Cryptocurrency markets are undergoing a transformative shift with the emergence of Exchange-Traded Funds (ETFs) for Spot Bitcoin. Recently, the total assets invested in Exchange-Traded Funds for Spot Bitcoin have reached a cumulative value of $4.16 billion worldwide. This serves as evidence of the increasing acceptance of these innovative financial instruments, offering both individual and institutional investors a regulated and secure path to invest in Bitcoin.
Canada stands out as a leading country in this field, hosting seven Exchange-Traded Funds for Bitcoin investments with a total investment of $2 billion. The most prominent of these is the Purpose Bitcoin ETF, which is the largest globally, with assets totaling $819.1 million. It is seen as a successful example that reflects the integration of cryptocurrencies within the central financial system.
In Europe, led by Germany, a more flexible regulatory approach has been adopted, exemplified by the ETC Group Physical Bitcoin, launched in June 2020, with assets worth $802 million. This makes it the second-largest globally traded Bitcoin investment fund. Additionally, Europe is home to seven other tax-friendly Exchange-Traded Funds, which, in my opinion, bolsters the legal and financial framework, making it crypto-friendly in the region.
So far, only eight countries worldwide have adopted Exchange-Traded Funds (ETFs) for Spot Bitcoin. These countries include the G20 group, Canada, Germany, Brazil, Australia, Liechtenstein, Guernsey, and the Cayman Islands. The above chart illustrates the global distribution of Exchange-Traded Funds for Spot Bitcoin and their strength in the cryptocurrency market.
Despite this, the United States continues to maintain a cautious stance on these funds. The U.S. Securities and Exchange Commission (SEC) has only approved ETFs linked to Bitcoin futures contracts. I believe that the approval of a U.S. Bitcoin ETF could have a significant impact on the price movements of Bitcoin and cryptocurrencies.
Even though there is anticipation in the markets regarding the approval of up to 10 requests for Spot Bitcoin ETFs, the SEC’s concerns about market manipulation and cryptocurrency fraud remain significant obstacles to deciding at this time. The debate intensifies when the focus shifts to the potential U.S. market for these ETFs. In my view, the markets could experience a price surge starting from a billion dollars or more in demand on the first day of approval of such a project. Therefore, the anticipation of the SEC’s decision regarding pending Spot Bitcoin ETF applications is substantial.
It is expected that approximately $155 billion will flow into the Bitcoin market once these ETFs are approved. The total assets under management (AUM) for these companies is about $15.6 trillion. If they allocate just 1% of the AUM to Bitcoin ETFs, the total amount in U.S. dollars entering the Bitcoin market would be approximately $155 billion. This represents nearly one-third of Bitcoin’s current market capitalization.
Looking ahead, the SEC’s decision on pending Spot Bitcoin ETF applications may serve as a turning point in the world of cryptocurrencies. It could potentially open up a new horizon in the cryptocurrency market, especially once the SEC’s approval is expected by the first quarter of 2024. After the anticipated halving event, I believe that the immediate demand for Bitcoin through Exchange-Traded Funds could exceed the sales of miners by 6-7 times at its peak, and Bitcoin ETFs could represent 9-10% of the total circulating Bitcoin by 2028.