The race to launch a spot Bitcoin exchange-traded fund (ETF) has begun, with seven major institutional firms, including BlackRock, the world’s largest asset manager, filing applications with the United States Securities and Exchange Commission (SEC). This surge in interest from financial giants has generated optimism and higher Bitcoin prices, signaling a potential return of institutional trust to the crypto market.
Institutional interest in cryptocurrencies had waned after the collapse of major crypto giants like FTX during the prolonged crypto winter of 2022. The regulatory scrutiny faced by several crypto exchanges further dampened investor confidence. However, the recent filings for a spot Bitcoin ETF by BlackRock, Fidelity, Valkyrie, and others have reignited optimism, leading to a recovery in BTC price above $30,000 and renewed investment in the crypto market.
While past spot Bitcoin ETF applications faced withdrawals or rejections from the SEC, the approval of the ProShares Bitcoin Strategy ETF in October 2021 set a precedent. Now, the filing by BlackRock, along with other recent filings by WisdomTree, Invesco, Valkyrie, ARK Invest, and Fidelity Investments, has increased the likelihood of the SEC approving the first spot Bitcoin ETF. Analysts give BlackRock a 50% chance of obtaining approval.
Industry experts believe that 2023 to 2024 will be critical for the approval of a spot Bitcoin ETF. Factors such as rampant inflation, high interest rates, and positive business revenues make this an opportune time for cryptocurrencies to perform well in an economic environment where inflation and interest rates play key roles.
Institutional trust in Bitcoin has been steadily growing, despite the challenges faced in 2022. More institutions are now showing interest in cryptocurrencies and exploring their investment potential. The unique nature of Bitcoin as a scarce asset that cannot be debased is increasingly recognized by traditional financial institutions. This institutional demand for Bitcoin not only boosts its value but also attracts new retail investors, encouraging broader participation in the crypto market.
While some institutions distanced themselves from crypto due to negative publicity surrounding FTX and bank failures, they are now reassessing the risk-reward ratio of entering the market. Regulatory environments and interpretations of laws will heavily influence institutional decisions regarding cryptocurrencies. MicroStrategy, a leading investor in Bitcoin, has continued its purchasing spree despite price fluctuations, demonstrating unwavering institutional inflow.
Institutional inflows played a significant role in the 2020 to 2021 bull run, during which companies like MicroStrategy and Tesla added Bitcoin to their balance sheets. Analysts believe that stable and predictable retail interest will prompt institutions to act swiftly, further driving the growth of the cryptocurrency market.
Additionally, developments in the retail market, such as Hong Kong opening doors for crypto exchanges to serve retail customers, contribute to the overall positive market sentiment. The upcoming Bitcoin halving event in April 2024, where the block reward gets halved every four years, is expected to create scarcity-driven price surges as both retail traders and institutional giants rush to accumulate more Bitcoin.