As the US moves closer to launching a Bitcoin (BTC) spot exchange traded fund (ETF), enthusiasts are pondering the range of benefits the offering will bring.
A recent report by investment firm Bernstein states that the approval of a spot ETF will provide a seal of legitimacy for Bitcoin and other virtual currencies. The report predicted an influx of institutional capital into the ecosystem, noting that the size of the ETF could be as much as 10% of BTC’s market cap in less than three years.
The consequences of an injection of capital into the markets will trigger a price rally for the entire cryptocurrency market after a long bear market.
The report posits that the US Securities and Exchange Commission’s (SEC) approval of a spot bitcoin ETF application would open the floodgates for more applications, similar to the approval of a BTC futures ETF in 2021.
Price spikes and institutional interests aside, a spot-based Bitcoin ETF could change the landscape for digital asset custody. Year-to-date demand for institutional-level custody solutions has surged, with the custody space reaching over $250 billion in value.
The SEC has been inundated with applications from leading Wall Street firms seeking approvals to launch their spot bitcoin ETFs. After a series of regulatory back-and-forths, the Securities and Exchange Commission extended its review of Ark 21Shares’ filing, making it the second extension of the filing by the SEC.
“Given interest from leading global asset managers in Bitcoin (BTC) spot ETFs and potential mechanisms to address SEC objections, the likelihood of approval has increased,” the report said.
Several theorists point to the domino effects of Canada’s Purpose Bitcoin ETF as it amassed over $400 million in assets in less than 48 hours of its launch. While the US is taking a slow and steady approach, experts are touting Southeast Asia as the next region to launch a spot BTC ETF.
Disadvantages of a spot ETF
Despite all the benefits, critics warn that offering a spot bitcoin ETF has several flaws. Perhaps the biggest downside is investors’ inability to withdraw from the underlying instruments, a flaw at odds with Web 3’s ethos.
Another downside is the lack of unified BTC pricing, which could open up multiple opportunities for market arbitrage. The SEC remains suspicious of existing custody solutions, citing insufficient investor protection guard rails as the reason for denying approval.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.