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Potential Impact of SEC Approval on Bitcoin ETF: Analysts Differ on Market Response

With the SEC inching closer to approving a spot Bitcoin ETF after over a decade of rejections, analysts hold divergent views on the potential impact on the crypto market. Here’s a breakdown of perspectives

Mixed Opinions:

  • This week marked the 15th year since the mining of the first block on the Bitcoin blockchain, with ongoing appeals for SEC approval of a U.S. spot Bitcoin ETF for over a decade.
  • Analysts anticipate approval of at least one proposal among the current dozen or more, possibly as early as Friday.
  • Opinions on the market impact vary, with some cautioning against overestimating the immediate effects, while others anticipate a radical shift in supply and demand dynamics.

Gabor Gurbacs’s View (VanEck):

  • Gabor Gurbacs, the director of digital assets strategy at VanEck, suggests that while a spot ETF will create significant long-term value, initial flows may only amount to “a few hundred million of (mostly recycled) money.”
  • Gurbacs cautions against overestimating the initial impact of U.S. Bitcoin ETFs, emphasizing a more gradual effect over the long term.

Potential Supply Shock:

  • Other analysts anticipate a massive influx of institutional demand, requiring ETF issuers to purchase tens of billions of dollars worth of Bitcoin.
  • This scenario could lead to a radical shift in supply and demand dynamics, with some analysts predicting a potential “supply shock.”
  • A decline in exchange balances to a five-year low in October is seen as a sign that holders are storing Bitcoin in personal wallets, signaling reduced inclination to sell.

Comparisons with Gold and Traditional ETFs:

  • Analysts draw comparisons with the SPDR Gold Shares ETF (GLD), the first spot gold ETF in the U.S., which amassed $1.9 billion in its first four weeks and grew to $4.8 billion by the end of the first year.
  • Invesco’s QQQ, an ETF tracking the Nasdaq-100 index, gathered $847 million in the first 30 days after its 1999 launch.
  • The ProShares Bitcoin Strategy ETF (BITO), based on Bitcoin futures, attracted around $1.5 billion in its first 30 days after introduction in October 2021.

BITO’s Performance:

  • BITO, investing in regulated CME futures, has closely tracked Bitcoin’s spot price since inception and accumulated $1.65 billion in total assets as of Thursday.
  • Despite exposure to rollover costs, BITO has served as a viable option for those seeking Bitcoin exposure without direct ownership and storage concerns.

As the crypto community awaits potential SEC approval, the market’s response remains uncertain, hinging on factors such as investor behavior, institutional demand, and the overall evolution of Bitcoin ETFs in the financial landscape.

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