Massive Entry of Traditional Financial Institutions

The approval of Bitcoin spot ETFs has provided traditional financial institutions a more direct, secure, and compliant way to participate in the market. Although institutional investors could indirectly participate in the Bitcoin market in the past by purchasing GBTC or MicroStrategy stocks, this method had some flaws, including discrepancies between the market performance of the underlying assets and Bitcoin itself, as well as issues related to the liquidity and premiums of the related investment tools.

Previously, institutional investors might have adopted a cautious attitude toward the crypto market due to their status and nature, mainly due to the lack of standardized tools and the opacity of digital asset regulation. However, the launch of Bitcoin spot ETFs has broken this pattern, offering institutional investors a pathway that fits within the traditional investment framework. The listing of regulator-approved Bitcoin ETFs on conventional stock exchanges not only provides regulatory recognition for these institutions but also lays a safer foundation for their foray into the digital asset domain.

With the formal approval of Bitcoin spot ETFs, those traditional financial institutions with misconceptions or biases against cryptocurrencies might reassess their views on digital assets. This shift in perception could lead to a more positive attitude, thereby encouraging more traditional financial institutions to participate in the crypto market. Large institutions already involved in the crypto market, such as BlackRock, would increase their investment in the crypto ecosystem due to positive expectations. This investment will not only inject more capital into the market but is also expected to have a significant and positive impact on Bitcoin’s market price, leading to more stable growth for the entire industry. This development trend also indicates that Bitcoin is gradually moving from the fringes to the mainstream, opening new doors for the breakthrough of crypto assets.

Bitcoin Spot ETF List (Source: James Seyffart)

The Relationship Between the Cryptocurrency Market and Traditional Markets Will Become Closer

For a long time, Bitcoin was considered by most investors to have little correlation with traditional markets (such as U.S. stocks, gold, etc.) due to a lack of understanding of it in mainstream consciousness. However, the reality is that since 2017, Bitcoin’s price has shown an increasingly strong correlation with traditional assets such as U.S. stocks, gold, and other commodities. Taking gold, which is also considered a safe-haven asset, as an example, before 2016, gold prices gradually declined, while, conversely, Bitcoin prices showed a slow upward trend. However, in the subsequent trend, the two exhibited convergence, and by 2018, they both reached a periodic high point. In August 2020, gold prices reached their highest point but quickly fell back; meanwhile, Bitcoin prices rapidly climbed, entering a bull market. Notably, the peak of Bitcoin prices corresponded precisely to the periodic low of gold prices in 2021. However, after November 2022, both bottomed out and rebounded simultaneously, showing a consistent trend, and since then, their correlation has grown stronger.

Compared to gold, the price trend of U.S. stocks (especially the Nasdaq 100) and Bitcoin is even more aligned, with Bitcoin showing a higher sensitivity to macro-level changes than U.S. stocks. On one hand, the approval of spot ETFs has further strengthened Bitcoin’s deep liquidity and made its price fluctuations more stable. On the other hand, there might be a difference between the prices of spot ETFs and Bitcoin spot prices, and the difference in trading hours between U.S. stocks and the cryptocurrency market could provide arbitrage opportunities. These arbitrage opportunities are expected to attract more capital and institutions into the cryptocurrency market, making the connection between the cryptocurrency market and U.S. stocks even closer.

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The Bitcoin price and Nasdaq index trend chart

As a long-term trend, the inflow of funds into Bitcoin ETFs may have a limited correlation with Bitcoin’s short-term trajectory. Still, the market impact it triggers will be more profound, and its resultant connection with traditional markets will become even more profound.

Increased Market Awareness

The approval of Bitcoin spot ETFs represents an increase in market awareness outside the crypto sphere, marking digital assets as an undeniable part of the global financial system. The influx of institutional investors indicates that Bitcoin and other digital assets have evolved from a fringe market into a respected investment vehicle. The shift in attitude towards Bitcoin by major financial institutions further cements its position within the mainstream financial community. This trend has garnered widespread attention from traditional media, increasing news coverage about Bitcoin and crypto assets. This, in turn, enables more people to understand their essence and potential applications.

The enhancement of market awareness extends beyond recognizing Bitcoin and crypto assets; it also promotes the widespread acceptance of blockchain technology. As the core underlying technology of Bitcoin, blockchain is increasingly recognized for its enormous potential in fields such as finance, supply chain management, and healthcare. The increase in awareness aids in the research and application of blockchain technology and encourages more industries to explore how this technology can enhance efficiency, transparency, and security, thereby fostering a positive feedback loop.

Furthermore, the increase in market awareness profoundly impacts the innovation and development of the entire crypto ecosystem. More startups and projects are joining the world of Web3, utilizing blockchain technology to address various real-world issues. This wave of innovation is expected to pave new paths for the future development of finance, society, and technology, positioning digital assets and blockchain technology on a more favorable development trajectory. Thus, the rise in market awareness is not only a current challenge for the crypto industry but also a source of potential opportunities for its future. It plays a role beyond merely driving price increases in the entire crypto market.