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- Bitcoin Spot ETF Anticipation: The crypto sector eagerly awaits the transformative approval of Bitcoin Spot ETFs, seen as a catalyst for a significant surge in investments from various entities.
- Timelines and Predictions: SEC-set timelines hint at a critical decision, potentially as early as January 2024. Analysts, such as those from JPMorgan and Bloomberg, express confidence in approval, projecting a 75% likelihood by year-end and an impressive 95% probability by the close of 2024.
- Market Impact and Projections: The potential approval of Bitcoin spot ETFs is expected to profoundly impact the overall crypto market, with bullish sentiment and price projections, including speculation of Bitcoin price reaching $40k before 2024. The market eagerly awaits the regulatory green light for this groundbreaking financial instrument, poised to reshape Bitcoin investment dynamics.
ETFs an Overview:
Crypto ETFs made a significant impact on the investing market with the introduction of BTC and ETH ETF propositions. An ETF is a hybrid investment vehicle, blending features of individual stocks and mutual funds, offering a diversified portfolio of assets traded on major stock exchanges.
Unlike mutual funds valued once at the end of the day, ETFs reflect real-time price changes, allowing investors to trade them throughout the day like regular stocks. A Bitcoin ETF is a natural evolution tailored to the crypto industry, mirroring the value of Bitcoin. It enables participation in the BTC market without the need for direct ownership, simplifying the process for traditional investors, who can have a stake in Bitcoin’s value fluctuations without holding BTC itself.
Learn More: Index Funds vs Crypto ETFs
What is a Bitcoin ETF?
A Bitcoin futures ETF is an exchange-traded fund comprised of assets linked to the price of Bitcoin. Unlike being traded on a crypto exchange, these ETFs are traded on a conventional exchange.
Presently, the underlying assets in Bitcoin futures ETFs consist of Bitcoin futures contracts, which are traded on the Chicago Mercantile Exchange. A futures contract is a standardized agreement in which two parties commit to exchanging a specific quantity of assets on a designated day at a predetermined price.
The creation of these ETFs involves acquiring futures contracts from the CME Group and assembling them into a fund. Subsequently, the company makes the fund available to investors for purchase on an exchange. The futures contracts within the fund are then actively managed.
Even though the ETFs are yet to be approved and implemented, there are two types of BTC ETFs can you can explore. They are:
- Bitcoin spot ETFs custody actual BTC by acquiring an equivalent amount from the market when investors buy shares, ensuring a direct correlation between ETF shares and Bitcoin holdings. This, combined with the rebalancing process, provides a reliable way to track Bitcoin’s price fluctuations.
- Bitcoin futures ETFs, in contrast, don’t own Bitcoin but involve investors in futures contracts, where they commit to buying or selling Bitcoin at predetermined prices on specific dates. The value of futures ETFs is influenced not only by Bitcoin’s spot price but also by expectations of its future price, potentially causing deviations from the spot price. Futures ETFs offer flexibility, with the ability to short BTC, introducing their own advantages and risks not present in Bitcoin spot ETFs.
Additional Read: Bitcoin Spot ETF vs Bitcoin Futures ETF
Comparative Analysis of Bitcoin & Ethereum ETF
A good number of globally available exchange-traded funds (ETFs) for Bitcoin (BTC) and Ethereum (ETH) predominantly fall under the category of “futures ETFs.” These instruments enable traders to speculate on the future prices of BTC or ETH by investing in futures contracts associated with Bitcoin or Ethereum. These contracts involve agreements to buy or sell assets at predetermined prices on specified future dates.
In contrast, crypto spot ETFs offer direct exposure to the underlying crypto. Through a spot ETF, traders or investors can acquire these assets at their current “spot price,” eliminating the need for direct handling or management of the underlying crypto—a task often perceived as complex.
The ETF holds Bitcoin or Ethereum on behalf of its shareholders within a trust, and the ownership of a portion of this trust is represented by ETF shares.
Given that spot ETFs require the actual purchase of Bitcoin from the spot market, many argue that they hold an advantage over futures ETFs. This is because spot ETFs influence genuine demand for Bitcoin on the spot market, consequently impacting the BTC price.
Moreover, BlackRock, the world’s largest asset manager, has submitted an application for a spot Bitcoin ETF. With a historical track record of 575-1 for ETF approvals, the crypto industry eagerly anticipates the potential approval of the inaugural spot Bitcoin ETF.
Spot ETFs are traded on exchanges, akin to regular stocks, facilitating easy buying and selling during market hours. However, as of now, there are no approved Bitcoin spot ETFs in the United States.
Timelines for Bitcoin Spot ETFs
In 2023, notable traditional financial institutions submitted a series of applications for the approval of BTC spot ETFs.
The approval process by the SEC for a Bitcoin Spot ETF begins with the submission of an application by the ETF sponsor. Subsequently, the SEC scrutinizes the application, releases it for public commentary, and may request modifications. Critical decision dates are established, encompassing outcomes such as approval, denial, or potential delays for additional scrutiny—this is particularly anticipated for a pioneering ETF in the United States.
However, so far, all the propositions have been put under tremendous scrutiny, and the filing of the ETFs has been put into multiple delays and reviews by the SEC. Earlier this week, November 29, 2023, the BTC-spot ETF application reviews for Franklin and Hashdex had been delayed for further review and are now pending until January 1, 2024.
— James Seyffart (@JSeyff) November 28, 2023
According to ETF analysts, January 2024 might be the ‘clear runway’ for the ETF approvals. Till the decisions are made, the crypto communities are patiently waiting for a confirmed date.
Okay, we’re nearing in on deadline dates for 3 spot #Bitcoin ETF applications. I want to get ahead of it because there’s a pretty good chance we’ll see delay orders from the SEC. Delays WOULD NOT change anything about our views & 90% odds for 19b-4 approval by Jan 10, 2024 pic.twitter.com/LE7sOlHAHM
— James Seyffart (@JSeyff) November 14, 2023
Timelines for Ethereum Spot ETFs
Following the surge in ETF filings for Bitcoin ETFs, there has also been a lot of interest garnering for the proposition of Ethereum ETFs. All the ETF filings have tp undergo the same process till its approval.
Unlike Bitcoin spot ETFs, the timelines for the approval of Ethereum spot ETFs are less clearly defined and not as widely publicized. Nevertheless, certain filing discussions for well-known Ethereum spot ETFs are listed in the tweet.
Actually this was originally filed on 9/29 and i never saw it. This is an amendment — either way here’s the firms who have filed for spot ETH etfs pic.twitter.com/4RKYrfY7P8
— James Seyffart (@JSeyff) October 18, 2023
ETF’s Affect on BTC Price
The approval of a Bitcoin spot ETF is highly anticipated within the crypto sector, and some are also anticipating it triggering a substantial increase in investments from various entities. Coupled with that, the BTC enthusiasts also have the Bitcoin halving event to look forward to in the Q2 of next year.
As per recent insights from analysts at JPMorgan, approval for Bitcoin spot ETFs is expected “within months,” with the earliest possible decision slated for January 2024, potentially less than a month away.
NEW: @JSeyff & I are upping our odds to 75% of spot bitcoin ETFs launching this yr (95% by end of ’24). While we factored Grayscale win into our prev 65% odds, the unanimity & decisiveness of ruling was beyond expectations and leaves SEC w “very little wiggle room” via @NYCStein pic.twitter.com/IyEGmWjuHa
— Eric Balchunas (@EricBalchunas) August 30, 2023
Additionally, Bloomberg senior analyst Eric Balchunas estimates a 75% likelihood of a Bitcoin spot ETF approval by the end of this year and a 95% probability by the conclusion of the following year (2024).
With Bitcoin price reaching its highs so close to the halving event, the ETF approval is set to create a bigger bullish sentiment across the crypto community. The analysts are of the opinion that the BTC price is set to touch the $40k mark before 2024, propelled by the anticipation of the Bitcoin ETFs. Further changes in the market are yet to be seen and gaged as the approval decision comes closer.
Read On: Bitcoin Price Prediction
ETF Impact on the Overall Crypto Market
- Increased Market Accessibility: ETFs offer a more accessible gateway for traditional investors to enter the crypto market, potentially drawing substantial institutional capital and fostering mainstream acceptance.
- Liquidity Boost: The arrival of these ETFs is anticipated to infuse liquidity into the market, as they provide a convenient, regulated vehicle for investors to trade crypto assets, potentially increasing market efficiency.
- Price Stability: With increased liquidity and participation, ETFs could contribute to reducing price volatility in the crypto market, promoting a more stable trading environment.
- Market Validation: Approval of Bitcoin and Ethereum ETFs would serve as a validation of these crypto by regulatory bodies, enhancing their credibility and potentially attracting more investors.
- Diversification Opportunities: These ETFs could offer investors diversified exposure to the crypto market, allowing them to spread risk across different assets within a single investment vehicle
Learn More: Ethereum Price Prediction 2024
In conclusion, the crypto landscape is on the verge of a transformative moment with the widely anticipated approval of a Bitcoin spot ETF. The potential influx of investments from various entities adds an element of excitement to this development. Insights from JPMorgan analysts suggest that approval may be just months away, with a critical decision looming as early as January 2024. Bloomberg’s Eric Balchunas adds to the optimism, placing favorable odds on approval, projecting a 75% likelihood by the end of this year and a staggering 95% probability by the close of 2024. As the regulatory landscape evolves, the crypto market eagerly awaits the green light for this groundbreaking financial instrument, poised to reshape the dynamics of Bitcoin investment.
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