Approval of Spot Bitcoin ETF Applications in the US, Can it Lower the Price?

• In his recent ‘Blockchain Letter,’ Morehead shared valuable insights on this event and highlighted unique situations surrounding it.
• In his detailed analysis, Morehead recounts how the Bitcoin market rallied dramatically by up to 2,448% until the launch of CME futures.
• Morehead humorously asks in his letter, ‘Could you please remind me one day before the official start of the Bitcoin ETF? Maybe I would like to take some profit.’

The approval of a spot Bitcoin ETF in the US has been a subject of curiosity for months: Can approval negatively impact the Bitcoin price?

Possible Effects of Spot Bitcoin ETFs in the US

In recent weeks, the potential approval of a spot Bitcoin ETF in the US has gained significant attention. Dan Morehead, the CEO and founder of Pantera Capital, shared valuable insights on this event in his recent ‘Blockchain Letter’ and emphasized the unique situations surrounding this event.

Morehead questions the traditional Wall Street mantra of ‘Buy the rumor, sell the news’ concerning the current validity of this expression in the context of a spot ETF. Historically, he shares thoughts on how this aphorism played out, especially in examples like the launch of CME Futures and Coinbase’s IPO. Both cases exhibited significant price increases in the BTC market before their events and then experienced sharp declines in line with the prediction of this aphorism.

In his detailed analysis, Morehead recounts how the Bitcoin market rallied dramatically by up to 2,448% until the launch of CME futures. However, this bullish trend suddenly reversed on the day futures were listed, indicating the beginning of a bear market with an 84% decline. He parallels this situation with the Coinbase IPO scenario; the market surged again, reaching its peak on the day Coinbase was listed with an 848% increase, followed by a 76% decline.

Morehead humorously asks in his letter, ‘Could you please remind me one day before the official start of the Bitcoin ETF? Maybe I would like to take some profit.’ However, he says, ‘this time it’s different.’ Morehead believes that by delving into the potential impact of a spot ETF, it represents a significant step in its adoption. Like he argued that futures were a ‘step backward,’ he thinks a spot ETF could fundamentally change access to BTC, open doors to new investor pools, and permanently alter the demand function for Bitcoin.

What is the difference with Spot ETFs?

Morehead, who previously believed that CME futures and Coinbase listings had very little real-world impact on Bitcoin access, thinks that the spot ETF scenario is fundamentally different. He says, ‘A BlackRock ETF changes access to Bitcoin fundamentally. It will have a significant (positive) impact.’ According to his view, an ETF will introduce BTC to broader investor classes and significantly change the investment landscape.

Drawing a parallel line to the history of gold ETFs, Morehead suggests that Bitcoin ETFs could revolutionize Bitcoin investment, increase its appeal and legitimacy, much like how gold ETFs changed the gold market. He anticipates a significant change in Bitcoin demand dynamics similar to what happened with gold ETFs.

In conclusion, Morehead returns to the question of whether the launch of an ETF will be a ‘buy the news’ event. He states, ‘Buy the news, buy the rumor.’ This expression summarizes Morehead’s belief that, unlike past events, the introduction of a Bitcoin ETF will not lead to a sell-off but will mark the beginning of a new era in Bitcoin investment.