The cryptocurrency market, especially Bitcoin, has been affected by unconfirmed expectations of the approval of spot-based exchange-traded funds (ETFs). While Bitcoin has outperformed other cryptocurrencies, this outperformance may be partially due to the market anticipating the approval of spot Bitcoin ETFs, according to David Duong, head of institutional research at Coinbase Institutional.
Traditional finance giants like BlackRock filed for spot-based Bitcoin ETFs in mid-June, leading to an 8% gain in Bitcoin’s price, while Ether, the second-largest cryptocurrency, lost 7.5% during the same period. Duong pointed out that Bitcoin’s performance and the potential ETF approval are influencing the cryptocurrency market, especially when compared to macroeconomic factors.
Despite the U.S. Treasury yield curve’s term structure showing untoward developments since mid-June, Bitcoin has risen. This suggests that factors beyond macroeconomics, like the expectations of ETF approval, have been at play in the Bitcoin market.
Bitcoin Market Impacted by Spot-Based ETF Expectations
Once a spot-based ETF is approved, Coinbase’s analysis suggests that Bitcoin may lose its edge over the broader market for a period. This situation is similar to what happened following the launch of futures-based ETFs in October 2021.
Duong emphasized that the impact of potential spot-based ETF launches would extend beyond just capital flows. It could signal a “tacit shift” in the regulatory environment, which could have positive implications for market valuations.
Bitcoin spot-based ETFs have been highly anticipated, and their approval could pave the way for mainstream investment in the digital asset, potentially bringing billions of dollars in new demand to Bitcoin.
The cryptocurrency market has been eagerly awaiting the arrival of spot-based Bitcoin ETFs, with the hope that they will attract significant institutional investment. It’s important to note that the regulatory environment around these ETFs could have lasting effects on the market.