- The recent Bitcoin (BTC) spot ETF applications in the United States are undoubtedly generating excitement, but some analysts have different opinions on whether this excitement is justified.
- BITO experienced its second-highest opening day in history, attracting over $1 billion in capital, but mostly halted capital inflows within a few days.
- Looking at the existing crypto ETFs in Canada, analysts note that they represent about 1% of the country’s ETF market. If a spot Bitcoin ETF in the US attracts a similar share of ETF capital, it would amount to $54 billion.
As the race for a spot Bitcoin ETF moves into the review stage, the question now arises: Can an approved spot Bitcoin ETF attract capital?
Could Approval of a BTC ETF Lead to Negativity?
The recent Bitcoin (BTC) spot ETF applications in the United States are undoubtedly generating excitement, but some analysts have different opinions on whether this excitement is justified. While many believe that approval will bring a wave of new investor capital to the asset, others think it could simply turn into a “sell the news” event.
Jillian DelSignore, the CEO of FLX Networks, questioned whether a spot Bitcoin ETF would attract significant capital beyond the first few days after its launch. While a spot Bitcoin ETF is backed by actual BTC, a futures ETF is backed by Bitcoin futures contracts.
ProShares Bitcoin Strategy ETF (BITO) attracted over $1 billion, experiencing its second-highest opening day in history, but mostly halted capital inflows within a few days.
DelSignore said, “I certainly think billions of dollars will come in,” but added, “The question for me is what happens from there. Will it calm down?”
JP Morgan strategist Nikolaos Panigirtzoglou shares a similar view. The strategist mentioned that spot ETFs have been available in Canada and Europe for years and have not attracted significant capital due to not benefiting from outflows from gold ETFs. While he acknowledged that there might be some benefits to having a spot ETF, he predicted that they would be “fairly limited.”
What Are the Positive Aspects of a Spot ETF?
On the contrary, Bloomberg Intelligence ETF analysts Athanasios Psarofagis and James Seyffart see significant potential for a spot ETF. Looking at the existing crypto ETFs in Canada, analysts note that they represent about 1% of the country’s ETF market. If a spot Bitcoin ETF in the US attracts a similar share of ETF capital, it would amount to $54 billion.
In this context, the total US commodity ETF market is $137 billion. Additionally, Glassnode analysts state that there is currently approximately $13.5 billion worth of BTC actively involved in price discovery.
Furthermore, Nate Geraci, president of consulting firm “The ETF Store,” believes that a spot ETF provides more meaningful benefits than a futures ETF and notes that the latter does not fully track the price of BTC. Since BITO was launched, it has dropped by 63%, while BTC has only dropped by 53% during the same period.
Grayscale Bitcoin Trust (GBTC), the world’s largest Bitcoin fund with over 650,000 BTC under management, faces a tracking error issue. Its share price is currently trading at a 26% discount to the underlying value of BTC because shareholders cannot redeem shares for cash as easily as they could with an ETF. The fund has entered into a legal battle with regulators to ensure instant alignment of share prices with the underlying BTC value.
BlackRock’s entry into the Bitcoin ETF race in recent months has managed to boost the price of Bitcoin in the past few weeks and created optimism that a spot ETF may finally be approved. The company’s CEO, Larry Fink, who was once skeptical about Bitcoin, said last week that Bitcoin “has the potential to be superior to any currency.”
