Spot Bitcoin ETFs - Not as Bullish as You Think?

13 Nov 2023 by Rory Kejzerko 3 min read

The crypto space can often be an echo chamber. The several in-waiting Spot Bitcoin ETF applications are a prime example of this, as with many coming courtesy of the world’s biggest asset managers, green arrows across many crypto charts are what traders almost unanimously expect.

However, what if there’s an alternative narrative in which the landmark approvals may follow…one that’s by no means as bullish as many of us predict. Well…there is one, where typically, it comes out of the traditional finance world by way of investment bank megalith JP Morgan.

For context, the general sentiment in reference here is that with the arrival of institutional Spot Bitcoin ETF products in the US, more buyers and sellers will enter the market, leading to more liquidity, stabler prices, and less volatility. In turn, this should transform Bitcoin into a more attractive proposition for traditional investors looking to venture into DeFi, which consequently, should also boost bullishness in the altcoin space.

However, in a report published last week, the global finance house added scepticism to the two main predictions that drive such bullish sentiment. The first of these is that “a Spot Bitcoin ETF approval would help crypto markets to attract fresh/new capital as the newly-approved ETFs see inflows,” whilst the second is that “approval would cement a win for the crypto industry and a setback for the Securities and Exchange Commission (SEC) thus making it more likely that going forward the SEC approach towards the crypto industry will soften”.

When it comes to the former, analyst Nikolaos Panigirtzoglou wrote that instead of fresh influxes of capital being funnelled into the crypto industry, it’s likely that existing funds will simply pivot from products such as the Grayscale Bitcoin Trust (GBTC) and Bitcoin Futures ETFs to the newly-approved Spot Bitcoin ETFs.

Further, the pivotal emphasis here is that crypto funds will pivot, as opposed to grow in terms of volume. To conjure such notion, the report references Europe and Canada’s current Spot Bitcoin ETFs, and how they’re yet to garner any substantial investment attention.

And with regards to the latter, the report simply states that despite wins from the likes of Ripple and Grayscale in recent lawsuits against the SEC, it’s still “far from clear that the regulatory tightening of the crypto industry will lessen significantly going forward given how unregulated this industry is”.

As will probably be the case for quite some time, such sentiment is reinforced by the fact that the FTX collapse is still fresh in the minds of many regulatory authorities.

The report also went on to reference and downplay the impact of the imminent Bitcoin halving - a 2024 event that many believe will drive-up prices due to the coin’s supply becoming more scarce. It dubbed such consensus as ‘unconvincing’ for two reasons; with the first being that it’s hard to actually predict the impacts it may have, and the second being that the event is already priced into Bitcoin’s current and ongoing value.

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