Bitcoin Spot ETF Approval: What’s Next?
2023 might have been an ordinary year for every enthusiast within the DeFI Space if the term “Spot ETF” had not been around. The Crypto ETF discussion has been going on since the early 2010s but it has gained momentum over the last couple of years due to the momentum behind the Spot ETF concept. As 2024 is here and some of the Spot ETFs are nearing their final decision, let’s take a look at the update behind the “Spot ETF” hype and what is on the horizon for the DeFI Space.
Decision on Bitcoin Spot ETF Approval…
The DeFI Space has only been around for less than two decades and it has continued to be a roller-coaster ride for everyone. It has experienced the highest of highs amid a worldwide pandemic during 2021 and the lowest of lows the year after. The Space continues to be filled with plenty of uncertainty whether it’s the direction of the market, the sustainability of the project, and the regulatory framework.
Bitcoin started as a Digital Currency that was meant to be an alternative to the fiat currency but over the years viewed as a Digital Asset that people can buy and trade. The DeFI Space generally also experiences a change of heart, it started off aiming to build a separate space from the traditional world but soon realized that these two aspects will always be interconnected as long as DeFI enthusiasts and institutions still operate within the traditional world.
The journey of the DeFI Space to its all-time high has also managed to change many perceptions of the doubters that turn into believers. A lot of the individuals who in the early 2010s doubted the potential of Bitcoin have eventually changed their view and turned into keen Maximalists. This change of perception is also experienced by many regulators who wished to ban Digital Asset ultimately to decide on building a Regulatory Framework to foster its potential.
The Spot ETF discussion is also the result of many individuals who changed their perception over the past couple of years because of the potential that the DeFI Space holds. Despite the underwhelming 2023 as many predicted, Bitcoin ended up thriving by the end of the year and closing with +154% which is enough to outperform many indexes within the traditional markets. With this performance, it’s fair to see why a lot of Investment Banking Firms and VCs might be interested in adopting Bitcoin to the Spot ETF context.
While the topic of ETF is nothing new within the DeFI Space as plenty of ETFs have been filed over the years by various institutions, it is Futures ETFs that have come to fruition in 2021. The main difference between Futures ETFs and Spot ETFs is that while the former invests on a basket of futures contracts of Digital Assets, Spot ETFs invest directly on the basket of the digital assets themselves based on their spot price within different markets.
Futures ETFs have been approved a long way back due to their regulation being quite similar to the current ETF from the traditional market as it is not investing in digital assets directly. The hurdle of the Spot ETFs is they require a different regulation for the digital asset that hasn’t been formalized yet within the US and that is why a lot of interested parties are still lining up and awaiting the final decision on the approval.
2024 obviously marks a decade-long journey for Spot ETFs going back to 2013 when Winklevoss Brothers came up with the idea for a Bitcoin Trust ETF that was eventually denied by the SEC. The attempt would soon be followed by Grayscale Investments and Biwise who would soon file their own Bitcoin Trust but would eventually withdraw its request amidst the regulatory concerns with this concept during the late 2010s and early 2020s.
Over the years these firms would continue to persist with the Spot ETF idea as dozens of fund issuers have a bitcoin ETF application currently in front of the SEC. Bitwise would continue to publish research addressing rebuttals to various Bitcoin ETF filings over the years. It was ArkInvest and 21Shares who kickstarted the latest wave of Spot ETF Filings in April 2023 as their persistence would eventually begin a positive trajectory within the market.
That idea obviously hasn’t gone unnoticed within the DeFI Space as asset management giant Blackrock would eventually raise the hype within 2023 to make the Spot ETF concept a reality. The conversation has been going on since the end of 2023 and nearing the supposed deadline in 2024. 21Shares President Ophelia Snyder offered insight on why there has been a “pattern-break” amid the recent ETF Filings as issuers are offering more details to regulators about how the funds would operate.
The long-awaited Bitcoin Spot ETF approval finally arrived on January 10 where 11 Bitcoin Spot ETFs are set to begin trading the next day. These 11 Bitcoin Spot ETFs include ARK 21Shares Bitcoin ETF (ARKB), Bitwise Bitcoin ETF (BITB), and Grayscale Bitcoin Trust (GBTC) just to name a few with more approvals expected to come within 2024. These would definitely present a huge excitement for the DeFI Space amidst the new journey with Bitcoin Spot ETFs.
The Path Ahead….
The Spot ETF approval is surely one of the most awaited events within so much so that many have marked its calendar for the announcement. It’s fair to see why as this approval opens up a new realm of possibilities for the DeFI Space and manages to bridge the gap with the traditional markets. This will in turn bring a fresh breed of institutional investors and capital inflows to the limited supply of Bitcoin which will surely impact its value in the long run.
It is predicted within less than a month, the spot ETFs will be boasting $10 billion of AUM, with inflows reaching one billion in one day alone. For context, these inflows should prevent a steady amount of liquidity to hold the value steady against strong market fluctuations and this is just the beginning. With more approvals coming to reality in 2024, we might also await the emergence of Blackrock with more than $9 Trillion of assets under its management.
Other than monetary benefits this Spot ETF should also be another significant step in having a regulatory compliance framework for the DeFI Space, especially in the U.S. where regulation is still awaiting. For years the DeFI Space has still waiting for the U.S., the reserve country of the world, to come up with its regulation but this approval will provide clarity on its stance to push this regulation into reality within 2024.
This would also serve as momentum for the exciting year within DeFI Space in 2024 ahead as one of its landmark events has presented a positive outcome. This positivity will be crucial in driving more enthusiastic and revolutionary projects to enter the DeFI Space. With more institutions and enthusiasts committed to the DeFI Space, it will in turn provide an opportunity for many innovative and sustainable projects to also join the ETF Journey just like Bitcoin & Ethereum did. Who will step up to the challenge?
We at Nagaya Technologies certainly believe that there is a huge potential to be found in the DeFI space. We hope that the development going around the world will be able to help nurture growth for the rest of 2024 and beyond. That is also why we created the world’s first hybrid digital assets called Nagaya which will soon be a part of the revolution needed for sustainable Digital Assets for the Global DeFI space. Interested to know more about Nagaya, you can visit our website at www.nagaya.co
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