In January 2024, a milestone was achieved in the Crypto trading industry: several spot Bitcoin ETFs were approved by the US Securities and Exchange Commission (SEC).
This moment has forever changed the Cryptocurrency market. Months later we are only now beginning to fully understand the impact of these products.
Let’s find out exactly how, according to PrimeXBT’s expert analysis.
What is an exchange-traded fund?
An exchange-traded fund (ETF) is an investment product that holds an asset, or collection of assets. Shares of such a fund are traded intraday on various exchanges, allowing investors to gain indirect exposure to the underlying assets featured in the ETF.
The largest ETF issuer in the US is BlackRock, with more than a third of the overall ETF market share. BlackRock is the world’s largest asset manager, with roughly $10 trillion in assets under management. BlackRock is among 11 different Bitcoin ETF providers that investors are able to choose from today.
Why is the Bitcoin spot ETF important?
The Bitcoin spot ETF is significant for a variety of reasons:
- ETF providers must own the underlying asset to offer shares of the ETF to clients. With a scarce asset like Bitcoin, any demand absorbs what limited supply is available of the pioneering Cryptocurrency;
- Bitcoin ETFs offer trust and safety not commonly associated with buying spot BTC. For example, institutions don’t have to worry about BTC custody – the ETF provider is responsible instead. This is reassuring for institutions dealing with substantial capital, or retail investors who aren’t comfortable setting up a Cryptocurrency wallet of their own;
- ETFs are traded on traditional exchanges and brokerages, where many investors are already doing business. Being able to track the performance of these ETFs adds an added layer of convenience and comfort that otherwise isn’t possible.
The impact of supply and demand on Bitcoin price
According to a report by Barron’s “the new ETFs are buying nearly 6,500 Bitcoins per day.” While this figure was already much higher than the daily supply of BTC generated by miners, as of 20 April, the supply was slashed in half following the Cryptocurrency’s halving event.
After the halving, the daily block reward miners receive dropped to just 450 BTC from 900 BTC. With ETF demand absorbing roughly 6,500 BTC daily on average, this is more than 14 times what miners are generating each day.
Because financial markets rise and fall based on supply and demand, the ETFs combined with the halving have greatly tipped the scales in favour of Bitcoin price appreciation. Since the ETF approval, Bitcoin price climbed from $38,000 per coin to $73,000 in only the first three months after the SEC’s approval.
Why this has changed the Crypto trading industry forever
ETFs have caused a dramatic shift in demand for Bitcoin by creating new products that appeal to a broader consumer base. We’ve already explored how this environment favours price increases, but there is still much more to consider.
Bitcoin is now being widely adopted by ETF buyers, who have a much longer investment time horizon. These so-called stronger “hands” will hold longer and help smooth out the volatility that Bitcoin is notorious for. This could lead to diminished returns between each cycle, but with much less drawdown to worry about.
Furthermore, the success of Bitcoin ETFs are undeniable. According to data, BTC ETFs now hold around 50% of the asset value that Gold ETFs represent. Yet BTC ETFs have only been available for just over three months, while Gold ETFs have been around for 20 years now. This thriving interest could also lead to the creation of Ethereum ETFs, XRP ETFs, Litecoin ETFs, and more, as investors seek out such products.
How to take advantage of the Bitcoin ETF effect with PrimeXBT
Although Bitcoin price has grown from $38,000 to $73,000 at its peak since the spot ETFs were approved in the US, prior to that, Bitcoin price had more than doubled from a low of $16,000. Investor speculation caused Bitcoin price to “front run” the ETF approvals, causing a new all-time high in BTCUSD before the halving, for the first time ever.
Bitcoin traders can continue to look for potential upside targets above $100,000 over the next several months to a year from now, as the bull market blossoms further. Potential also exists on certain altcoins with a higher probability of getting an ETF wrapper. Much like Bitcoin price was front run, altcoins could see a similar boost ahead of an actual approval.
PrimeXBT Crypto Futures lets traders go long and short on the most popular Crypto assets, from Bitcoin, Ethereum, XRP, and Litecoin, to more obscure altcoins like Dogecoin, Cardano, Polygon, or Filecoin. Adjustable leverage of up to 200:1 is offered, as well as built-in charting software, risk management tools, and some of the lowest fees around.
Summary
With the increased market acceptance of Cryptocurrencies, a Bitcoin bull market is in full bloom. And with so much opportunity ahead, it is important to get ahead of the trend with a platform you can trust.
PrimeXBT, in addition to low fees and powerful trading tools, was recently awarded “Best Cryptocurrency Broker” for 2024 by the prestigious ADVFN awards. This highlights the trust and safety the brand is best known for. When seeking to capitalise on the drastic change that Bitcoin ETFs have caused, look no further than PrimeXBT.
Disclaimer: The content provided here is for informational purposes only and is not intended as personal investment advice. Past performance is not a reliable indicator of future results. The financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. Virtual assets are inherently volatile and subject to significant value fluctuations, which could result in substantial gains or losses. These products may not be suitable for all investors. Before engaging, you should consider whether you understand how these leveraged products work and whether you can afford the high risk of losing your money. PrimeXBT does not accept clients from Restricted Jurisdictions as indicated in our website.
