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Investors in the cryptocurrency market are becoming increasingly confident that the US Securities and Exchange Commission will soon give the green light to an exchange-traded fund that invests directly in Bitcoin (BTC-USD). This narrative is also playing out in Bitcoin itself The price of the most famous token has increased by almost 35% compared to the previous month.
Still, some may be wondering what all the fuss is about. Proponents of a spot Bitcoin ETF (BTC-USD) have claimed that allowing such a product would make Bitcoin investing accessible to a wider range of investors and thus become a widely accepted asset class.
Coinbase Global (COIN), the largest crypto exchange in the US, said in a recent report that the product, if approved, could open up crypto markets to players in traditional finance, including registered investment advisors (RIAs), pension funds and other institutions have not had access to the asset class in the past.
In the long term, a spot Bitcoin ETF (BTC-USD) could add billions of dollars to the crypto market’s total capitalization, which stood at $1.38 trillion as of Thursday, Monday’s report said. “Although this will take time, we expect ETFs to lay the foundation for a more regulated environment, greater inclusion and significant growth in demand.”
But wait, there’s more. “The opportunity may be much larger than just allowing new capital to enter the crypto market,” wrote David Duong, head of institutional research at Coinbase. “ETFs will ease restrictions on large asset managers and institutions buying and holding Bitcoin, which will improve liquidity and price discovery for all market participants.”
Additionally, regulatory approval of a Bitcoin (BTC-USD) ETF “could also open the door to new products such as loans, futures and options.” If successful, it could multiply the existing crypto offering for accredited investors and significantly expand adoption .”
JP Morgan analyst Nikolaos Panigirtzoglou, meanwhile, argued that the approval of a spot BTC ETF would not lead to a flood of new money. In a recent note, he noted that these ETFs are already listed in Europe and Canada and have attracted “little interest from investors since their launch.”
BlackRock (BLK) is among the largest Wall Street firms awaiting approval of a spot BTC ETF that would allow investors to gain exposure to Bitcoin (BTC-USD) without having to hold the asset directly. The company filed for the iShares Bitcoin Trust in June, a move that caused crypto prices to rise as traditional finance continues to make inroads into the crypto space. Other asset managers vying to be first to market the product in the U.S. include WisdomTree, Valkyrie, Ark Invest and Invesco (IVZ).
When BlackRock (BLK) filed for the product in mid-June, the price of Bitcoin (BTC-USD) rose from around $26,000 to just over $30,000 in a matter of days. The token is now changing hands for under $36,000. The strong rally underscores increased investor optimism about the potential regulatory approval of a spot BTC ETF.
Some industry giants assume that the first approval will take place this year. Coinbase (COIN) also expects there is a good chance that at least one spot BTC ETF will be approved before the end of the year.
“Typically, the SEC extends its decision window as much as its regulatory framework allows, which in this case would be the final deadline for the ARK-21Shares Bitcoin ETF application of January 10, 2024,” Duong noted.
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