Bitcoin ETFs Arrive to a Lukewarm Market Reception: What’s Next?

After months of speculation and investor hysteria, Bitcoin Spot ETFs have finally arrived on Wall Street. So why isn’t BTC rallying already? 

The US Securities and Exchange Commission approved spot Bitcoin exchange-traded funds (ETFs) on January 10, 2024, which empowers investors to buy into the cryptocurrency without having to navigate the crypto landscape’s exchanges, counterparty risk, or limited liquidity pools. 

While the news was greeted by many buoyant cryptocurrency enthusiasts, who shared memes at scale about how rich the long-awaited approval is set to make them, Bitcoin remained barely moved by the announcement. 

CoinGecko data shows that Bitcoin’s 24-hour price in the wake of the news yielded a less than 1% increase in the value of the asset, despite analysts suggesting that the arrival of the spot Bitcoin ETF would be a watershed moment for the crypto industry. 

Has the fanfare surrounding the Bitcoin ETF brought unrealistic expectations for the cryptocurrency? Let’s take a look at what the impact of the SEC’s long-awaited ETF approval will look like for the coming months: 

Quantifying the Value of a Bitcoin ETF

At this stage, it’s important to highlight just how important the arrival of a Bitcoin ETF will be for the future of cryptocurrency as a whole. 

The SEC’s approval means that cryptocurrency will become accessible to a vast audience of investors and institutions alike who can buy and sell Bitcoin with little prior experience in trading cryptocurrency. 

The move also helps to bring greater levels of validation to a crypto landscape that’s struggled to earn the trust of investors owing to high-profile exchange collapses, security breaches, and links to the black market. 

“This ETF has two main impacts: increased distribution in the US (a moderate impact, as there have been ETFs outside of the US for years) and increased credibility of crypto as an ‘asset class’ (a very high impact),” explained Kevin de Patoul, CEO of crypto liquidity provider Keyrock, in a CNBC interview.

“There is now a U.S. bitcoin spot ETF, and bitcoin is no longer considered shady or infamous. This significantly changes the perception for the mainstream public.” 

The numbers surrounding the value of a Bitcoin ETF are certainly cause for excitement too. With the world’s most famous cryptocurrency now available for financial institutions with a combined $100 trillion in assets under management, the prospective institutional inflows into an industry with a market capitalization of around $1.71 trillion at the time of writing could be transformative. 

“Projections range from substantial to record-breaking, with some envisioning flows in the multiple billions—an unprecedented feat in the ETF realm,” highlights Anthony Rousseau, head of brokerage solutions at trading platform TradeStation. 

Rousseau’s views were echoed by Standard Chartered analysts, who suggested that Bitcoin ETFs could draw $50 billion to $100 billion in 2024 alone as part of an inflow volume that could see the price of Bitcoin climb to $100,000.

Elsewhere, more conservative estimates claim that inflows could be far lower, reaching $55bn over five years. 

What’s Next for the Value of Bitcoin?

The hours that followed the SEC’s approval of the Bitcoin ETF were largely subdued, indicating that the market had already factored in the prospect of exchange-traded funds arriving as the expectation of approval grew amid a prosperous Q4 2023 for BTC. 

While there are lofty expectations among some analysts following the approval of the Bitcoin ETF, others believe that initial excitement will give way to a more gradual level of adoption. 

“It wouldn't shock me if ETF users broadly who are now looking at getting some exposure to bitcoin within the ETF vehicle are going to go through their normal review process to make sure that they're comfortable with the ETF, and that often takes time,” said David Mann, head of ETF products and capital markets at Franklin Templeton. 

In an interesting turn of events, the hours following the SEC’s approval of Bitcoin ETF applications saw more investor interest switch to leading altcoin Ethereum. 

Ethereum rallied over 13% in the space of 36 hours as investors speculated that the asset could be next to win ETF approval. 

Above all else, Ethereum’s surprising outperformance in the wake of the Bitcoin ETF announcement highlights the rapid pace and speculative nature of cryptocurrency markets. 

Given that the SEC approved Ethereum futures ETFs, there’s logic behind the speculation. With the commission failing to object to Ethereum being categorized as a commodity during this application process there’s potential for the arrival of an Ethereum spot ETF in the future. 

Could the ETF Fail to Impact Bitcoin?

It’s also worth addressing the elephant in the room. This unprecedented circumstance could have been factored into the price of Bitcoin over recent months and won’t influence the price of the cryptocurrency any further. 

“There are already several other ETFs tracking Bitcoin's price, and the new ETF might struggle to attract enough investors to be successful,” highlights Maxim Manturov, head of investment research at Freedom Finance Europe. “The cryptocurrency market remains highly volatile, and the price of Bitcoin could significantly drop, even if a Bitcoin ETF is approved.”

“There is no guarantee that Bitcoin will reach its previous all-time high after the long-awaited ETF is approved. However, a Bitcoin ETF could be a key catalyst for Bitcoin's price growth,” Manturov added.

For investors looking for a Bitcoin bull run in 2024, the answers could arrive in the coming weeks and months as we gain a perspective on the levels of inflows entering spot Bitcoin ETFs. In a landscape as volatile as crypto nothing can be assured, but there should be plenty of cautious optimism taken from such a transformative moment in the short lifespan of digital currencies.