U.Today - Ilan Solot demonstrates three parts of the Bitcoin ETF narrative and tracks how this saga might affect the progress of the ongoing cryptocurrency rally. After major ETF announcements, crypto might be finally losing its "toxic asset" label that still looks dangerous to 90% of potential investors.
BlackRock (NYSE:BLK), WisdomTree Bitcoin ETF ambitions rebuild legitimacy of Bitcoin (BTC) as class
According to the analysis by Solot, the Bitcoin ETF narrative and its effects on the cryptocurrency market's performance should be better understood as a combination of three elements: frontrunning, actual liquidity flow ("when/if the product launches") and rebuilding the legitimacy of the whole asset class.The last part of the narrative gained steam after the announcements of BlackRock and WisdomTree filing for spot Bitcoin ETF approval with the U.S. regulator SEC.
To prove this theory, Solot recalled that the previous two micro-rallies of Bitcoin (BTC) failed to result in significant capital inflow into publicly-traded crypto-based investing vehicles. CoinShares' Weekly Flow tracker registered pale activity of investors despite the BTC price performing well.
Thus, both rallies of Q1, 2023, were either fueled by captive capital churning inside the system or that emerged within the cryptocurrency segment itself: second-layer protocols, ZK-tech solutions, liquid Ethereum (ETH) staking products and so on.
Also, liquidity was pushed to the cryptocurrency segment by the interest of investors in hedging against the and growing inflation in various regions across the globe. At the same time, Solot admits, according to research by a $5 trillion asset manager Nomura, only 3.5% of investors are ready to store more than 10% of their portfolios in crypto and offer their clients to do so.
What does Bitcoin ETF means for retail? Three pillars
Should it be approved, the spot Bitcoin ETF launch might totally change the game. First, it will erase the negative effects associated with self-custody risks of owning "physical" crypto.Then, investing in Bitcoin ETF will be way more convenient for the vast majority of investors. Technically, they will be injecting liquidity into yet another ETF just like they used to.
Also, working with spot Bitcoin ETF is more optimal for tax reasons, in particular in the United States.
As covered by U.Today previously, yesterday, on June 30, 2023, the U.S. SEC dismissed the ETF filings by U.S. asset managers as "inadequate"; Bitcoin (BTC) dropped by 4.12% in minutes following this statement.