Opinion: Spot Bitcoin ETFs alone won’t deliver immediate profits
Disclaimer: The author’s views and opinions expressed in this article are their own and do not reflect the views and opinions of crypto.news’ editorial team.
If we were to use the SEC’s approval of 11 spot Bitcoin ETFs in January as an indicator of its long-term price response, HODLers might have been disappointed to see the price only rise by six percent in just over a month. While the approvals did bring a wave of positive attention and increased institutional activity in the crypto market, the immediate price jump that everyone predicted did not materialize.
However, we are now witnessing Bitcoin reaching record-breaking prices and the beginning of a full-scale bull market unfolding right before our eyes. The attention brought by major asset managers like BlackRock and Fidelity has paid off in a big way, even if it initially stalled.
But are ETFs the sole reason for BTC’s significant price jump? While the convenience of ETFs has unlocked new demand, it has also delayed the actual adoption of BTC as a sovereign store of value.
What the ETF approvals have brought to the industry is a renewed sense of confidence in the crypto market after a challenging crypto winter. This renewal can be attributed to the more confident embrace of trusted financial institutions, who are guiding the way towards broader adoption.
The more professional image that ETFs have brought is truly welcomed and provides a clear roadmap for how massive institutions and the general public can incorporate crypto and blockchain technology without completely changing their financial reality.
While there is a risk of consolidating a decentralized financial instrument within the confines of traditional, centralized control if a majority of BTC is held in spot ETFs, the likelihood of that happening is currently low.
It is also inaccurate to attribute the bullish momentum in the crypto market solely to ETFs. While they likely play a significant role, both monetarily and in terms of image, it would be reductive to ignore other factors at play.
The Bitcoin ETFs play a dual role in bringing attention and funds to BTC while also sharing the spotlight with other sectors of the industry. The bear market allowed crypto projects to focus on rebuilding and developing products that could withstand regulatory, technological, or institutional scrutiny. Ignoring the progress made in infrastructure development would be detrimental.
Blockchain infrastructure has become a cornerstone of the ecosystem’s growth. Infrastructure projects have raised around $800 million in equity funding since the start of 2024, and last year saw over $1.1 billion in the same quarter. This proactive funding is now paying off through institutional interest.
The rapid development of layer-2 projects for Bitcoin has also contributed to scalability. Additionally, the Ethereum ecosystem and other altcoins are witnessing increased activity and development. Without instrumental technologies like zero-knowledge rollups (zk-rollups), the industry and development would be in a different place.
In such a short period, it is difficult to determine if ETFs are solely responsible for the market turnaround. Did they draw attention to developments that would have happened regardless, even if the ETFs were rejected? Or did they spark a breakthrough beyond the industry’s expectations?
Bitcoin ETFs will bring value to the broader crypto ecosystem and promote adoption by presenting a more professional image, which will encourage retail investors to learn and understand the asset class over time. Despite recent negative net inflows of BTC ETF activities, the outlook remains positive for the impact these advancements will have on the space.
While we can expect more price swings, it would be wrong for HODLers to assume that they will achieve quick gains solely because of the ETFs. However, ETFs do create a new foundational pillar for institutional attention and investment that will ultimately strengthen Bitcoin and the entire crypto market in the long term.
Read more: Spot Bitcoin ETFs are here. What’s next? Regulating defi? | Opinion
James Wo, a seasoned entrepreneur and crypto space investor, founded DFG in 2015. He currently manages a portfolio exceeding one billion USD in assets. With a track record as an early investor, James has supported companies such as LedgerX, Ledger, Coinlist, Circle, and ChainSafe. He has also been an early investor and advocate for protocols like Bitcoin, Ethereum, and Polkadot.
