Bitcoin ETFs: Potential Distraction from Key Crypto Trends, Warns Coinbase
Summary:
Coinbase analysts David Duong and David Han identify that the current emphasis on Bitcoin spot exchange-traded funds (ETFs) may distract from more crucial crypto trends in the post-ETF period. They suggest that the rise of decentralized finance (DeFi), showcasing strength in Ether (ETH), and the upcoming Bitcoin halving are key industry themes. The report also highlights the disproportionate share of ETFs in total Bitcoin trading volumes and anticipates a possible increase in selling pressure on Bitcoin miners.
Coinbase analysts, David Duong and David Han suggest that too much immediate emphasis on Bitcoin (BTC) spot exchange-traded funds (ETFs) could divert attention from significant developing crypto trends in the post-ETF climate. The "Monthly Outlook: Post-ETF Trading Themes" report published by Coinbase on February 8 highlighted a tendency toward "short-term overestimation" of the impact of the $1.46 billion inflow into Bitcoin spot ETFs in January.
Although the introduction of Bitcoin spot ETFs marked a significant development in the cryptocurrency sector, it's worth noting that U.S. Bitcoin spot ETFs represent merely "10-15%" of the comprehensive Bitcoin spot trading volume across centralized global exchanges. The report added that these ETFs currently occupy approximately 650,000 BTC, equivalent to 3% of Bitcoin’s entire supply.
At the time of report release, public trading data showed Bitcoin’s spot trading volume at $29.5 billion within 24 hours. In comparison, on Feb. 8, ten Bitcoin spot ETFs traded close to $1.3 billion, equating to about 4.4% of Bitcoin traded on centralized exchanges within a day.
However, the Coinbase analysts highlighted the emergence of more vital themes po-ETF like an increase in decentralized finance (DeFi), potentially adding substantial value to Ether (ETH). Noting the 58% DeFi total value locked on the Ethereum blockchain, the report underscores the strength of ETH as one of three critical industry themes. Others include DeFi expansion and anticipated selling pressure on Bitcoin miners as the "halving" nears.
Mining economics might take a hit due to the halving in April, leading to increased sell pressure among miners as profit margins reduce and lesser excess profits can be retained in Bitcoin, the analysts posit. They add that this impact may not be instantaneous.
As reported earlier, in spite of a peak in total DeFi’s value locked (TVL) exceeding $200 billion in October 2021, there has been a significant downfall in subsequent years. However, 2024 has witnessed a DeFi TVL resurgence, increasing 18% from $55 billion on Jan. 1 to $65 billion currently.
Similarly, ETH’s price has grown notably this year, up by 7% from $2,350 on Jan. 1 to $2,510 presently. Ethereum community member and investor, Ryan Berckmans believes the shift from a proof-of-work to a proof-of-stake consensus mechanism could potentially push the ETH price to a high of $27,000 during the current bullish cycle.
Published At
2/9/2024 4:16:17 PM
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