Cryptocurrency advocates believe spot Bitcoin ETFs will be a ‘watershed’ that could add billions of dollars in value.

Cryptocurrency proponents prefer physical Bitcoin ( BTC

-1.22%
) Although the ETF has been approved, some skeptics believe investors could see negative price action in the short term.

“It took a long time for a Bitcoin ETF to emerge,” Bybit co-founder and CEO Ben Zhou said in emailed comments to The Block. “But now with BlackRock and other (traditional finance) giants in the mix, approval is more likely than ever. If approved, the effect will permeate the entire cryptocurrency market, bringing not only new money but also new confidence.”

Zhou said the move would be a watershed moment for the broader cryptocurrency space, but argued that it is not a necessary requirement for success and that institutions need ETFs more than Bitcoin. “The past two years have proven that you can throw almost anything at Bitcoin – bankruptcies, hostile regulation, banking crises – and Bitcoin still performs significantly better than any asset on Earth,” he said.

The Securities and Exchange Commission has not yet approved a spot Bitcoin ETF and has not said when a decision will be made on the multiple applications under review.

billions more dollars

David Duong, head of institutional research at Coinbase, said in a November outlook report that the impact of spot Bitcoin ETFs will be significant. This opens up opportunities for the wealth management community and could serve as the basis for additional financial products.

“In the long term, this means that a spot Bitcoin ETF could add billions of dollars to the overall cryptocurrency market cap, as well as spark new potential investments in the asset class. It will take time, but the ETF could lead to more We expect to lay the foundation for investment: a regulated environment, greater inclusivity and a substantial increase in demand,” Duong said.

He added that some effects may take time to appear. For example, ETFs may make it easier to include Bitcoin exposure in your portfolio, but your employer may not immediately allow 401(k) retirement contributions to Bitcoin. Likewise, he believes spot Bitcoin ETFs are a better fit for banks and broker-dealers than futures-based ETFs, but there may be limits to how much they can allocate to such instruments in the near term.

Adam Cochran, managing partner at Cinneamhain Ventures, shared a similar view. He said observers are largely overestimating the short-term impact of spot Bitcoin ETF approval, but are underestimating the long-term impact.

“The biggest change for Bitcoin ETFs is their informal legality for pension funds, RIAs, mutual funds and other conservative funds,” he said. “Some funds and advisors have regulations in place to prevent them from pushing clients into OTC assets like GBTC, but many funds and advisors have internal risk control policies that prevent this. The same was true for gold back in the day. But once it was “Because companies like BlackRock had legitimate ETFs that they properly stored and settled and managed, it became legal for these funds and advisors to pursue them.”

Nate Geraci, president of investment advisory The ETF Store, noted that the approval of a potential spot Bitcoin ETF could serve as a bridge between decentralized and traditional finance.

“For many mainstream investors, cryptocurrencies are seen as too complex or risky to get involved in,” he told The Block. “ETF wrappers will act as a bridge to help mainstream investors become more educated and comfortable with cryptocurrencies. In the long term, this will help mainstream investors eventually break out of the ETF packaging and interact directly with the underlying technology, as well as crypto overall. “It will help with currency adoption.”

What about price action?

While cryptocurrency proponents believe a spot Bitcoin ETF could have a positive impact on the price, critics have cast doubt on the idea in the short term.

“When a tsunami of buying meets a fixed supply, the price only moves in one direction,” said Dan Held, a prominent Bitcoin analyst and part-time CMO at Taproot Wizards, a Bitcoin NFT project. .

Nansen CEO Alex Svanevik added that this could benefit the wider ecosystem. “A rising tide lifts all boats,” he said, noting that more capital allocated to Bitcoin would be good for all cryptocurrencies.

However, cryptocurrency skeptic and prominent bullion Peter Schiff suggested caution in the short term.

“As warned, the Bitcoin ETF is likely to be a ‘buy the rumor, sell the news’ event rather than a ‘buy the rumor, sell the news’ event. There are very few speculators left who will buy Bitcoin when they hear news of it selling. You may find out that it isn’t there!” that Posted in.

““If the ETF launches and you don’t see the highly anticipated institutional and other new investor demand, look below!” Added.

This is consistent with CNBC host Jim Cramer, who has recently been bullish on Bitcoin, calling it a technological marvel in a January appearance.

He added, “I think the people working for it will use it as an opportunity to sell.” “You can’t kill it,” he added.

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