How the Highly Anticipated Spot Bitcoin ETF Impacts the Market

2023-11-10, 09:52

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## [TL；DR]: 
The approval of spot <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> ETFs signifies the acceptance and recognition of Bitcoin by the traditional mainstream world, which will contribute to the larger-scale adoption of Bitcoin in reality, thus attracting market attention.

As of November 8, 2023, there are approximately 20 active spot Bitcoin ETF products worldwide, with a total assets of $4.16 billion.

The entry of spot Bitcoin ETFs is imminent. Faced with the potential influx of massive funds, the crypto community needs to consider balancing the expansion of real adoption rates and the original intention of decentralization.

## Introduction
In late October, a series of progress news about the US spot Bitcoin ETF application greatly stimulated the sharp rise in Bitcoin prices and drove the overall positive trend of the market to continue nowadays.

Why do spot ETFs have such a significant impact on market confidence, what is the current market pattern of spot ETFs, and how to evaluate the advantages and disadvantages of this product? The article will explain all questions.
 
## A 10-year Journey of Applying for Spot Bitcoin ETFs
The approval of spot Bitcoin ETFs signifies the acceptance and recognition of Bitcoin by the traditional mainstream world, which contributes to the larger adoption of Bitcoin in reality and has always been a focus of market attention.

The earliest Bitcoin ETF application can be traced back to July 2013, when Gemini co-founders Cameron and Tyler Winklevoss submitted their first ETF application to the US SEC. But at that time, regulatory agencies and even potential investors were not very familiar with cryptocurrencies, and the SEC directly rejected the application, thus starting a 10-year game journey.

By April 2019, news of the approval of a Bitcoin ETF quickly spread, greatly boosting the bearish market. Although the news was later falsified, market sentiment remained high, and Bitcoin triggered a wave of bull market trends that year, indicating the significant impact of Bitcoin ETF products on the market.

In fact, the widely known Grayscale Bitcoin Trust (GBTC), which was originally a fund in the process of applying for an ETF, was converted into a trust due to its failure to obtain approval from the US SEC. Although GBTC was not an ETF, it was the first and only investment product at that time that could be traded in the US stock secondary market and track the price of Bitcoin, resulting in a high premium to the actual price of Bitcoin after its issuance.

In the 2020 Bitcoin bull market, Grayscale has been in an overweight state, becoming an important indicator of market bullishness at that time.

The world's first spot ETF was also issued and listed during this period. The first to be launched was the German ETC Group Physical Bitcoin, which was publicly traded in June, followed by the 3iQ Bitcoin Fund and VanEck Bitcoin ETN, which were launched in the fourth quarter.

After the Grayscale application to convert Bitcoin Trust GBTC into spot ETF was rejected in 2021, the Bitcoin futures ETF was approved for issuance by the SEC that year.

At a time when the US SEC was concerned about the lack of transparency and liquidity in transactions, as well as market manipulation, leading to slow progress, Canada, Brazil and other countries took the lead in approving the issuance of spot Bitcoin ETFs in the excitement of the 2021 bull market, helping to drive up Bitcoin prices significantly.

In 2023, countries such as the UK and Germany have also issued spot Bitcoin ETFs, and Hong Kong, China, has also approved two futures ETFs. However, their trading scale is too small and their influence is limited. The focus of market attention is still on the progress of many institutions in the United States waiting for approval.
  ![](https://gimg2.gateimg.com/image/article/169960982914391699609401_.pic.jpg)
Overview of CSOP Bitcoin Futures ETF Products Figure 1 Source: csopasset.com
 
In fact, since 2017, based on the standards of protecting investors and the public interest, the US SEC has rejected more than ten applications for such ETFs, but things are undergoing positive changes.

After repeated confrontations, the US SEC's attitude towards the review began to soften. On the one hand, Grayscale won the lawsuit against the SEC, and the SEC needed to reconsider the application for Grayscale GBTC conversion. On the other hand, institutions such as BlackRock that are applying for spot ETFs began filing product information with the US Securities Depository and Clearing Corporation (DTCC), although this does not mean that the SEC has officially approved the application, But positive signs of progress undoubtedly indicate that the event is about to be completed.
 
## The Market Pattern of Spot Bitcoin ETFs
As of November 8, 2023, there are approximately 20 active spot Bitcoin ETF products worldwide, with a total assets of $4.16 billion; There are also 7 futures ETF products, mainly located in the United States (5) and Hong Kong, China (2).

According to CoinGecko data, out of the 20 spot Bitcoin ETF products worldwide, Canada has 7, accounting for nearly 50% of the asset size. Among them, the largest Public Bitcoin ETF (BTCC) manages nearly $820 million in assets, as detailed in the table below.
![](https://gimg2.gateimg.com/image/article/1699855251WechatIMG1449.jpg)
Table 2 Source: CoinGecko

Currently, Canada and Europe are the main markets for spot Bitcoin ETFs.

Canada has the largest number of products of this type issued earlier. Canada's 3iQ Bitcoin Fund (QBTC) was launched on the Dubai Nasdaq as early as 2021, resulting in a wider range of funding sources.

Since last year's bear market, there has been no significant increase in Canadian holdings of BTC in this category of products.

Germany was the first to issue spot Bitcoin ETFs, with a total asset of $800 million. In addition, other European products of this type are registered in tax havens, but they have little say in the crypto market like Brazil and Australia, and have little impact on the crypto market.

If everything goes smoothly, until the US SEC approves all current applications, the US will launch 12 spot Bitcoin ETFs by early next year. More product quantities, as well as potential huge funds, will keep the United States up.
 
## Is the Rescue Team Here or is the Wolf Here?
In the view of many analysts, the approval of the US spot Bitcoin ETF will attract the participation and interest of many investors and trading institutions, help accelerate the adoption rate of Bitcoin, enhance the value of Bitcoin and even the entire crypto market, and will be an important milestone in the development of the crypto market.

For example, NYDIG in the United States stated that once issued and listed, the asset management scale of these products would reach $28.8 billion, of which $27.6 billion would be invested in spot products.

Bitwise, the world's largest virtual currency index fund management company, is more optimistic. Its CEO, Matt Hougan, stated that if the product can be approved, the overall size of spot Bitcoin ETFs can quickly reach tens of billions of dollars.

He estimated that within five years, it may attract approximately $50 billion in funds, and the price increase after going public may further expand the scale.
<a href="/price/polymath-poly" target="_blank" class="blog_inner_link">poly price</a>
Figure 3 Source: @ Matt_ Hougan

But not everyone has a positive attitude. Arthur Hayes believes that the influx of Wall Street institutions may have a negative impact, and the entry of financial institutions representing the national will may manipulate online consensus and stifle community innovation.

He stated in a column that it is a questionable question whether they (referring to institutions such as BlackRock) will support these upgrades. Obviously, when passive holders of large-scale shares emerge in the ecosystem, there will be more uncertainty about this matter.

Everything has two sides. On the one hand, the crypto community is eagerly anticipating the ETF approval process, hoping for the value growth brought by the benefits. On the other hand, the community has to think carefully in the long term and seek effective response plans.

The entry of spot Bitcoin ETFs is imminent. Faced with the potential influx of massive funds, how the crypto community will balance expanding real adoption rates and maintaining decentralization intentions may be a long-term issue that people must pay attention to under the current trend.

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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