Ilan Solot outlines three facets of the Bitcoin ETF story and examines how the development of the current cryptocurrency uptrend may be impacted by this drama. Following significant ETF announcements, cryptocurrency may finally shed the “toxic asset” moniker that makes it appear risky to 90% of prospective investors.
BlackRock, WisdomTree Bitcoin ETF ambitions rebuild legitimacy of Bitcoin (BTC) as class
According to Solot’s analysis, frontrunning, actual liquidity flow (“when/if the product launches”), and reestablishing the legitimacy of the entire asset class should all be taken into account when analysing the Bitcoin ETF narrative and its effects on the performance of the cryptocurrency market.
After news broke that BlackRock and WisdomTree had filed for approval of a spot Bitcoin ETF with the SEC in the United States, the final section of the story gained momentum.
Solot used the fact that the previous two Bitcoin (BTC) micro-rallies had not brought in a sizable amount of money into publicly listed crypto-based investment vehicles to support his argument. Despite the strong performance of the BTC price, investors showed little activity, according to CoinShares’ Weekly Flow tracker.
Therefore, both of the price increases in Q1 2023 were either caused by captive capital moving around inside the system or by stories that developed inside the cryptocurrency sector itself, such as those about second-layer protocols, ZK-tech goods, liquid Ethereum (ETH) staking products, etc.
Additionally, investors’ need to protect themselves against global inflation and the instability of the banking sector drove liquidity to the cryptocurrency market. Solot acknowledges that just 3.5% of investors are prepared to hold more than 10% of their portfolios in cryptocurrencies and offer their customers to do the same, according to data by Nomura, a $5 trillion asset manager.
What does Bitcoin ETF means for retail? Three pillars
The introduction of the spot Bitcoin ETF might completely alter the landscape if it is authorised. First, it will neutralise the drawbacks of self-custody hazards of holding “physical” cryptocurrency.
The great majority of investors will then find it far more easy to invest in Bitcoin ETF. Technically speaking, they will be adding liquidity to yet another ETF in the same manner as before.
Working with a spot Bitcoin ETF is also preferable for tax reasons, especially in the US.
As previously reported by U.Today, yesterday, on June 30, 2023, the U.S. SEC rejected the ETF registrations by U.S. asset managers as “inadequate”; Bitcoin (BTC) fell by 4.12% in the minutes that followed this declaration.
