• Why the SEC’s approval of a Bitcoin ETF could be a game changer

  • Following a flash crash, some consolidation, and yet another crypto ban by China, Bitcoin fell by more than 20% from its multi-month high of more than $52K. September hasn’t been kind to the king coin, and after a particularly bleak month, BTC needed a massive boost. As the market anticipated Bitcoin’s September lows giving way to October highs, it hoped for a miracle to boost the price of BTC.

    At this point, Bitcoin ETFs appeared to be the light at the end of the tunnel, capable of pulling the king coin back up. Over the last few days, there has been speculation that Bitcoin ETFs could be available by the end of October, following the comments of Mike McGlone, a senior commodity strategist at Bloomberg Intelligence.

    He also stated that external events such as the massive volume of trade seen by Canadian BTC ETFs were among the major factors that pushed the SEC toward a positive ETF decision, despite the fact that no decision could be made as of yet.

    If Bitcoin ETFs are approved in the United States, it will not only be a major crypto milestone, but it will also help the top coin’s adoption. But, before delving into the future of Bitcoin ETFs, it’s worth looking at how ETFs have performed in the past.

    The history of ETFs appears to be favorable.

    When Gold ETF was introduced, it proved to be a game changer; in fact, in just seventeen years, GLD ETF has about $57 billion in assets under management, making it the world’s 20th largest ETF. It was an instant success, and GLD eventually came to control over 1,000 tonnes of gold to back up its value. People have speculated that a portion of the gold price increase, from $300 per ounce to $1,600 between 2004 and 2010, was caused by the ramping up of physical gold ETFs.

    Furthermore, when Grayscale launched GBTC (an ETF-like investment option) in 2013, BTC’s price increased by nearly 1200 percent from January to April 2013. Its price increased by more than 700 percent in the second half of the year, reaching $1000 by December 2013.

    This is how Bitcoin ETFs will drive up prices.

    Bitcoin ETFs may create additional demand pressure, which could affect prices. According to an Ecoinometrics newsletter, without a proper physically-backed Bitcoin ETF in the US, ETF-like investment vehicles (including GBTC) already capture 4% of the maximum supply. Another Bitcoin ETF could increase that fraction to around 6% or even 8%.

    Furthermore, because BTC adoption is already high and institutional sized capital has increased since October 2020, the chances of a BTC ETF changing the game for the better are high. Bitcoin transaction volumes have remained high, indicating that there is a lot of money moving around in the space. Furthermore, institutional-sized capital with a transaction size of more than $1 million accounted for approximately 82 percent of settled volume over the previous week. This notable increase in institutional sized capital began in October 2020 and has been on an upward trend ever since.

    However, nothing can be said for certain at this time because the SEC’s decision is still pending. Aside from that, the SEC would have to approve a Bitcoin ETF that is backed by actual spot BTC. Nonetheless, approval of a Bitcoin ETF in the United States would be a game changer for the asset.

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