A popular and much-awaited approval of a spot Bitcoin ETF has grabbed headlines. The U.S. Securities and Exchange Commission (SEC) has officially approved a Spot Bitcoin Exchange-Traded Fund (ETF).
Spot Bitcoin ETF: A Brief Introduction
A spot Bitcoin ETF is traded on stock exchanges. It holds Bitcoin as a primary asset. It is a way of investing in Bitcoin without actually owning it. The fund actually buys the Bitcoin using the shares from investors. Each share of the fund refers to claim the portion of the Bitcoin, which is keen to rise or fall according to the price of Bitcoin.
Potential Effects of Approval
Before the ETF approval, investing in Bitcoin was quite complex. The ETF will make the investing process quite seamless, which will attract new investors, estimated to be around 26% of millennials and 21% of American adults who already own cryptocurrency but hesitated to invest in Bitcoin. The increased accessibility will probably increase the demand for Bitcoin, which will potentially boost its price by 10-20%.
The SEC’s approval of the ETF will work as a powerful validation for Bitcoin’s legitimacy as an investable asset. This legitimacy may attract some big-budget investors who manage assets worth trillions of dollars and were previously worried about entering the crypto space. With such investors, the overall stability and credibility of the Bitcoin ecosystem might grow by 30%.
Liquidity Boost and Market Maturation
The ETF's approval will inject significant liquidity into the Bitcoin market, which is estimated to be around 5-10 billion USD initially. The increased liquidity will allow individuals to buy and sell their Bitcoin funds without affecting the actual price. The ETF’s important but hidden mechanism will track the actual price of Bitcoin, which will cause a greater price discovery efficiency. The following reasons might be obtained for such efficiency:
- 15-20% less volatility in Bitcoin’s price.
- 30-40% increased investor participation.
- 25-30% increased trading volume.
The ETF approval is definitely a major step. However, its impact on the Bitcoin price may remain uncertain. We may witness some regulatory hurdles in the future and crypto markets remain volatile. So investors must be prepared for fluctuations.
The Spot Bitcoin ETF approval opens doors for wider Bitcoin adoption. It’s probably going to leave some positive impressions as shown above. However, we need to observe the crypto market closely to view the exact results. Let’s expect benefits for Bitcoin investors caused by the ETF approval.
[Note: These are just predictions. Actual results may vary in the future. The author isn’t responsible for any variation in the result.]