Opinion: Sole reliance on spot Bitcoin ETFs won’t guarantee immediate profits
Disclaimer: The author’s views and opinions expressed in this article are their own and do not necessarily 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 impact, HODLers may have been disappointed to see the price only rise by six percent in just over a month. While the approvals did bring positive attention and increased institutional activity to the crypto market, the immediate price surge 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. The attention brought by major asset managers like BlackRock and Fidelity has paid off in a significant way, even if it initially stalled.
But are ETFs the sole reason for the significant price increase of BTC? While the convenience of ETFs has generated new demand, it is also delaying the actual adoption of BTC as a sovereign store of value.
The ETF approvals have brought a renewed sense of confidence in the crypto market after a challenging crypto winter. This renewal can be attributed to the increased acceptance from trusted financial institutions, which has paved the way for broader adoption.
The more professional image that ETFs bring is 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 a majority of BTC being held in spot ETFs, thereby consolidating a decentralized financial instrument within traditional centralized control, the chances of that happening are currently slim.
It is also inaccurate to attribute the bullish momentum solely to ETFs. While they do play a significant role, it is reductionist to ignore the other factors at play.
The Bitcoin ETFs not only bring attention and funds to BTC but also share 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, and institutional scrutiny. The progress made in infrastructure has contributed to the current revival.
Blockchain infrastructure has become a cornerstone of the ecosystem’s growth. Infrastructure projects have raised around $800 million in equity funding since the beginning of 2024 alone. The rapid development of layer-2 projects for Bitcoin and the contributions of the Ethereum ecosystem and other altcoins have also played a significant role in the industry’s growth.
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 imagination?
Bitcoin ETFs will undoubtedly bring value to the broader crypto ecosystem and promote adoption by giving the industry a more professional image. This 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.
We can expect more price fluctuations, and it would be wrong for HODLers to expect quick gains solely because of the ETFs. However, they do create a new foundational pillar for institutional attention and investment that will ultimately strengthen Bitcoin and the entire crypto market in the long run.
Read more: Spot Bitcoin ETFs are here. What’s next? Regulating DeFi? | Opinion
About the author: James Wo is a seasoned entrepreneur and crypto investor who founded DFG in 2015. He currently manages a portfolio worth over one billion USD in assets and has been an early investor in companies like LedgerX, Ledger, Coinlist, Circle, and ChainSafe. He has also been a strong supporter of protocols like Bitcoin, Ethereum, and Polkadot.
