The Bitcoin ETF prediction

According to recent forecasting, the SEC is closer than ever to approving the first spot Bitcoin ETFs on the US markets.

The assumption, which has been circulating for some time now, is that it may approve en bloc all those applications that have all the requirements to be.

Summary

• The forecasting on Bitcoin ETFs: the details
• The consequences for crypto markets
• Beyond the forecasting for Bitcoin: the difference with futures ETFs
• The price of gold
• The difference with Bitcoin

The forecasting on Bitcoin ETFs: the details

Bloomberg Senior Analyst Eric Balchunas wrote bluntly that they predict not only a 75% chance that the SEC will approve them, but more importantly that they will be approved before the end of 2023.

The fact that they are actively engaging w issuers on their current filings (via comments, which hasn’t ever happened bf) we think appeal unlikely and denial unlikely. Again we holding line at 75% odds approval by end of year, a number that would only go up if we go into January https://t.co/Ybpz88oCRb

— Eric Balchunas (@EricBalchunas) October 9, 2023

Balchunas was commenting on a tweet from a Bitcoin Magazine reporter who pointed out that by the end of this week the SEC could already make a decision.

In fact, the agency has a deadline on Friday in relation to Grayscale’s application, but it is likely to do as it has in the past and postpone the decision until it is allowed to.

Balchunas responded by saying that the fact that the SEC is actively involving issuers by asking them for currents has never happened before for these types of requests, which were simply rejected. For this reason they consider a rejection unlikely.

He then reiterated that they consider approval by the end of the year likely at 75%, adding that this percentage will go up if no rejections come before January.

The consequences for crypto markets

However, it should be remembered that this kind of prediction has been circulating for a while now.

Indeed, it is possible that the markets are already betting on a possible approval by 10 January 2024, and in this case it could even already be considered partly priced in.

In other words, it even seems likely that by the time the official news is released, the impact on crypto markets may prove to be weak, or at any rate not decisive.

The real wide and deep consequences will be there only if spot Bitcoin ETFs succeed in the traditional financial markets, and this to date is still a total unknown.

Indeed, one should not forget that there are already ETFs on Bitcoin, both on spot BTC (in Canada and other countries outside the US) and on BTC price futures (also in the US). Such products so far have not been very successful, so it is by no means a foregone conclusion that the first spot Bitcoin ETFs approved in the US will be.

Beyond the forecasting for Bitcoin: the difference with futures ETFs

But there is one very important difference with BTC price futures ETFs.

In fact, spot Bitcoin ETFs must be fully collateralized in BTC, which must be bought in the market and immobilized as collateral.

The more successful these ETFs are, the more BTC will have to be taken from the crypto market and immobilized as collateral. This will help reduce the supply in the market, helping the price go up in case demand does not go down or even up.

In this regard, the assumption that is circulating is that such a process could take up to 3 years, so the impact on the markets may not be at all immediate.

However, it should be added that in April 2024 there will be the fourth halving of Bitcoin, and all three past halvings were followed by a big bullrun the following year.

So if spot Bitcoin ETFs are approved by January 2024, and are successful within three years, 2025 would seem to be the ideal candidate for a possible new bullrun.

The price of gold

The fact is that when spot gold ETFs were first introduced to the financial markets they caused the price of gold to take a huge leap.

In 2004 the first gold ETF landed on the New York Stock Exchange. Until then in the entire history of the US the price of gold had never exceeded $1,000 an ounce, and by then since 1987 it had always been below $500.

After the launch of ETFs, however, it made an initial leap that took it above $700 within two years, and within another two years it exceeded $1,000 for the first time in history. His run did not stop there, however, because over the next three years he also came close to $2,000.

In other words, in just seven years after the launch of ETFs it made an incredible +400%, after a full seventeen years of substantial lateralization.

This is why many believe that the impact of ETFs on Bitcoin spot in the US can greatly favor the market value of BTC.

The difference with Bitcoin

There were also ETFs on gold even before the 2004 launch on the New York Stock Exchange. But while back then it was difficult to buy financial products on foreign exchanges, today it is definitely easier.

Then there are two key differences that make one believe that the impact could be different.

The first is that BTC is a risk-on asset, while gold is commonly thought of as a risk-off asset. In other words, gold ETFs are perfect financial products to be placed within a long-term portfolio.

With regard to Bitcoin, on the other hand, inclusion in long-term, low-risk portfolios is advisable only at small or even very small percentages. Thus an ETF on spot Bitcoin may prove less attractive than one on gold.

However, gold does not guarantee significant gains at all, so much so that even its current value is lower than it was at its peak in 2011. In contrast, Bitcoin can allow for gains over the medium to long term, which makes it significantly more attractive, albeit with a much greater degree of risk.

The second difference, however, is even more important. Before the gold ETF, it was virtually impossible to buy gold on the financial markets. By contrast, buying BTC on crypto markets is already very easy, and crypto markets are financial markets in their own right, albeit still detached from the traditional ones. So from this point of view, the gold ETF turned out to be much more attractive than an ETF on Bitcoin.

Despite all this, to date it is impossible to make precise predictions about what the success of spot Bitcoin ETFs will be, although there are those who say that they could attract capital worth more than a third of the entire market capitalization of BTC today.

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