Bitcoin (BTC) futures ETFs have already been approved, launched, and triggered such significant price gains that they’ve sent the primary cryptocurrency to the heights of popularity. Bitcoin hit its ATH in November, two years ago, due to the approval and launch of the first BTC futures ETFs, which encouraged those who had previously flirted with the idea of investing in Bitcoin to act accordingly. Besides those who have already learned how to buy Bitcoin online and put the lesson into practice, new interested parties have jumped on the bandwagon, triggering unforeseen and unparalleled performance growth.
Now, it’s not far-fetched that many expect the same optimistic and favorable scenario to unfold again when the SEC finally approves the Bitcoin spot ETFs. The SEC has repeatedly reviewed submissions, postponing the final decision until the first quarter of 2024. Interestingly, many pundits associate this event with two scenarios: the exponential growth of Bitcoin’s price with the halving contributing to it and the slow disappearance of crypto exchanges.
How pertinent and justifiable are these suppositions? Should investors worry and prepare for the end of the exchange era?
Could freshly developed tools take over the well-rooted ones?
As widespread as the concept of exchange-traded funds is, as puzzling and vague as it can be for many lacking a solid foundation in today’s financial markets. Strengthening knowledge of the upcoming economic developments that will boost exposure to Bitcoin for everyone starts with decoding the ins and outs of the ETFs.
ETFs represent a type of security or fund typically traded on exchanges, primarily associated with Bitcoin assets. Similarly, Ethereum ETFs offer exposure to investments linked to the cryptocurrency in question. Investors can acquire shares on the open market and utilize the proceeds to construct a portfolio of assets structured on a stock market, market index, or other asset class, with Bitcoin making the case for the in-development investment tools of the moment.
A BTC ETF empowers investors to leverage the fluctuations of Bitcoin without literally holding Bitcoin itself and exposing themselves to all the complexities involved. For it will become so effortless and more manageable to explore crypto and capitalize on it this way, some connoisseurs hold a rather extremist perspective and deem crypto exchanges irrelevant in the distant future. No justification or proof exists to back up any supposition or opinion, so the only thing left to do is see how the dynamics between the many crypto investment sources will alter.
Futures and spot BTC ETFs – where’s the difference?
Hearing about ETFs could be perplexing if there isn’t a solid foundation of knowledge. Bitcoin futures ETFs have already been approved and launched, coinciding with the asset’s ATH recording. October 2021 saw the acceptance and launch of the futures BTC ETF, which catapulted the asset to new heights, reaching an astronomical price of $69,045.00. The valuation was hit on the tenth of November and resulted from the SEC’s approval of listing BTC futures ETFs.
Futures BTC ETFs bring about other costs and profits compared to spot BTC ones and potential expenses linked with rolling over or establishing the former aren’t excluded. Furthermore, the former can either increase or reduce losses and gains, being built to offer leveraged or inverse exposure to the leading asset’s price.
On the other hand, spot BTC ETFs offer investors exposure to the current bitcoin market price, where the associated term “spot” comes from. A spot BTC ETF usually has bitcoins as foundational assets and aims to monitor BTC’s live price as accurately as possible.
Some spot Bitcoin ETFs already exist, like CBTC, but one can find them outside of the U.S., such as in Canada or Europe.
The case of unfair treatment from the SEC
Indeed, there’s a lot of noise regarding the discrepancy between the treatments accorded to the two similar investment tools. On the one hand, the SEC approved the futures BTC ETFs in 2021, now drawing its fair share of criticism and revolt. Furthermore, SEC reps failed to explain why the listing of futures BTC ETFs received the green light, but spot BTC ETFs have been consecutively postponed. The court ruling exclaimed that this unjustified treatment offered to two like products is unlawful, emphasizing the lack of a pertinent explanation exposed to the broader audience. On the other hand, Grayscale’s proposition was treated differently, just as the submissions of Hashdex, Fidelity, BlackRock, and Invesco, among others, were. Now, the numerous applications for spot BTC ETFs from more than ten financial entities, including those enumerated, are up in the air.
Inevitably, scenarios like BTC ETFs mowing down crypto exchanges arise
Justifiably, all sorts of suppositions and presumptions are born anytime a new development breaks into the market, which is also true with spot BTC ETFs. A share of the crypto community considers that lower transaction costs brought about the potential spot BTC ETFs could leave crypto behind for some investors, thus tipping the scale in favor of the newest creations and wiping the rooted crypto exchanges off investors’ maps.
ETF analysts consider the upcoming investment vehicles to take their toll on the relevancy of crypto exchanges in the financial sphere. The crypto community awaits the proposed exposure-building tools in the U.S., as they’ve already been approved in other parts of the world, benefiting investors greatly. However, analysts bring attention to the potential, undesired aftermaths that crypto exchanges could face.
Some industry analysts have already forecasted the inception of trading on a spot Bitcoin ETF in the first quarter of the subsequent year. If things go as planned, the inaugural spot BTC ETF could occur close to the reward-slashing halving event, raising expectations about a possible bull run.
Some, such as Adam Back, the Blockstream CEO, consider the joyous scenario where BTC hits an unmet $100,000. According to other reputed entities in the crypto space, Bitcoin could come as close as $1 million after the halving and maiden BTC ETF take place.
Once approved, the newly-presented investment vehicles and the venerable, widespread crypto exchanges could battle for supremacy. A potential spot BTC ETF could signal danger for crypto exchanges, and the world will have to watch for the red flags and manage their investment preferences accordingly.
Spot Bitcoin ETFs are yet to be approved and established, but assumptions and suppositions regarding their potential consequences on crypto exchanges have already been vociferated.
Disclaimer: Nothing presented here in this article offers any kind of financial or legal advice. Be sure to do your own research and make decisions on your OWN research.
