Bitcoin ETFs have been a hot topic in the cryptocurrency market, with many investors eagerly awaiting their approval. According to Coinbase Institutional’s David Duong, the approval of spot-based Bitcoin ETFs is already partially priced in, and the expected influx of money into these ETFs will likely happen over time. In recent months, Bitcoin has outperformed other cryptocurrencies due to traders pricing in the potential approval of these ETFs.
Bitcoin’s Performance Linked to Spot-Based ETFs
Since BlackRock and other traditional finance heavyweights filed for spot-based BTC ETFs in mid-June, Bitcoin has gained 8%, while Ether has lost 7.5%. This divergence in performance indicates that the potential approval of one or more spot Bitcoin ETPs has already been partially priced in. As a result, it is less clear how much more Bitcoin could outperform once a favorable SEC decision occurs.
Impact of Spot-Based ETFs on the Regulatory Environment
The impact of the potential launch of spot-based ETFs would go beyond flows, signaling a “tacit shift” in the regulatory environment, which could bode well for market valuations. However, these expected inflows into highly-anticipated ETFs tend to materialize over time. For example, the SPDR Gold Shares ETF drew just $1.9 billion in inflation-adjusted terms in the first 30 days from the launch.
Bitcoin’s Edge Over the Broader Market
Bitcoin may lose its edge over the broader market for some time once the spot-based ETF is approved, as seen following the launch of futures-based ETFs in October 2021. Nevertheless, the potential launch of spot-based ETFs could bring about a positive change in the regulatory environment, which would benefit market valuations in the long run.
Investor Expectations and the Future of Bitcoin ETFs
As the approval of spot-based Bitcoin ETFs is already partially priced in, investors should be prepared for the possibility that Bitcoin’s outperformance may not be as significant as expected once the ETFs are approved. In addition, the influx of money into these ETFs will likely happen over time, meaning that the immediate impact on the market may not be as substantial as some may hope.
Despite these factors, the approval of Bitcoin ETFs remains an important milestone for the cryptocurrency market. The tacit shift in the regulatory environment could lead to a more favorable outlook for cryptocurrencies in general, and the eventual inflow of funds into Bitcoin ETFs will undoubtedly contribute to the growth and stability of the market.
Conclusion
In conclusion, the approval of spot-based Bitcoin ETFs is already partially priced in, and the expected influx of money into these ETFs will likely happen over time. Bitcoin may lose its edge over the broader market for some time once the spot-based ETF is approved, as seen following the launch of futures-based ETFs in October 2021. However, the impact of the potential launch of spot-based ETFs would go beyond flows, signaling a “tacit shift” in the regulatory environment, which could bode well for market valuations. Investors should keep an eye on developments in the regulatory landscape and be prepared for the gradual materialization of inflows into Bitcoin ETFs.
