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Potential benefits and growth metrics related to the BTC ETF
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This week we provide a brief overview of the current status of the Bitcoin ETF applications: when the first spot ETF is likely to be approved, the benefits vs the existing options to buy Bitcoin in a regulated way, and the signs of adoption growing in anticipation of this milestone.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin fees increased by 60%, led by the ORDI BRC-20 token increasing in price by 150% this week
- Ethereum fees climbed by 48%, with Uniswap being the protocol consuming the most gas
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Both Bitcoin and Ethereum recorded $110M in net inflows to CEXs, a relatively modest amount relative to their market caps
Are We 1 Month Away From the Bitcoin Spot ETF?
After 10 years of rejections, it appears that the first Bitcoin spot ETF might be just one month away. The Ark Invest Bitcoin ETF application reaches its final deadline for the SEC to decide whether to accept or reject an ETF on January 10.
Based on multiple companies being approved simultaneously for the first Ethereum futures ETF, most market experts suggest there is a likelihood several Bitcoin spot ETFs would also be approved at the same time. Recent updates in Blackrock’s and Bitwise’s applications also suggest these entities may be preparing for an approval in early January even though their deadlines are later.
Source: IntoTheBlock’s Bitcoin ETF Perspectives
$13T in Aggregate AUM — Assets under management by the companies applying for a Bitcoin ETF surpass $13 trillion
- Notably, Blackrock is the world’s largest asset manager and is filing for the iBTC ticker, expanding its iShares ETF brand into crypto
- The prospect of having many of these ETFs launch at the same time drives competition between them
- This means that Blackrock employees are likely to be competing with Fidelity’s, Franklin Templeton and other companies to sell their Bitcoin ETF products to their clients in order to acquire market share
- This is expected to lead to the onboarding of institutions into Bitcoin, giving it a large credibility boost while facilitating inflows from traditional finance
The Importance of Spot vs Futures ETF
Today if institutions trading on American stock exchanges want access to Bitcoin, they can do so through Grayscale’s GBTC or futures-backed ETF products. These products have shown to be inferior to simply holding regular spot Bitcoin.
Source: IntoTheBlock’s Bitcoin Cycles Perspectives
Subpar Existing Products — Current publicly traded Bitcoin products have failed in many ways
- Since there are no redemptions from GBTC, Grayscale’s product has seen discounts of over 50% at its worst, even being negatively correlated to Bitcoin’s price in December 2023 as Digital Currency Group faced issues
- Like GBTC, Bitcoin futures ETFs have been more volatile than Bitcoin itself
- This is the case as the futures ETFs “rollover” from one month expiration onto the following month’s contract, which typically is at a premium to spot prices; in other words futures ETFs are constantly buying Bitcoin at higher prices than if they were trading spot, leading to higher volatility and worse returns
- Last but not least, the spot products actually purchase Bitcoin in the market rather than derivatives contracts, which can be more supportive of prices
The high likelihood of spot Bitcoin ETFs being approved has already led to a significant rally in prices and broader adoption.
Source: IntoTheBlock’s Bitcoin Addresses Metrics
Record Number of Bitcoin Addresses — The number of addresses holding BTC surpassed 50,000,000 for the first time ever this week
- Though one address does not necessarily mean one user, the growth in addresses with a balance of Bitcoin suggests growing adoption
- Bitcoin’s dominance of the total market has also been increasing recently, reaching 52% this week, its highest since April 2021
- The total amount of stablecoins in circulation has been growing for two consecutive months for the first time since early 2022, pointing to greater liquidity being attracted into the crypto market
Overall, the spot Bitcoin ETF appears to be closer than ever. While it is true that it should bring several benefits for Bitcoin and the crypto market, it is also evident that the market has been anticipating this, particularly accelerating in the last few months.
Are We 1 Month Away From the Bitcoin Spot ETF? was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.