Assessing how Bitcoin’s market will do if an ETF is approved
ABitcoin ETF has been long denied to U.S investors. In recent times, countries such as Canada and Brazil have authorized BTC, ETH ETFs. And yet, the SEC continues to refrain from doing so in the United States.
However, such optimism has grown significantly over the last few weeks after SEC Chair Gary Gensler’s comments at the Aspen Security Forum. Gensler discussed crypto in detail, and one of his comments was,
“Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded Bitcoin futures.”
Many speculated that this was an indirect suggestion to Wall Street about the kind of Bitcoin ETF the SEC will be willing to accept. A Futures-based ETF without direct exposure to spot markets. Hypothetically, let’s assume a Bitcoin ETC does become official by yearend. How will BTC react post approval?
Now, between a yearly low in 2001, to right before the Gold ETF approval in 2004, Gold’s value rose by 76%. Inteterestingly, Gold’s value dropped by 9% in the following month
However, over the next 5-6 years, Gold went on a parabolic rise, hitting a high of $1900 from $420-$440 - A straight 330% hike from the time Gold ETF started trading.
It was a clear fractionalization of assets, according to statistics. Gold was made easily accessible and fresh institutional interest emerged for the asset during the 2008 financial crisis. Gold was already considered a hedge against inflation. That remains one of the best periods to have invested in Gold.Now the question is- How is Bitcoin supposed to react?
An official Bitcoin ETF will obviously improve the credibility of the digital asset as a legitimate investment vehicle. If it emulates Gold like-for-like, BTC will be valued at over $200,000 within the next 5 years.
Any Bitcoin ETF would be subject to extraordinary volatility during off-market hours, and investors will not be able to exit their positions during off-hours.
In order to tackle such a scenario, a U.S ETF would need to offer 24-hour trading on OTC exchanges. This will ensure investors do not have a blind spot with these Bitcoin products.