% (after first six months: 0.39%)
- iShares Bitcoin Trust (IBIT) 0.12% (after first 12 months: 0.25%)
- VanEck Bitcoin Trust (HODL) 0.25%
- Franklin Bitcoin ETF (EZBC) 0.29%
- Fidelity Wise Origin Bitcoin Trust (FBTC) 0% (after July 31, 2024, 0.25%)
- WisdomTree Bitcoin Trust (BTCW) 0.0% (after first six months 0.3%)
- Valkyrie Bitcoin Fund (BRRR) 0.0% (after three months 0.49%)
- Grayscale Bitcoin Trust (GBTC) 1.5%
- Hashdex Bitcoin (DEFI) 0.9%
Not Your Keys, Not (Quite) Your Coins
Don’t get swept away by the Bitcoin ETF hype just yet! While the potential for a price surge is thrilling, there’s a flip side to the ETFs. Remember, with ETFs, “not your keys, not your coins,” the famous slang in crypto industry, says it all! You’re trusting a third party to hold your Bitcoin, which comes with its own set of risks.
But hey, even with the risks, the potential recognition and capital injection from institutions is undeniable. Think of it as Wall Street finally joining the Bitcoin party, ready to shake things up. And trust me, they’ll shake things up. Their influence on the market and Bitcoin’s price could be massive.
So, buckle up and keep your eyes peeled. This week could be a turning point for Bitcoin and the entire digital asset space, thanks to this institutional lovefest via ETFs. It’ll be fascinating to see how it plays out, but just remember, the ride might be bumpy, so keep your wits about you and your risk tolerance in check.
FAQs:
- Has the BTC ETF been approved?
No, the US Securities and Exchange Commission has not yet approved any ETF. But it does have many deadlines for giving final decisions in January 2024.
- Is Bitcoin ETF risky?
Investment in cryptocurrencies can be risky as they are highly volatile assets. Bitcoin ETF is linked with the Bitcoin price so, it can be risky to invest in Bitcoin ETF.
- Is bitcoin ETF safe?
Every investment comes with a risk and cryptocurrency market is a highly volatile market. So, one should not invest more than they can afford to lose.
- Why buy an ETF over Bitcoin?
ETF provides benefits of not knowing technicality and fundamentals and offers investors exposure to its price movements without owning the asset directly.
- How do I invest in a bitcoin ETF?
Open a brokerage account with the service providers if you don’t have one. Determine the shares you want to purchase with price, make a payment and the ETF will be yours!
