What will the coming spot Bitcoin ETF mean for markets? Experts weigh in

Bitcoin is in a pivotal stage of its evolution as an asset class. After numerous back and forth talks and exchanges, United States regulator Securities and exchanges Commission (SEC) met with BlackRock for a fourth time over their application for a spot price Bitcoin ETF late last week, sparking even more hope that an approval will come soon.

What is the impact of BTC spot ETF?

To understand the significance of a Bitcoin spot price ETF, it’s important to know the background. t’s been managed and handled much like a commodity: first only possession of the Bitcoin tokens themselves was an option (obviously often at great expense and requiring unique digital storage facilities) and then, after some years of this, futures ETFs were approved. This opened up a way for investors who didn’t have the cash for buying Bitcoin outright – now they could buy a futures contract.

As FTI Consulting explains: “futures contracts [enable] the ETF allows investors to buy or sell the asset at a future date at a set price. Regardless of the asset’s actual price that day, you must buy or sell the asset at the stipulated price on the specified date. While the contracts will attempt to track the spot price of Bitcoin, the ETF will not necessarily correlate with the actual price.”

This is where a spot ETF would be a radical departure: a regulation-backed product which correlated in real time to Bitcoin’s price, right now, as determined according to its correlation to an existing and established market (such as cash in US dollars, for example).

This is what FTI Consulting calls “the middle ground between crypto and traditional investing” and it is, understandably, kind of a big deal in the journey of Bitcoin as a market in its own right. There are seemingly more signs every day that an SEC approval of at least one spot Bitcoin ETF (BlackRock is a favourite contender for many) within the next month.

…But, assuming this actually happens – as is increasingly looking likely – what does that mean for Bitcoin’s investors?

Short to medium term consequences of a Bitcoin spot ETF: Price peak still to come

According to Jeff Lewis, hedge funds product manager at Pantera, what a Bitcoin spot ETF means for investors is an even greater spike in Bitcoin prices leading into the first few months of 2024:

As Lewis points out, this is not only due to the spot ETF, but also due to the fact that Bitcoin is due for its next halving in April 2024.

Medium to long term: Good as gold

In the medium to longer term, many argue that at least one Bitcoin Spot ETF from a major financial institution would lend the asset class a more widely respected sense of legitimacy and stability that would boost its long-term prospects further.  

On December 15^th, CEO and Chief Investment Officer at U.S. Global Investors Frank Holmes compared the imminent  spot ETF approvals to gold getting its own spot price in his own prediction:

Long term: More liquidity and more crypto derivatives

On December 14th, Coinbase Research came out with its 2024 Crypto Market Outlook report. In it, Coinbase said that they expect the approval of a Bitcoin spot ETF has seen to have far, far more long-term consequences than just a December-January price rally: