Even if America gets its bitcoin ETF, success isn’t guaranteed

A casual look at crypto headlines might suggest that a spot bitcoin ETF in the US is a foregone conclusion, and a positive one at that.

Take the recent news that asset management giant BlackRock is hewing close to the Securities and Exchange Commission’s preferred model for creation and redemption. This suggests that BlackRock is keen to grease the runway as much as possible to capitalize on what Larry Fink called “pent-up interest” in a bitcoin ETF.

This month also saw Bitwise drop a buzzy new ad featuring the world’s most interesting alcohol spokesperson, Jonathan Goldsmith. The ad’s importance was less to do with its alignment to a popular advertising meme, and more to do with the dollars dropped on what will likely be an aggressive marketing campaign from multiple parties if and when a bitcoin ETF application gets the greenlight.

All the announcements and filings, the new ad and the near-constant discussion around an ETF — the cumulative effect is that it’s hard to turn your head and not see the emergent consensus: The SEC simply must approve an ETF.

It’s taken as equally gospel that the approval will provide rocket fuel for the price of bitcoin. Nicholas Scherling, founder and CEO of DeCryptoFi, told TheStreet that “it’s definitely going to pump quickly” if such an approval takes place.

I don’t think he’s wrong, necessarily — October’s fake bitcoin ETF fiasco was evident enough that the market is ready to chase after any positive news with reckless abandon.

But let’s assume (safely, as many would seemingly argue) that a bitcoin ETF is approved. Then what?

One’s view on what would come next might depend on their innate bullishness around bitcoin and crypto generally. A price pump? Probably. A busy first day on the market for whichever ETF or ETFs make it to market first? I wouldn’t bet against it.

Hordes of investors ready to toss their dollars into the fray? I’m not so sure.

Needham recently put out some survey data on this front, and according to Benzinga’s coverage, found that “advisors are seeing mostly disinterest from clients around bitcoin and an ETF.” However, those same advisors reportedly believe that interest would rise alongside any future interest in the price of bitcoin.

Read more from our opinion section: Forget cat memes. The next crypto bull market will be driven by TradFi.

Reports around that survey suggest one conclusion: Investment advisors, rather than the clients themselves, will be the active force behind any mainstream investor movement toward bitcoin ETFs. What’s more, that interest will largely be driven by the asset’s price rather than any ETF itself.

I wouldn’t be surprised if an American spot bitcoin ETF follows the same path as other crypto-adjacent financial products — strong out of the gate, followed by the slow work of salesmanship as advisers basically add it to their toolkit. It’ll be the product sellers, narrative in hand, that drive activity there, rather than the innate strengths of the product itself.

After all, it’s 2023, and for the past few years we’ve seen numerous platforms take shape — Coinbase and Fidelity among them — design themselves around the idea of selling bitcoin and other digital assets to investors.

If an investor wants exposure to bitcoin, it’s never been easier to buy it — even if you can’t make such purchases through your brokerage account quite yet.

Maybe I’m wrong and John Q. Investor is eagerly awaiting the bitcoin ETF’s arrival, investment dollars in hand. But after years of crypto hype cycles largely playing out the same, I think it’s fair to predict that any prospective bitcoin ETF’s success will be slow-going. I wonder if the crypto space’s attention span can handle that outcome.

Michael McSweeney has worked in crypto media since 2014, including editorships at CoinDesk and The Block. In his spare time, he writes fiction and plays disc golf. Contact Michael at michael.mcsweeney@blockworks.co.

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