Are Bitcoin ETFs Really a Gamechanger?

There are several omnipresent trends that could give rise to Bitcoin and the whole crypto market with regards to awareness, demand and market size.

Chief among them is the investment vehicle of a spot Bitcoin ETF (exchange-traded fund), which aims to bridge the cryptocurrency market with that of traditional finance.

Democratizing crypto investing

According to some estimates, the approval of a Bitcoin spot ETF by the United States Securities and Exchange Commission (SEC) could potentially drive an astonishing $30 trillion worth of capital into the Bitcoin market. This astronomical sum accounts for the projected assets managed by financial advisors in the United States looking to gain exposure to Bitcoin through a regulated exchange traded fund.

Globally the potential for crypto investment inflows is much, much greater.

The spot ETF avenue chosen integrates crypto with traditional investment vehicles. It is delivered via traditional brokerage accounts, such as those offered by BlackRock, ARK Invest and Valkyrie.

The ongoing process of spot Bitcoin ETF applications has the effect of raising awareness and popularity of crypto among retail investors. Spot Bitcoin ETFs would provide small investors with a regulated and convenient way to gain exposure to Bitcoin without owning it.

Not only that, but the rise in Bitcoin applications, regardless of whether they get approved, could spell the early sign of the next bull run.

Should the spot ETF filings be approved, not only would it make the whole process of crypto investing more democratic, but it would also give a considerable jolt to crypto market’s liquidity.

A spot Bitcoin ETF is backed by physical Bitcoins that underpin the value of the ETF. If the value of the digital coins backing the ETF rises, the value of the investment is expected to increase. Simply, if the price of Bitcoin increases, the investment should too.

Asset class on par with gold?

Some believe that Bitcoin will smash gold's performance over the next 8 to 10 years. When traditional finance is in dismay, investors head towards commodities, notably the bullion. In contemporary times, Bitcoin has become more into focus as a store of value and a potential hedge against inflation and recessions.

A case in point are countries that are plagued by runaway inflation where people have found in crypto the much-needed protection against this scourge. In short, fiscal troubles can be good news for crypto, but it's not always the case.

Growing appetite for crypto accumulation

Large institutional players have built a good chunk of their investment strategies on crypto holdings. For instance, Michael Saylor, Executive Chairman of MicroStrategy, is a big proponent of crypto as an investment vehicle.

At the time of writing, MicroStrategy now holds approximately 158,245 BTC, which were acquired at an aggregate purchase price of approximately $4.68 billion at an average purchase price of roughly $29,582 per Bitcoin. The company said it had issued and sold a total of 403,362 MSTR shares to fund the purchase.

The big players’ appetite for crypto accumulation should serve as yet another layer of assurance for the small investor. Based on reports surfacing in September, there was an undisclosed entity, rumored to be Larry Fink's BlackRock, that has stealthily accumulated a staggering $3 billion in Bitcoin over the past three months.

If confirmed, this would catapult the entity to be regarded as the third-largest Bitcoin holder globally. The holder’s identity aside, one thing is clear: the move comes after BlackRock’s filing for spot Bitcoin ETF application in June 2023. The firm’s filing for its first spot Bitcoin ETF has fueled optimism for further institutional adoption of cryptocurrencies.