What Happens If Blackrock Bitcoin ETF Is Approved? What Are The Risks Of Investing In A Bitcoin ETF?

What Happens If Blackrock Bitcoin ETF Is Approved? What Are The Risks Of Investing In A Bitcoin ETF?

Bitcoin reached $35,100, its highest price in almost a year and a half. The surge was fueled by rumours of an imminent exchange-traded bitcoin fund (ETF), despite BlackRock’s disclosure that the Securities and Exchange Commission (SEC) still reviewed its application for a spot bitcoin ETF. Still, Bitcoin prices are floating above $35,000.

This positive sentiment spread throughout the broader cryptocurrency market and influenced related stocks. And some experts predict that the price of Bitcoin will continue to rise. But now the question remains: Is this the beginning of a bull market or just another bull trap? Keep reading to find out!


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What would happen if the Spot Bitcoin ETFs got approved?

While we are yet to have any definitive news about the approval of a spot Bitcoin ETF at the moment, the rumour mill is undoubtedly in full swing. But what might ensue if the spot bitcoin ETFs truly receive the green light?

How do spot bitcoin ETFs work?

Let’s get things clear before we move on. How exactly do spot Bitcoin ETFs work?

Spot Bitcoin ETFs hold the cryptocurrency directly, creating a portfolio that mirrors the performance of the included digital assets. In this sense, the amount of inflow capital requires the fund to purchase the exact worth of Bitcoin minus the custodial fees.

In simple words, any inflow of capital means a direct influx to the Bitcoin total market capitalization.

Bitcoin will be deemed an established asset class

Crypto advocates have said such spot ETFs offer consumers a cheap and safe way to trade the token instead of buying it directly from unregulated crypto exchanges. That could attract a large inflow of capital into the crypto market.

Ilan Solot, co-head of digital assets at Marex, a London-based broker, stated, “The SEC accepting a spot bitcoin ETF application would validate bitcoin as an established asset class alongside all other asset classes.”

This could mean Spot Bitcoin ETFs will be on the institutional firms’ watchlists, bringing in enormous buying power from institutional investors and driving up the price in after the Bitcoin ETF gets approved.

How high can Bitcoin be after Blackrock ETF approval?

The answer lies in how much money will be flowing into the ETF market. If no money is flowing into those ETFs, nothing will be changed, but analysts believe a bitcoin exchange-traded fund (ETF) would allow investors previously wary of crypto access to the asset via the stock market, ushering in a new wave of capital to the sector.

Matrixport suggests that if the Blackrock ETF is approved, Bitcoin could potentially increase to a value between $42,000 and $56,000, with a potential inflow of $24 billion.

Which funds have sent a Bitcoin ETF application to the U.S. SEC?

The U.S. Securities and Exchange Commission (SEC) currently has 8 to 10 filings for potential bitcoin exchange-traded products under consideration, according to SEC Chair Gary Gensler.

The following asset management firms have submitted a Bitcoin ETF application to the U.S. SEC: Blackrock (with the iShare Bitcoin Trust – $IBTC), Bitwise, WisdomTree, Fidelity, Invesco, and Valkyrie.

Is holding a Bitcoin ETF the same as holding Bitcoin?

You may be wondering: What is the difference between holding Spot Bitcoin ETF and holding Bitcoin directly? A Bitcoin ETF provides an opportunity for investors to be part of Bitcoin’s price dynamics without direct ownership of the cryptocurrency.

What are the benefits of a Spot Bitcoin ETF over Bitcoin?

Choosing a Bitcoin ETF over Bitcoin can be beneficial for the following reasons:

  • It provides a method to participate in Bitcoin’s market trends without actually owning the cryptocurrency. This might attract investors who are wary of the risks of owning and keeping Bitcoin, like threats to cybersecurity or dealing with unregulated cryptocurrency exchanges.
  • Investing in a Bitcoin ETF provides access to the Bitcoin market through the traditional stock market, which may be more familiar and accessible to institutional investors under the regulatory framework.

What are the other catalysts driving the price of Bitcoin in 2024?

Apart from the Bitcoin ETF approval, 2024 could be an exciting year for Bitcoin because of different catalysts that could drive up the price to a higher level.

Bitcoin halving in 2024

The fourth Bitcoin halving is expected to happen around April 17, 2024. It’s not possible to be exact because halving takes place on a schedule not determined by dates but by “block height.” 6 days ago.

What is Bitcoin halving?

Bitcoin halving is an event that occurs approximately every four years and is programmed into the Bitcoin protocol. During this event, the number of new Bitcoins created and earned by miners is halved.

This reduction in the supply of new Bitcoins entering the market is believed to contribute to the long-term price appreciation of Bitcoin. The previous Bitcoin halvings in 2012 and 2016 were followed by significant price increases, and many investors anticipate a similar pattern for the 2024 halving.

Here is an (unscientific) estimate of Bitcoin’s value 1 year after the halving. Assuming the price remains at the $36,000 level next year at the time of halving and using the most conservative increase percentage from the past, Bitcoin’s price could rise above $100,800 1 year after the halving in 2025.

Year Price at Halving After 1 Year Increase Percentage
2012 $182 $510 180%
2016 $661 $2,600 293%
2020 $8,600 $58,000 574%
2024 $36,000 (estimated) $100,800 (estimated) 180% (estimated)

Note: This is not financial advice, and past performance does not guarantee future results. Investors should consider their investment strategy carefully and consult with financial professionals if necessary.

To learn more about the scientific measurement of Bitcoin, you may find it more interesting from on-chain analysis.

Pausing rising interest rates

The pausing of rising interest rates is another catalyst that could drive the price of Bitcoin up in 2024 because it is an expected phase before the Fed starts to reduce rates.

When interest rates get lower or remain stagnant, investors often seek alternative assets with higher potential returns, such as Bitcoin. This increased demand for Bitcoin could lead to a rise in its price.

Where can you invest in a Bitcoin ETF?

If the Spot Bitcoin ETF is approved, most brokers with access to U.S. ETFs should also provide access to these ETFs. Here are two online brokers that are likely to offer this service:

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Final words

In summary, the green light for a Bitcoin ETF could fundamentally transform the Bitcoin landscape, potentially triggering a significant upswing in its value. Nevertheless, the world of Bitcoin and Bitcoin ETFs has its perils, with market fluctuations and regulatory unpredictability being key considerations.

So, if you’re considering investing in Bitcoin or Bitcoin ETFs, it’s essential to do your own research and consider how much risk you’re willing to take! Be MoneySmart!

Frequently asked questions: Bitcoin ETFs

What is a Bitcoin ETF?

A Bitcoin ETF (exchange-traded fund) is a type of investment fund and exchange-traded product that is designed to track the price of Bitcoin. It provides a way for investors to gain exposure to Bitcoin without owning it.

What are the risks of investing in a Bitcoin ETF?

Investing in a Bitcoin ETF carries similar risks as investing directly in Bitcoin. These include market volatility, regulatory changes, and cybersecurity threats. It’s important for investors to carefully consider these risks before investing in a Bitcoin ETF.

How is a Bitcoin ETF different from directly owning Bitcoin?

A Bitcoin ETF tracks the price of Bitcoin and allows you to invest in its price dynamics without owning the cryptocurrency itself. It provides a way for investors to access the Bitcoin market via the stock market, which could be attractive to those who want exposure to Bitcoin but are hesitant about directly owning it.

What is Bitcoin halving?

Bitcoin halving is an event that occurs approximately every four years and is programmed into the Bitcoin protocol. The number of new Bitcoins created and earned by miners is halved during this event.

Related articles

Setting it apart from traditional markets, cryptocurrency offers a unique characteristic – the ability to trace a multitude of transaction data on the blockchain. From transaction volumes to the quantities of currency resting in an exchange, even to the dormant funds and their duration of inactivity. This wealth of information presents an invaluable snapshot of the market landscape.

 

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