The emergence of multiple filings for Bitcoin Exchange-Traded Funds (BTC ETFs) has marked a significant milestone in the evolution of the crypto market. These financial instruments have garnered considerable attention from investors, traders, and financial regulators alike.
BTC ETFs, designed to provide exposure to the volatile and innovative world of crypto, hold the potential to reshape the crypto landscape and traditional financial markets.
BTC ETFs could boost the crypto to the tune of billions
In August, a United States appellate court ordered the Securities and Exchange Commission to reconsider its denial of Grayscale’s BTC ETF application. Unnoticed repercussions of this decision include the potential influx of $600 billion in new money into the crypto market.
ETFs offer investors a regulated means of gaining exposure to various asset classes, including Bitcoin. Similar to how the iShares MSCI Brazil ETF and the VanEck Brazil Small-Cap ETF have democratized investment in the Brazilian market, the approval of a BTC ETF could democratize investment in the crypto sector.
According to a September report by Bernstein analysts, a Bitcoin exchange-traded fund might generate an estimated $600 billion in new demand, more than doubling Bitcoin’s current market cap of approximately $550 billion.
However, these forecasts are hypotheses, as the actual outcome will depend on a number of variables, including market dynamics, company strategies, and regulatory responses. Notably, the SEC has already delayed its judgment on Cathie Wood’s Bitcoin ETF application multiple times.
In August, Cathie Wood anticipated these delays, asserting that she believed the SEC would simultaneously approve multiple Bitcoin ETFs. However, on September 26, the SEC extended the decision period to January 10.
SEC Chair Gary Gensler’s delays and rejections of Bitcoin ETF applications have attracted criticism and exacerbated investor frustration. A bipartisan group of legislators urged Gensler this month to grant immediate approval for an ETF, contending that after the Grayscale court decision, there is no reason to deny spot crypto ETFs, which they believe would enhance investor protections.
James Seyffart, a Bloomberg ETF analyst, opined that the SEC’s recent decisions may have diminished the likelihood of ETF approval in 2023. The third week of October is scheduled for the review of filings from significant players such as BlackRock, Bitwise, and Wisdomtree.
Approval of Bitcoin ETFs would be a major step towards mainstream crypto adoption. The court’s decision casts doubt on the SEC’s exclusive authority over digital assets, indicating that other entities, such as Congress and the courts, can influence crypto regulations. This could contribute to broader crypto acceptance, making Bitcoin investing more accessible and regulated and attracting more capital to the crypto market.
BTC’s current market performance
While BTC is on track to halt its six-year losing skid in September, a minor drop ahead of what could be an impending federal government shutdown could jeopardize this month’s gains.
The largest crypto by market cap changed hands at $26,800 on Friday afternoon, showing a 3.2% return so far this month. However, BTC has fallen 1.6% from the $27,400 it briefly touched on Thursday.
Extending this negative price action throughout the weekend could jeopardize BTC’s preliminary positive monthly return, given the crypto began September at around $26,000.
As market participants anticipate futures-based exchange-traded funds to become online early next week, ETH remained relatively flat at around $1,660.
Ripple’s XRP, Solana’s SOL, and TRON, the native currency of the Tron network, all gained 3%-5%, outpacing the overall digital asset market.
Will BTC stand as a hedge against inflation?
The US economy has been in turmoil recently, with the Personal Consumption Expenditure (PCE) inflation index jumping by 3.5% in the last year. Even when volatile food and energy industries are excluded, it is clear that the Federal Reserve’s efforts to control inflation have fallen short of its 2% goal rate.
Treasuries in the United States have lost a whopping $1.5 trillion in value as a result of these rate increases. This has caused investors to wonder whether Bitcoin and risky assets, such as the stock market, will succumb to higher interest rates and a monetary strategy targeted at slowing economic development.
As the US Treasury continues to flood the market with debt, there is a real possibility that interest rates may rise much higher, aggravating fixed-income investors’ losses. An extra $8 trillion in government debt is scheduled to mature in the next 12 months, adding to financial instability.
