Potential U.S. Bitcoin ETF Approval: Boon for Traders, Challenge for Crypto Exchanges
Summary:
As the cryptocurrency community anticipates possible U.S. approval of a Bitcoin exchange-traded fund (ETF), some experts warn this could potentially spell chaos for digital currency exchanges. Key figures in the industry believe the approval of a Bitcoin ETF, which could coincide with Bitcoin's fourth halving, could significantly boost Bitcoin's value. However, experts warn that the situation for centralized cryptocurrency exchanges might not be as favorable, predicting intense competition and challenges for these platforms. The introduction of a Bitcoin ETF could convey benefits for retail traders with institutional trade execution and commissions coming into play, and may also create more price competition in the crypto industry, driving money back to investors.
The cryptocurrency world is awaiting the potential approval of a Bitcoin exchange-traded fund (ETF) in the US. However, some ETF experts caution that this could have undesirable effects on digital currency exchanges. Industry insiders predict that a Bitcoin ETF could begin trading by early 2024, coinciding with Bitcoin's fourth halving, an event that Adam Back, CEO of Blockstream, thinks could skyrocket Bitcoin's value to $100,000. Jan3 CEO Samson Mow has even suggested that the approval of a Bitcoin ETF by the Securities and Exchange Commission (SEC) in the US could send Bitcoin soaring to $1 million shortly after approval.
However, Nate Geraci, president of ETF Store, and Eric Balchunas, Bloomberg ETF analyst, warn that the forecast for centralized cryptocurrency exchanges does not look as promising. They suggest that the approval of a Bitcoin ETF in the US could pose significant challenges for these platforms. Geraci, writing on X (formerly Twitter), predicted a "bloodbath" for cryptocurrency exchanges. He stated that retail Bitcoin ETF traders could benefit from institutional trade execution and commissions, whereas retail crypto exchange users would have to deal with retail trade execution and commissions. He said this situation ought to be rectified to compete with a Bitcoin ETF.
Balchunas pointed out that a Bitcoin ETF would typically cost 0.01% to trade, the average ETF trading fee. This is a stark contrast to trading expenses on platforms like Coinbase, which can reach 0.6%, depending on the digital currency, the transaction size, and trading pairs. Balchunas argued that the introduction of a Bitcoin ETF could lead to more price competition in the crypto industry. He believes this will drive money back to investors from exchanges that pour vast sums of cash into advertising their offerings at events like the Super Bowl.
In September 2023, Balchunas told industry journalist Laura Shin in an interview, "It would be the last 'Crypto Super Bowl' if they launch ETFs, because ETFs are such a thin, rough industry, and some of these crypto exchanges were sort of selling populism, making a ton of money on their really high fees." Traditionally, Coinbase has made a good chunk of its revenue from transaction fees. The platform made $2.4 billion in transaction fees from institutional and retail investors in 2022, which accounted for 77% of its total net revenue of $3.1 billion. However, the company is striving to lessen its dependence on fees, actively branching out into other revenue-generating services such as subscriptions.
Published At
12/18/2023 1:40:00 PM
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