Investing.com -- Despite the buzz around the Bitcoin exchange-traded funds (ETFs) in the second quarter, the digital assets landscape saw mixed performance, with crypto assets lagging behind more traditional assets, broker Canaccord Genuity (TSX:CF) stated in a research report on Monday.
Despite major events such as the Bitcoin halving and the SEC's approval of spot Ethereum ETFs, Bitcoin remained rangebound. Canaccord attributes this price action to regulatory headwinds, macroeconomic uncertainty, and some cooling off from a strong first quarter.
However, the broker notes a clear maturation across crypto's institutional investor base. "Favorable supply-demand dynamics post-halving could add to the ETF tailwinds for Bitcoin," Canaccord Genuity states. The approval of spot Ethereum ETFs is expected to broaden institutional interest in other digital assets.
The SEC's approval of both Bitcoin and Ethereum spot ETFs has been a key development. Although crypto asset prices underperformed in Q1, potential ETF inflows could reverse this trend as retail investors seek to add crypto exposure to tax-advantaged accounts. Canaccord expects that spot ETFs could become a more meaningful part of crypto's price action in the future.
In Q2, BTC ETF inflows slowed from their February highs. However, the opportunity for Bitcoin ETFs is still in its early stages. Over 50% of the world's largest hedge funds are now trading or holding spot BTC ETFs, with major institutions beginning to disclose holdings. The SEC may soon approve spot BTC ETF options.
The SEC approved initial applications for around eight spot Ethereum ETFs in Q2. Final approval of S-1 registrations could see these ETFs trading as early as July 8. Canaccord Genuity sees this as an opportunity to drive price action for Ethereum and the broader ecosystem.
Meanwhile, digital assets became a key issue in the 2024 U.S. elections, with candidates softening their stances and advocating for the asset class. While the SEC remains hesitant to approve key crypto IPO filers, U.S. lawmakers made progress on a stablecoin bill, moving it through the House committee.
Besides Bitcoin, the digital assets ecosystem remained above its 2023 lows in Q2. Layer 2 solutions outpaced the Ethereum Layer 1, with Coinbase’s BASE surpassing Optimism as the second-largest Layer 2 within a year of its launch. The launch of DeFi project EigenLayer saw its total value locked (TVL) surpass $20 billion.
New infrastructure developments improved accessibility, and the prospect of a "killer app" bringing thousands of new users on-chain has become increasingly realistic with efficiency gains across Layer 2 solutions.
Canaccord Genuity concludes, "We remain encouraged by the SEC's approval of both Bitcoin and Ethereum spot ETFs. While the macro outlook and timing of potential rate cuts remain uncertain, the evolving regulatory landscape and institutional interest could provide positive momentum for digital assets moving forward."