Imminent Bitcoin ETF Approval: The Impact on Crypto Market and Big Players
Summary:
This article explores the anticipation surrounding the potential approval of a U.S.-based Bitcoin ETF and how it could influence the crypto market. Experts predict that the decision from the U.S. Securities and Exchange Commission could come as soon as January 9 or 10, and could notably impact companies like Coinbase and MicroStrategy. While MicroStrategy could face competition, Coinbase is aligning itself to become the custodian for future Bitcoin ETFs. The article emphasizes Bitcoin's price sensitivity to the SEC's decision, with recent predictions of application rejections causing a brief 7% drop in its value.
As Bitcoin (BTC) approaches a potentially monumental week, all eyes in the cryptocurrency market are fixated on the prospect of a United States-based Bitcoin exchange-traded fund (ETF) receiving the green light. The much-anticipated approval could ignite another rush in the crypto bull market and encourage broader crypto usage. Numerous hopefuls are awaiting the approval of their spot Bitcoin ETF applications, with the latest series of Form S-1 amendments submitted on January 8.
Analysts are predicting that the U.S. Securities and Exchange Commission (SEC) could potentially sanction the first spot Bitcoin ETF on January 9 or 10. Eric Balchunas, a senior ETF analyst at Bloomberg, is overwhelmingly confident - stating there's a 90% likelihood that a Bitcoin ETF will get the nod. The consequence of this decision, whether acceptance or rejection, will undoubtedly shake up the crypto market. The Bitcoin ETF market spotlights big players like BlackRock and Fidelity, who manage trillions of dollars in assets. The large-scale involvement of these giants could alter the foundations of companies such as Coinbase or MicroStrategy, both of which are openly traded.
MicroStrategy's dominance could be threatened.
MicroStrategy has consistently purchased Bitcoin as a hedge against inflation and an alternative to holding cash. Their commitment to Bitcoin saw them accrue 189,150 BTC at an average value of $31,168 per coin, as of their latest acquisition on December 27, 2023. This makes MicroStrategy the business entity with the largest Bitcoin holdings, trailed by Marathon (crypto mining firm) and Tesla.
Listed on Nasdaq, MicroStrategy offers traditional investors a way to indirectly gain exposure to Bitcoin. However, it could face stiff competition and risk losing its status as the leading Bitcoin proxy if a Bitcoin ETF is approved. According to Spencer Bogart, a partner at Blockchain Capital, an approved Bitcoin ETF is a potential stumbling block for MicroStrategy since it could increase its stock price but also pressure its Bitcoin-related stock premium.
On April 11, 2023, the value of MicroStrategy's Bitcoin holdings turned positive due to the rise in Bitcoin's price. Even if MicroStrategy shares experience a rapid sell-off, the Bitcoin adoption rate can still make it profitable. The proposed Bitcoin ETF is seen as a link to expedite the inflow of capital from Wall Street into the Bitcoin sector, promoting long-term adoption. This adoption could, in turn, mean increased buying of MicroStrategy shares. Another plus to owning MicroStrategy instead of a Bitcoin ETF is the lack of management fees, which can vary from 0.24% for Bitwise to 1.5% for Grayscale.
Coinbase is positioning itself to be the custodian of potential Bitcoin ETFs.
Coinbase has partnered with top-league asset managers like BlackRock, VanEck, and Grayscale, offering custodial services for their aspiring Bitcoin ETFs. With companies such as Grayscale, Fidelity, ARK Invest, Franklin Templeton racing to become the most liquid ETF, Coinbase is staking its claim as the trustworthy custodian for Bitcoin ETFs. The crypto exchange could benefit from increased demand from heavyweights in traditional investing, thus broadening its existing model of earning revenues through subscriptions and services. Despite this positive outlook, pending SEC investigations could put pressure on Coinbase's stock price.
Bitcoin's price is hyper-sensitive to the go-ahead or denial of a spot Bitcoin ETF by the SEC. Let's not forget the prediction made by Markus Thielen, head of research for crypto platform Matrixport. On January 2, he stated his belief that the SEC would reject the current ETF applications, leading to a quick 7% slump in Bitcoin's price the following day. This illustrates the high volatility of Bitcoin and the eagerness of sellers to latch onto any news from the SEC.
It's crucial to note that this article doesn't contain any investment tips or recommendations. Trading and investing are always risky, and diligent research is recommended before making any decision.
Published At
1/9/2024 5:01:00 PM
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