Over the past six months, talks of spot Bitcoin exchange-traded funds (ETFs) have become increasingly prominent. With over a dozen applications filed from asset management companies such as BlackRock Inc. and Grayscale, the proposed ETFs are inching closer and closer to reality.
With talks becoming more serious, the price of Bitcoin has also been doing well. Bitcoin is approaching $40,000 for the first time since April 2022, and the hype around the token and ETFs is real.
While there are already a handful of Bitcoin ETFs on the market, they use futures to track the price of Bitcoin. This results in high fees, as the manager has to continually roll over the contracts, and it means the ETF may not always track exactly with Bitcoin. The proposed spot Bitcoin ETFs attempt to solve these issues by owning Bitcoins and creating an ETF on that basis. While this may seem like a simple and demanded solution, there are some steep regulatory hurdles that the applicants must overcome.
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Despite these challenges, firms are continuing to meet with the Securities and Exchange Commission, and JPMorgan predicts that some spot Bitcoin ETFs could go live as soon as early 2024. Because of this, many are beginning to look at the implications of a spot Bitcoin ETF on crypto.
eToro CEO Yoni Assia is one of those who wonders what a market with spot Bitcoin ETFs would look like.
Assia pointed out that the ETFs have the potential to lead to large-scale adoption on an institutional level for two main reasons.
First, he believes that many institutions "work in a very rigid way." Because of this, they can be hesitant to invest in assets that they are not familiar with or are not readily available. "[An] ETF, in many cases, is that infrastructure to enable institutional demand to those who don't want to self-custody," Assia said.
Second, Assia believes that the increased availability of Bitcoin would lead to more trust on an institutional level. Without the ETF, investors must go to a crypto exchange, use a wallet and navigate a new way of investing. With the ETF, it becomes more accessible and could result in new investors and price increases.
Assia also alluded to the impacts spot Bitcoin ETFs could have on retail investors. In his eyes, retail investing is "all about the user experience, simplicity and the ability to embed crypto investments and crypto trading in a wider portfolio." These ETFs would make it easier for retail investors to incorporate Bitcoin into their portfolios and increase access.
Assia, along with many others, sees spot Bitcoin ETFs as a net good for crypto. They believe that this could be a major step in the wide-scale adoption of the token.
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