“The Bitcoin ETF Countdown: What Happens if it Flops?”

Investors have been eagerly awaiting a spot Bitcoin ETF for a decade, and it now appears that one may be on the horizon. The price of Bitcoin surged on Monday following reports that BlackRock, the world’s largest asset manager, was closer to receiving approval from the U.S. Securities and Exchange Commission (SEC) for its Bitcoin ETF application.

Analysts and experts in the field have predicted that a crypto ETF (exchange-traded fund) is likely to hit the market in January, or possibly even sooner. However, SEC approval is still far from guaranteed, and the Commission has previously hesitated to approve the long-awaited product. An ETF would track the price of Bitcoin, allowing investors to gain exposure to the asset by purchasing shares rather than dealing with digital wallets, exchanges, or private keys. By eliminating the technical hurdles, some analysts and Bitcoin advocates have argued that such a fund could lead to a surge of capital into the Bitcoin market.

However, not everyone is convinced that a Bitcoin ETF will live up to the hype. In July, J.P. Morgan researchers pointed out that spot crypto ETFs in Canada and Europe have not yet moved markets with large investor interest. Eric Balchunas, an analyst at Bloomberg Intelligence, told Decrypt that there “may be a bit of a gap between the hype and the actual demand early on,” adding that when a Bitcoin ETF does finally start trading on a stock exchange, it may not perform as well as the first futures crypto ETF did when it launched two years ago and broke records.

A futures crypto ETF differs from a spot market ETF in that investors purchase shares that provide exposure to contracts that bet on the future price of crypto, rather than the asset itself. Despite denying spot market applications for years, the SEC approved the futures product at the peak of the bull market.

“I wouldn’t be surprised [if a spot market Bitcoin ETF] way underperforms flow-wise BITO [ProShares Bitcoin Strategy ETF] because BITO was launched at the peak of the mania,” Balchunas said. “I’m preparing for something that’s much more mild than BITO, but I want to think in three years, five years, it’ll be pretty successful.”

BITO began trading in October 2021, when Bitcoin was trading at $64,000 per coin. There was a voracious appetite for everything crypto at the time, and the product traded $280 million in shares in its first 20 minutes. By the time the market closed on day one, nearly $1 billion in shares had been traded.

However, the price of every digital asset has since plummeted, and the industry has been rocked by bankruptcies, hacks, and scams. This could deter potential Bitcoin ETF investors, especially those who have already suffered losses.

Ethereum futures ETFs, which launched earlier this month, also had a sluggish start. “A lot has happened, a lot of baggage has set in—even though Bitcoin came back this year—I think that it’ll be somewhat subdued,” Balchunas added.

Adam Guren, co-founder of crypto hedge fund Hunting Hill Digital, also pointed to liquidity constraints on today’s exchanges compared to 2021 as a consideration. Analysts have said that even attaining $500 million in day-one inflows would be a noteworthy achievement.

Additionally, the SEC has a lengthy list of Bitcoin ETF applications pending approval. Experts told Decrypt that there has been speculation that they may all be approved at the same time, which would disperse interest.

Despite the challenges, experts agree that the approval of a spot Bitcoin ETF would be beneficial for Bitcoin in the long run.

“More and more investors will be interested in a spot product than they would be in a futures product,” James Seyffart, an analyst at Bloomberg Intelligence, told Decrypt.

“If you’re looking at this over the year timeframe, I think that will show that the spot ETFs will have more demand in the futures ETFs,” he said.

Guren added that the approval of a spot Bitcoin ETF would be a “momentous milestone,” paving the way for “a more favorable environment for cryptocurrency investments in the United States.

Frequently asked questions and answer about spot Bitcoin ETFs:

Q 1: What is a spot Bitcoin ETF?

A: A spot Bitcoin ETF is an exchange-traded fund that tracks the price of Bitcoin. It would allow investors to gain exposure to Bitcoin without having to purchase the asset directly or deal with digital wallets, exchanges, or private keys.

Q 2: Why is a spot Bitcoin ETF important?

A: A spot Bitcoin ETF would make it easier and more accessible for investors to invest in Bitcoin. It would also provide institutional investors with a more regulated and compliant way to invest in the asset.

Q 3: When will a spot Bitcoin ETF be approved?

A: The SEC has not yet approved a spot Bitcoin ETF. However, there are a number of applications pending approval, and it is possible that a spot Bitcoin ETF could be approved in early 2024.

Q 4: What are the benefits of investing in a spot Bitcoin ETF?

A: The main benefit of investing in a spot Bitcoin ETF is that it provides investors with an easy and accessible way to gain exposure to Bitcoin. Spot Bitcoin ETFs are also traded on regulated exchanges, which provides investors with additional protection.

Q 5: What are the risks of investing in a spot Bitcoin ETF?

A: The main risk of investing in a spot Bitcoin ETF is the price volatility of Bitcoin. Bitcoin is a volatile asset, and its price can fluctuate wildly. Additionally, spot Bitcoin ETFs are still a relatively new product, and there is some uncertainty about how they will perform in different market conditions.

Q 6: How do I invest in a spot Bitcoin ETF?

A: Once a spot Bitcoin ETF is approved, you will be able to invest in it through a brokerage account. To do this, you will need to open an account with a brokerage that offers spot Bitcoin ETFs. Once you have opened an account, you can place an order to buy or sell shares of the ETF.

Q 7: What is the future of spot Bitcoin ETFs?

A: The future of spot Bitcoin ETFs is unclear. However, if a spot Bitcoin ETF is approved, it is likely to be a popular product among investors. Spot Bitcoin ETFs could also help to legitimize Bitcoin and make it more mainstream.

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