Why is Bitcoin ETF called a catalyst for change for the largest cryptocurrency by market cap?

At the beginning of the year, the US Securities and Exchange Commission approved spot Bitcoin exchange-traded funds. The regulatory approval changed the entire crypto landscape, not only the Bitcoin network because it redefined people’s perception of the industry and the dynamics of the blockchain-based assets market. The spot Bitcoin ETF is an investment fund that monitors BTC price and uses it as an underlying asset with the purpose of growing its exposure among investors (without forcing them to purchase it). According to Binance the development of Bitcoin ETFs has triggered an increase in the number of people searching for exchange platforms where to buy Bitcoin.

It’s significant progress for the crypto sector because it brings it closer to mainstream financial industries. Such developments inherently impact Bitcoin’s price, especially as the US holds around 60% of the worldwide equity market value. Europe and Canada have already approved and launched spot BTC ETFs, with the first listed on Euronext Amsterdam. This initiative’s emergence took two years, and now, US financial players like Fidelity and Hashdex are also being kept on hold until the final decision.

How the first BTC ETF could trigger a price readjustment – a comparison with gold

Inevitably, many suppositions and speculations have arisen ever since the news of the first US-based Bitcoin ETF broke into the world. Many more financial buffs draw on the comparison of Bitcoin with the most widespread rare metal, gold, to fortify their assumptions. It’s helpful to look at the case of the first gold commodity ETF in the US, the SPDR Gold Shares (GLD), to strengthen the foundation for presumptions. Before the launch of the GLD and IAU (the first gold-backed iShares Gold Trust), investors could only physically invest in physical bullion, also known as coins, bars, or metal ingots.

Yet, the approval and consequent launch of the GLD offered such a heightened exposure to the precious metal and made it so available to a greater investor audience that the price of gold grew by almost 360%. Associating this astronomical growth with the potential that Bitcoin might have to explode, it’s clear why many pundits place bets on BTC’s price spinning between $50,000 and $73,000 after the first ETF’s release.

Gold was rarely profitable enough to buy, move, and store, and the futures market didn’t make it easy for aspiring investors. Similarly, there are blockages and barriers to be raised for Bitcoin to become more accessible for any interested investor, bringing it closer to their wallet literally and boosting the asset’s mainstreamness and demand. Higher demand naturally leads to increased selling prices, which is all the more profitable for investors as the supply cannot exceed a pre-established amount of 21 million BTCs.

What about Ethereum?

Like Bitcoin, Ethereum pundits are awaiting a spot ETF on this asset. Bitcoin’s ETF was launched at the beginning of the year, and Ethereum’s ETF was approved in late May.

Spot Ethereum might not be considered a commodity like its counterpart, but approval for exchanges to list spot Ethereum ETFs in the USA might consequently boost its price and drive demand for the cryptocurrency sector.

Bitcoin keeps ruling as a digital store of value after the ETF approval

For many crypto pundits, the instance of another digital store of value rooted in the internet leapfrogging the harbingering one is unfeasible. The CEO of VanEck, a leading investment managing company, told reps of Cointelegraph that he’s confident in Bitcoin’s outperforming other assets and unbeatable place among the top digital coins, suggesting that it’s finding itself in a “bubble” where it outstrips itself every market cycle.

As long-term projections, the VanEck CEO expects BTC to transform into an accompaniment to gold, joining the group of those seeing the perfect candidate in the primary crypto. Comparisons have long been drawn between the two stores of value, and enthusiasm for Bitcoin has arisen. Advocates like George Tung, a market analyst at TheStreet, suggest that its increased ease of transportation, safeguarding, and payment utilization could catapult it above the rare metal’s place.

Types of Bitcoin ETFs

It’s essential to highlight that there are two types of Bitcoin ETFs: spot and futures.

The spot Bitcoin ETF can be defined as an exchange-traded fund created to offer investors direct exposure to Bitcoin’s present price. The term spot is used to refer to the current value of an asset, and in this case, Bitcoin’s price. The Bitcoin spot uses the actual price of Bitcoin as an underlying asset and tries to keep up with the real-time changes of the asset. Bitcoin’s volatility impacts the ETFs value, so the investors who turn to these commodities should rely on a strategic approach to manage potential fluctuations and quick price changes.

The physical Bitcoin ETFs require direct asset ownership, so the investors gain direct exposure to the cryptocurrency. Those who want to add Bitcoin to their portfolio prefer this solution because it offers a more transparent structure and eliminates storage issues. Those interested in physical Bitcoin ETF should remember that they will have to pay for physical storage.

Bitcoin futures ETFs’ value is connected to Bitcoin future contracts without holding the cryptocurrency. Investors have a lower exposure to the asset when they choose this tool.

Each type of Bitcoin ETF has its ups and downs, and investors must decide which one they prefer, according to their personal preferences and needs.

Summing up

Bitcoin, the asset often compared to gold for its native properties, boosts its appropriateness as a store of value, but it stands out through its scarcity. The last Bitcoin to be mined is expected to arise in 2140, seeing a limited supply establish the asset’s price as its demand grows. Just as gold gained widespread popularity following the introduction of the first GLD to the market, Bitcoin could experience a similar surge in its price. All these already-enumerated aspects, suppositions, expectations, and historically-proven facts for other assets that saw ETFs go live make a bullish case for the primary crypto coin.

As the world awaits the SEC’s final decision, those who have previously invested in Bitcoin or are considering doing so might only have reasons to rejoice later.