Approval of Spot Bitcoin ETF Could Lead to Sharp Drop in Available Supply in the U.S. Market
Summary:
Anticipation for the approval of a Bitcoin spot exchange-traded fund (ETF) in the U.S. could see Bitcoin supply dramatically decrease as institutional demand surges. Despite the predicted challenges for any entity attempting to monopolize Bitcoin, industry experts suggest a successful ETF could result in up to $30 billion of fresh capital being injected into Bitcoin. However, concerns persist over the potential short-term selling of Bitcoin following the approval, and uncertainties remain about the overall market impact.
The US market is likely to see a dramatic decrease in Bitcoin availability following the anticipated approval of a Bitcoin spot exchange-traded fund (ETF), according to several industry commentators. Big names including Ernst & Young foresee increased demand from institutions, indicating major financial players backing these ETFs, may not leave enough Bitcoin for other investors. Crypto entrepreneur and investor Lark Davis projected in September 2023 that the approval of a spot Bitcoin ETF could bring in an estimate of $30 billion in fresh capital to Bitcoin, buying nearly half of all available Bitcoin on exchanges.
Yet, purchasing such an enormous amount of Bitcoin could bring significant challenges for any party, most analysts and industry heads believe. Valkyrie CEO Leah Wald explained that while it could be theoretically possible for an entity to buy a substantial quantity of Bitcoin, completely buying out present circulation seems highly unlikely due to vast amounts of unreleased Bitcoin reserves. As per Wald, there are around 1.4 million BTC still to be mined out of a capped supply of 21 million coins, which also factors in the unwillingness of certain holders to sell, forming a natural protection against monopoly.
This sentiment was supported by Bitwise CIO Matt Hougan and Samson Mow, the Jan3 CEO, both of whom found it nearly improbable to establish a monopoly on Bitcoin due to the high prices spurred by products like a spot Bitcoin ETF. David Gerard, author and creator of the Attack of the 50 Foot Blockchain crypto blog, suggested that battling spot Bitcoin ETFs would not attempt to buy all Bitcoin in circulation because ETF's interest largely lies in dollars they could earn rather than the cryptocurrencies themselves.
However, the outlook may not all be positive. Fears remain, such as the argument made by BitMEX co-founder Arthur Hayes, who contended that successful ETFs could potentially "destroy" Bitcoin. Similarly, ARK Invest CEO Cathie Wood expressed concerns about short-term Bitcoin sales following approval news. Others believe that Bitcoin ETF approval might not significantly impact US markets, noting that spot Bitcoin ETFs have been trading elsewhere globally for years. But the argument that the potential capital injection from the U.S. is unparalleled stands - hence the market is likely to see an effect unlike any before.
Published At
1/5/2024 1:51:31 PM
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