- In recent weeks, institutional investors have shown interest in crypto funds based on the possibility of a potential Bitcoin Exchange Traded Fund (Bitcoin ETF).
- The lion’s share of institutional investments, accounting for 90% of the inflows, was directed towards Bitcoin private funds, totaling $312 million.
- A spot ETF tracks the real-time price of Bitcoin, a feature not present in approved futures-based Bitcoin ETFs.
According to the latest reports, increasing expectations for Spot Bitcoin ETF applications are encouraging institutional investors to allocate more funds.
Impacts of Spot Bitcoin ETFs on Institutions
In recent weeks, institutional investors have shown interest in crypto funds based on the possibility of a potential Bitcoin Exchange Traded Fund (Bitcoin ETF). According to a report by CoinShares, a Europe-based digital asset manager, there was a significant inflow of $346 million into crypto exchange-traded products (ETPs) last week; this marked the highest weekly inflow in nine consecutive weeks. A total of $1.5 billion in deposits has been made into these products this year.
The lion’s share of institutional investments, accounting for 90% of the inflows, was directed towards Bitcoin private funds, totaling $312 million. This increase brought the total assets under management of crypto funds to $45 billion. Exchange-traded products (ETPs) are investment instruments that trade with listed shares on exchanges. They aim to mimic the performance of underlying assets such as Bitcoin and Ethereum or indices like commodities, currencies, stocks, and bonds.
While Exchange Traded Funds (ETFs) fall under the ETP umbrella, they differ critically at a key point. A spot ETF tracks the real-time price of Bitcoin, a feature not present in approved futures-based Bitcoin ETFs. The U.S. Securities and Exchange Commission (SEC), citing concerns about volatility and potential market manipulation in the crypto markets, has been reluctant to approve a spot Bitcoin ETF in the U.S. However, there is a growing sentiment among industry observers that the SEC may reconsider its stance, and there is a possibility of approval.
Recent events have made the expectation even more interesting. In October, a false report claiming the approval of a BlackRock Bitcoin ETF led to a 10% increase in Bitcoin prices. More recently, a fraudulent incident occurred where someone registered a fake iShares XRP Trust under the name of BlackRock. The token gained value after the news but rapidly declined when BlackRock confirmed that the application was fake. The matter was immediately reported to the Delaware Department of Justice.
Overcoming regulatory hurdles amid ETF approval expectations
CoinShares, not just a bystander, made headlines as an active participant in pursuing a Bitcoin ETF in the U.S. The company attracted attention by securing the option to acquire the ETF business of U.S.-based digital asset manager Valkyrie. The company has until January 10 to complete the deal. Valkyrie, like other major players such as BlackRock and VanEck, has applied to offer a spot Bitcoin ETF in the U.S. Valkyrie’s initial application in 2021 was rejected, leading to a reapplication for the Valkyrie Bitcoin Fund in June 2023.
While the crypto industry closely monitors regulatory developments, the potential approval of a Bitcoin ETF in the U.S. continues to be a hot topic. Market reactions to speculative reports and events highlight the excitement and sensitivity surrounding this regulatory milestone. CoinShares, with its strategic moves, stands as evidence that it actively pursues the evolving landscape of cryptocurrency investment opportunities.
