The U.S. Securities and Exchange Commission (SEC) has approved a groundbreaking reform this week, allowing the establishment of Bitcoin spot exchange-traded funds (ETFs) in the United States. The anticipation is that the market will see the initial listing of spot Bitcoin ETFs this Thursday. The SEC's decision has garnered widespread global attention, primarily due to its impact on making it easier for ordinary investors to directly participate in the volatile world of cryptocurrency assets.
A total of 11 spot Bitcoin ETFs have received approval for listing, including renowned companies like BlackRock, Ark Investments, 21Shares, Fidelity, Invesco, and VanEck. Some of these products are expected to commence trading as early as this Thursday (11th).
The approval of Bitcoin ETFs is poised to open up possibilities for increased participation from institutional investors in the Bitcoin market. Institutional investors can engage in trading through the purchase and sale of ETFs without the need to directly hold or manage Bitcoin. For institutional investors, who are typically constrained by regulations and risk management, ETFs serve as relatively traditional and regulation-compliant financial instruments, presenting an attractive option for inclusion in Bitcoin portfolios. This is expected to enhance market participation, making it easier for investors to enter and exit the market while reducing the operational risks associated with buying and selling Bitcoin.
Furthermore, the SEC's approval is likely to be perceived as formal recognition of Bitcoin, potentially boosting investor confidence in the cryptocurrency. The heightened confidence may encourage more institutional investors, initially cautious about Bitcoin, to enter the market. Their participation signifies the potential for more funds to be locked into the Bitcoin market long-term, creating stable demand and supporting the long-term healthy growth of Bitcoin prices.
According to Standard Chartered data, institutional investor entry could attract a capital inflow ranging from $500 billion to $1 trillion this year. With Bitcoin supply constrained, predictions suggest Bitcoin prices may reach $100,000 by the end of this year, further rising to $200,000 by the end of next year.
As early as October 2023, reports indicated a tightening supply of Bitcoin, with total amount on exchanges hitting a 5-year low. This indicated a preference among Bitcoin holders to store their assets in personal wallets, suggesting reluctance to sell. The approval of Bitcoin spot ETFs, coupled with the already strained Bitcoin supply, may lead to a situation where demand outstrips supply.