Why the First US-Based Bitcoin ETF is a Watershed Moment for Crypto

At the same time, the Invesco Bitcoin Strategy ETF will also complete its 75-day reporting period one day after ProShares’ equivalent, meaning that it’s also opening to the public this week. While both of these exchange-traded funds are for bitcoin futures (rather than for direct spot-trading of BTC), they undoubtedly pave the way for other bitcoin- and crypto-related ETFs, especially after last week’s approval of the Volt Equity ETF (which tracks the stock of companies invested in BTC).

Indeed, the bitcoin and cryptocurrency market may now be standing at the threshold of an exciting new period for crypto, one in which mainstream investment definitively arrives. And with the delayed effects of the May 2020 Bitcoin halving increasingly kicking in, it’s almost certain that we’ll see a new all-time high (or several new ATHs) for BTC by the year’s end.

SEC Gives Greenlight to Bitcoin ETFs

The SEC approving a Bitcoin ETF has been crypto’s Holy Grail for several years now, with more than a few previous applications being consistently rejected, mostly for concerns related to potential market manipulation and to the lack of regulation.

Going at least as far back as 2017, rejections have put the kibosh on such funds as the Winklevoss Bitcoin Trust, the Wilshire Phoenix Bitcoin ETF, as well as the Bitwise Asset Management and NYSE Arca Bitcoin ETF (among many others).

Significantly, the SEC had rejected previous applications from ProShares for a futures-based Bitcoin ETF. In other words, this week’s approval indicates that the tide has really turned for Bitcoin and crypto, and that now is the beginning of a new era for the cryptocurrency market. With the SEC no longer opposing (at least some) Bitcoin ETFs, the authority has effectively sent a large ‘Buy Signal’ to the wider market, including investors who wouldn’t ordinarily consider bitcoin.

Hence, bitcoin’s price has increased by a little over 8% since reports indicated that the ProShares ETF would be allowed to launch unopposed. And needless to say, numerous commentators and bitcoin analysts believe its price is likely to increase even further.

Source: Twitter

‘Get ready’ indeed, because bitcoin surged over $60,000 without the 75-day period officially passing, implying that it’s likely to rise much further once it has ended. And the same goes for the Invesco ETF, as well as the ETFs whose deadlines are a few days and weeks away (e.g. VanEck Bitcoin Trust, Valkyrie Bitcoin Strategy ETF, and Galaxy Digital).

Source: Twitter

In fact, the Nasdaq listed the Valkyrie Bitcoin Strategy ETF last week, indicating that it too will be passed by the SEC and will be officially launched in the coming days.

Opening the Floodgates

This is likely to become a recurring event, with the approval of ETFs — including those based on spot-based purchasing of BTC — set to become increasingly common over time. In turn, we can only imagine that bitcoin’s price rises in parallel, with at least some of the rising interest spilling over into altcoins.

To put this into perspective, it’s worth pointing out that global ETF assets equalled a humongous $9 trillion in August of this year, while in the United States alone — where many of these new Bitcoin funds are coming from — the ETF market accounts for some $6.6 trillion. In the first seven months of 2021, this latter figure reached its current total by virtue of a fresh injection of around $519 billion in net capital inflows.

Now just imagine if, say, 10% of this total ($51.9 billion) had been spent on bitcoin. Even 1% would equal $5.19 billion, which easily eclipses the $1.5 billion Tesla famously invested in BTC in early 2021, pushing the cryptocurrency to new highs. Either way, we’re likely to see the ETF market pushing bitcoin to new all-time highs.

Incredibly, bitcoin is already the eighth most valuable asset in the world, with its $1.17 trillion market putting it just behind silver, which accounts for $1.31 trillion in wealth. With Bitcoin ETFs becoming increasingly common in the United States, it becomes hard to resist the conclusion that bitcoin will not only overtake silver, but also climb a few more positions in the not-too distant future.

Source: CompaniesMarketCap.com

Assuming that bitcoin does equal silver’s market cap, this would imply a price of about $70,000 for 1 BTC. This seems entirely doable given the current climate, especially with inflation creeping inexorably upwards in the United States, Europe and elsewhere. But let’s go further, and set out what bitcoin would be worth if its cap equalled those of the other assets listed above it in the top ten:

• Equal to Amazon – price of c. $91,500

• Equal to Google – price of c. $100,000

• Equal to Saudi Aramco – price of c. $106,000

• Equal to Microsoft – price of c. $121,000

• Equal to Apple – price of c. $127,000

• Equal to gold – price of c. $595,000

All of these prices (except for the one assuming parity with gold) seem entirely feasible within the next few months or next year. As for equalling gold, this is unlikely to happen (now or probably ever), yet even reaching a third of gold’s market cap would lift BTC to new record highs.

And just to clarify things, Bitcoin ETFs really do widen the pool of likely investors in BTC, given the SEC’s implied seal of approval.

“It’s one of the final frontiers for mandate access,” said Enigma Securities’ Joseph Edwards, speaking to Reuters.

“Plenty of Americans in particular have strings attached to how they deploy a lot of their wealth. It allows bitcoin to get in on the sorts of windfalls that keep US equities as consistently strong as they are.”

Put differently, SEC-approved Bitcoin ETFs are the greenlight which permits a larger number of institutional investors to enter the cryptocurrency market.

On top of this, exposing more of the world’s wealth to bitcoin makes it much less likely that regulators will clamp down restrictively on the cryptocurrency, giving that so much of the financial system’s capital will be bound up with it. And with institutional involvement already pushing BTC to recent highs, widespread institutional involvement could really take the cryptocurrency to the Moon.