In a week marked by considerable volatility and uncertainty, Bitcoin (BTC-USD) has surged, breaking the $30,000 threshold and inching closer to $35,000. This price level represents Bitcoin’s highest point since May of the previous year, surpassing significant milestones such as the 100 and 200-week moving averages, which have not been witnessed since April. In this turbulent market environment, the timing is a critical factor for traders navigating the cryptocurrency landscape.
Speculation is rampant regarding a possible market sell-off, primarily due to the impending approval of a spot Bitcoin Exchange-Traded Fund (ETF). The ETF ticker’s appearance on the Depository Trust & Clearing Corporation (DTCC) website has ignited discussions and premature tweets that have further stoked market volatility. Nevertheless, it is crucial to emphasize that approval is not guaranteed, given the Securities and Exchange Commission’s (SEC) concerns about potential market manipulation.
The proposed spot Bitcoin ETF is the brainchild of BlackRock (NYSE: BLK), the world’s largest asset manager. In contrast to existing Bitcoin ETFs like BITO and XBTF, which offer indirect exposure to Bitcoin, BlackRock’s spot Bitcoin ETF would provide direct exposure. This option could grant retail investors the ability to access Bitcoin through regular brokerage and retirement accounts, thus alleviating concerns related to managing a crypto wallet, including hacking and key loss.
BlackRock’s application has prompted similar applications from other asset managers. Notable figures in the financial industry, like Ric Edelman, argue that spot crypto ETFs may be more cost-effective than crypto futures ETFs like BITO and XBTF, which have relatively high expense ratios of 0.95% and 0.76%, respectively. Should these spot Bitcoin ETFs receive approval, they could present a convenient option for investors bullish on Bitcoin but reluctant to manage their own crypto wallet or establish an account on a crypto exchange.
This development towards spot Bitcoin ETFs arrives in the aftermath of the collapses of exchanges such as FTX, Voyager Digital, and Celsius Holdings (NASDAQ: CELH). These events have elevated skepticism surrounding the storage of Bitcoin on crypto exchanges. Spot Bitcoin ETFs offer a more straightforward avenue for risk-averse investors and institutional investors who may not be well-suited for purchasing and holding Bitcoin directly.
The impressive upswing in Bitcoin’s price comes in the wake of the “crypto winter” experienced in 2022. Year-to-date, Bitcoin has seen an increase of over 100%, with a nearly 20% surge within the past week alone. Despite charging fees, these spot Bitcoin ETFs, should they be granted approval, are likely to be more cost-effective than existing Bitcoin futures ETFs. As such, they present a potentially enticing option for investors.