Bitcoin ETF approval: Retail investors may suffer
A warning has been issued that Bitcoin (BTC) may face difficulties when the first spot exchange-traded fund (ETF) is approved in the United States. Joshua Lim, head of derivatives at Genesis Trading, predicts a volatile start to 2024 for BTC price action. Traditional finance, known as “TradFi,” is already betting on the approval of the spot ETF and has been building positions over the last few months. The signs are evident in the performance of the first Bitcoin futures ETF (BITO) and stocks of crypto firms such as Coinbase (COIN). However, once the spot ETF is approved, it could lead to a “buy the rumor, sell the news” event.
A repeat of the gold ETF?
There are concerns that lay investors may be disadvantaged when the ETF is approved. James Straten from CryptoSlate refers to history to support this view, citing the example of the Gold ETF (GLD), which dropped in price after its introduction but saw significant growth over the subsequent years. On a more positive note, institutional interest in Bitcoin remains strong despite recent news stories. CME futures continue to trade at a premium over the Bitcoin spot price.
Hot Take: Institutional interest remains strong despite challenges
Despite potential challenges surrounding the approval of a Bitcoin spot ETF, institutional interest in Bitcoin remains robust. While retail investors may face difficulties with market volatility, institutions continue to accumulate Bitcoin and trade at a premium. This suggests that institutional adoption of cryptocurrencies is not easily deterred by regulatory or legal issues. The approval of a Bitcoin spot ETF may trigger short-term market fluctuations but does not necessarily undermine long-term institutional confidence in digital assets.
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