Risk and Reward Assessment of Spot Bitcoin ETFs in 2024 Conducted by Experts
Article Rewritten:
Key Takeaways
Experts are predicting that the Bitcoin market will double in 2024, marking the end of the “crypto winter.”
The limited availability of “regulated” Bitcoin may clash with the high demand for ETFs.
Grayscale has proposed in-kind redemptions for ETFs, which could simplify processes and potentially influence approval decisions.
The upcoming launch of spot Bitcoin exchange-traded funds (ETFs) has become a major topic of discussion among industry experts. Insightful discussions from Coinbase researchers in a recent podcast have shed light on the potential challenges and opportunities surrounding this development.
Welcome to the Crypto Revival
David Duong, Coinbase’s head of institutional cryptocurrency research, has a positive outlook for 2024. His market forecast predicts a remarkable doubling of cryptocurrency market capitalization this year, signaling the end of the “crypto winter.” However, Duong emphasizes the need for the industry to progress and create a resilient and innovative ecosystem.
What Can We Expect in 2024?
Duong predicts that institutional investors will continue to focus on BTC in early 2024. The price of BTC may rise due to factors such as the upcoming BTC halving, changes in U.S. interest rate policies, and concerns about commercial real estate.
While Bitwise predicts that a spot Bitcoin ETF could be the most successful ETF launch ever, Duong sees the sourcing challenge as a positive sign despite high demand. He also anticipates that BTC may outperform traditional asset classes. Duong highlights two potential impacts of a BTC spot ETF approval in the U.S., which could lead to significant market changes by lowering the investment threshold and attracting more institutional investors as cryptocurrency regulations evolve.
Pay Close Attention, Everyone.
#bitcoinisinteresting
pic.twitter.com/pbfo6vlX0C
– Bitwise (@BitwiseInvest)
December 20, 2023
No Risk, No Gain!
One critical concern revolves around the availability of “regulated” Bitcoin. With the soaring demand, ETF institutions may struggle to source enough Bitcoin from legitimate channels, raising questions about their ability to meet ETF requirements.
In the complex world of institutional trading, attention is focused on the “basis trade,” which capitalizes on the price difference between Bitcoin’s spot and futures contracts. Recent data shows a profitable 20% return on this trade. However, with the launch of ETFs, this price differential might shrink, potentially affecting the appeal of the basis trade for institutional players.
Navigating Regulations
With 13 spot Bitcoin ETF applications awaiting approval from the Securities and Exchange Commission (SEC), analysts project a potential approval, possibly by January 10. Bloomberg’s Eric Balchunas and James Seyffart even place the odds at a significant 90%.
However, Seyffart’s recent insights into Grayscale’s strategy add a twist to the situation. Grayscale suggests in-kind redemptions over cash as a beneficial move for ETF issuers, streamlining processes and reducing costs.
Update:
@Grayscale
met with the SEC again yesterday regarding
$GBTC
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– James Seyffart (@JSeyff)
December 20, 2023
As the crypto community awaits potential ETF approvals, attention is focused on the associated risks. These challenges, if not addressed, could reshape Bitcoin markets and redefine institutional trading approaches, prompting stakeholders to adopt a measured and vigilant stance.
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Bitcoin ETF