With the Bitcoin (BTC) halving event less than a year away, several financial giants have filed applications for a spot Bitcoin exchange-traded fund (ETF) – a scenario last seen before the 2020 to 2021 bull run.
Institutional interest in the sector dried up after major crypto giants such as FTX collapsed amid a prolonged crypto winter in 2022. Bitcoin and many other cryptocurrencies traded largely sideways as several crypto exchanges faced regulatory scrutiny.
However, on news that major financial institutions such as BlackRock, Fidelity, Valkyrie and others were filing applications to list a spot Bitcoin ETF, the price of BTC returned to over $30,000, once again boosting investments in the crypto market.
One month Bitcoin price chart. Source: CoinMarketCap
While several institutional giants have filed one-off applications for Bitcoin ETFs with the U.S. Securities and Exchange Commission (SEC) in the past, all have either withdrawn their applications or been outright rejected by the regulator.
The SEC approved the first Bitcoin futures ETF in October 2021 – the ProShares Bitcoin Strategy ETF – which debuted on the New York Stock Exchange on October 19, 2021.
However, the spot filing of Bitcoin ETFs by asset management giant BlackRock has increased the chances of the SEC approving the first spot Bitcoin ETF. That’s according to Eric Balchunas, senior ETF analyst at Bloomberg, who gives BlackRock a 50% chance of getting approval for its spot Bitcoin ETF.
The most recent wave of ETF filings began with BlackRock’s filing with the SEC on June 16. WisdomTree, Invesco and Valkyrie also made filings in the days and weeks that followed.
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On June 28, ARK Invest, which previously filed for a spot Bitcoin ETF in June 2021, amended its filing to make it similar to that of BlackRock. The next day, asset manager Fidelity Investments also filed for a spot Bitcoin ETF. A total of seven institutional giants have applied for a spot Bitcoin ETF to date.
Some industry observers believe that the years 2023 to 2024 will be crucial for the approval of a spot Bitcoin ETF. Robert Quartly-Janeiro, chief strategy officer at cryptocurrency exchange Bitrue, told Cointelegraph that the timing is right because “inflation is rampant and the money supply is a mixed picture, interest rates are high and businesses are seeing decent revenues, meaning crypto will have to operate in an economic environment where rates and inflation are key considerations.”
Institutional Trust in Bitcoin
Bitcoin has weathered the aftermath of 2022 remarkably well and has recouped more than half of its price decline during the bear market, largely due to continued interest in the asset from institutional investors.
Indeed, there are now many more institutional investors in the crypto market than there were just a year ago. Until 2022, institutions kept a safe distance from the market, with even MicroStrategy stopping its routine BTC purchases.
Many large funds and companies are interested in cryptocurrencies and exploring their investment potential in them.
Despite market volatility, global institutions are showing continued interest in cryptocurrencies. Paolo Ardoino, Bitfinex’s chief technology officer, told Cointelegraph that Bitcoin represents tremendous value in terms of utility and its unique nature as a perfectly rare asset that can never be degraded. He said: “Most traditional financial institutions recognize this,” adding: “It is not surprising that at a time of record inflation in both major industrialized economies as well as emerging markets, the value of Bitcoin is better understood by the markets.
“Recent new applications for ETFs in the Bitcoin spot market by some of the world’s most prominent asset managers demonstrate that there is investor, as well as issuer, demand for Bitcoin, and this will only intensify. In addition to demonstrating increased institutional demand for Bitcoin, this will also attract new retail investors and encourage broader participation,” Ardoino said.
Although many institutions have moved away from crypto over the past year, this was largely due to the PR disaster caused by FTX, with bank failures exacerbating it even further. Richard Gardner, CEO of Modulus, told Cointelegraph that institutions anticipated the crypto industry’s shudder and decided to keep a low profile and avoid the political and public response in the wake of FTX, thinking they would be able to reconsider before crypto exploded.
“We’re at the point where they’re starting to weigh the risk and reward of getting back into the fray. Most institutions will likely be much more cautious, given the FTX disaster. Their decisions will be based largely on the regulatory environment. As governments put in place a comprehensive regulatory regime and bureaucrats decide how they plan to interpret the law, institutions will evaluate their response and move forward accordingly,” Gardner said.
MicroStrategy – the leading investor in Bitcoin and one of the drivers of institutional adoption of BTC in 2020 – continued its Bitcoin buying spree in 2023. When the company suffered significant losses when the price of BTC plunged below $16,500, CEO Michael Saylor maintained that it had no plans to sell and would continue to add more BTC to its treasury. MicroStrategy currently holds 152,333 BTC acquired for approximately $4.52 billion at an average price of $29,668 per Bitcoin.
Institutional Influx Rekindles Bull Run Optimism
While the 2017 bull run was sparked by retail interest, the 2020 to 2021 bull run was sparked by institutional inflows, with companies like MicroStrategy and Tesla, and several other publicly traded companies adding Bitcoin to their balance sheets.
Gracy Chen, chief executive of crypto exchange Bitget, told Cointelegraph that institutions will act quickly once they observe “stable and predictable retail interest.” Chen said: “The cumulative impact of institutions exceeds that of individual investors and, therefore, they will continue to be a driving force for the growth of cryptocurrency market capitalization. »
She also highlighted that growing institutional interest could drive crypto adoption, helping spark the next bull run:
“Analysts expect that if BlackRock’s ETF application alone is approved, the price of Bitcoin could double. Given BlackRock’s potential institutional investor base and influence, the approval of their BTC spot ETF would have a greater impact on the growth of the crypto market. With their BTC spot ETF application, they will likely inspire competition among the relevant financial companies. This will direct more funds from traditional markets to Web3.”
Besides the institutional push, major developments have taken place in the retail market, with Hong Kong opening the doors for crypto exchanges to offer services to retail customers. Ben Caselin, vice president of cryptocurrency exchange MaskEX, told Cointelegraph that during the previous bull run, “US institutions were the main drivers of the upsurge, but they were arguably not ready to engage deeply and behaved like retail, essentially chasing gains and acting on the hype.”
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“I expect this bull market to be driven by Asia again, perhaps with Hong Kong leading the region, but based on my personal observations on the ground, I also expect a significant push coming from the Middle East, particularly the UAE, Saudi Arabia and other oil-rich countries,” he added.
With the next Bitcoin halving scheduled for April 2024, the growing interest from institutional investors is seen as a bullish sign for the Bitcoin price and the broader crypto market. Bull runs have historically started in the run-up to the Bitcoin halving event, where the BTC reward amount per block is halved every four years. The scarcity factor is driving the price surge as retail traders and institutional giants rush to enrich their Bitcoin wallets.
