Bitcoin

Spot Bitcoin ETF will be a ‘bloodbath’ for cryptocurrency exchanges, analyst says.

adminDecember 18, 2023

The cryptocurrency community is eagerly awaiting the possible approval of a U.S. spot Bitcoin (BTC) exchange-traded fund (ETF), but some analysts are warning that this could potentially have unwanted consequences for cryptocurrency exchanges.

Several industry observers have predicted that a spot BTC ETF could begin trading as early as 2024. In this case, paired with Bitcoin’s block reward halving expected in April, Blockstream CEO Adam Back believes it could push BTC all the way to $100,000.

Bitcoin supporters such as Jan3 CEO Samson Mow have said Bitcoin could rise to $1 million within “days to weeks” if a Bitcoin spot ETF is approved in the US.

However, the outlook for centralized cryptocurrency exchanges is not so optimistic, according to ETF Store president Nate Geraci and Bloomberg ETF analyst Eric Balchunas.

Once approved, a potential spot Bitcoin ETF in the U.S. would be a “bloodbath” for cryptocurrency exchanges, Geraci wrote on X (formerly Twitter) on December 17.

Retail spot Bitcoin ETF buyers and sellers will benefit from underlying institutional trade execution and fees, according to Geraci. On the other hand, retail users of cryptocurrency exchanges are subject to “retail transaction execution and fees,” which needs to improve to compete with spot Bitcoin ETFs, he said.

Bloomberg ETF analyst Eric Balchunas highlighted that the cost of trading a spot Bitcoin ETF is 0.01%, the average fee for an ETF trade.

In contrast, transaction fees on exchanges like Coinbase can be as high as 0.6% depending on the cryptocurrency, trade size, and trading pair.

Once approved, Balchunas believes a spot Bitcoin ETF would create more price competition in the cryptocurrency industry and return money to investors from exchanges that spend huge amounts of cash to advertise their services at events like the Super Bowl.

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“If we launch an ETF, it will be the last ‘Crypto Super Bowl’ because ETFs are such a thin and rough industry and some of these cryptocurrency exchanges have been making a ton of money with really high fees by selling a kind of populism,” he said. he said In an interview with industry journalist Laura Shin in September 2023.

Historically, Coinbase earned most of its revenue from trading fees. In 2022, Coinbase earned $2.4 billion in trading fees from institutional and retail investors, accounting for 77% of its total net revenue of $3.1 billion. However, the company has been working to reduce its reliance on fees and has actively diversified its revenue streams into other revenue-generating services, such as subscriptions.

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