With the Bitcoin (BTC) halving event less than a year away, several financial giants have filed for spot Bitcoin exchange-traded funds (ETFs) — the last time this happened in 2020-2021 Years before the bull market.
Institutional interest in the industry dried up after the collapse of major crypto giants like FTX in the long crypto winter of 2022. Bitcoin and many other cryptocurrencies traded largely sideways as several crypto exchanges came under regulatory scrutiny.
However, with the news that major financial institutions such as BlackRock, Fidelity, and Valkyrie applied to list spot bitcoin ETFs, the price of bitcoin rebounded to more than $30,000, which once again stimulated investment in the encryption market.
Although several institutional giants have submitted spot bitcoin ETF applications to the U.S. Securities and Exchange Commission (SEC) in the past, all have either withdrawn their applications or faced outright rejection from regulators.
The ProShares Bitcoin Strategy ETF, the first Bitcoin futures ETF, was approved by the U.S. Securities and Exchange Commission (SEC) in October 2021 and debuted on the New York Stock Exchange on October 19, 2021.
However, the spot bitcoin ETF filing submitted 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 sees a 50% chance of BlackRock’s spot bitcoin ETF being approved.
The latest wave of ETF applications began with BlackRock’s June 16 filing with the US Securities and Exchange Commission (SEC). WisdomTree, Invesco and Valkyrie also filed applications in the days and weeks that followed.
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On June 28, ARK Invest amended its application to be similar to that of BlackRock, which had previously applied for a spot bitcoin ETF in June 2021. The next day, asset manager Fidelity Investments also applied for a spot bitcoin ETF. A total of seven institutional giants have applied for spot bitcoin ETFs so far.
Some industry observers believe that 2023-2024 will be critical for the approval of a spot bitcoin ETF. Robert Quartly-Janeiro, chief strategy officer at cryptocurrency exchange Bitrue, told Cointelegraph that the timing was right because “inflation is rampant, the money supply is mixed, interest rates are high, and corporate income is good, which means cryptocurrencies need to trade at interest rates.” And it comes into play in an economic environment where inflation and inflation are key considerations.”
Institutional Trust in Bitcoin
Bitcoin weathered the aftermath of 2022 well and recovered more than half of its price losses during the bear market, thanks in large part to continued institutional interest in the asset.
In fact, there are far more institutional investors in the cryptocurrency market today than there were a year ago. Institutions are keeping a safe distance from the market until 2022, and even MicroStrategy has stopped regular BTC purchases.
Many large funds and companies have already taken an interest in cryptocurrencies and are exploring their investment potential.
Despite market volatility, global institutions have shown steady interest in cryptocurrencies. Bitfinex CTO Paolo Ardoino told Cointelegraph that Bitcoin, as a completely scarce asset that will never lose value, represents enormous value in terms of utility and uniqueness. “Most traditional financial institutions recognize this,” he said, adding that “at a time of record inflation in major industrialized economies and emerging markets, the market has a better understanding of the value of Bitcoin, which does not Not surprisingly. “
“Recent new applications for Bitcoin spot market ETFs from some of the world’s foremost asset managers demonstrate that there is demand for Bitcoin from both investors and issuers, and that demand is only going to intensify. In addition to showing institutional demand for Bitcoin In addition to the increase, it will attract new retail investors and encourage wider participation,” said Ardoino.
While many institutions have distanced themselves from cryptocurrencies over the past year, this has largely been due to the public relations disaster wrought by FTX, which was further exacerbated by bank failures. Modulus CEO Richard Gardner told Cointelegraph that institutions foresaw the boiling over in the crypto industry and decided to keep a low profile and sidestep political and public reactions after the FTX incident, believing that they would be able to soar in cryptocurrencies. Revisit your decision before.
“We are at the point where they start to weigh the risks versus rewards of getting back into the fray. Given the FTX disaster, most institutions are likely to be more cautious. They will largely adjust to the regulatory environment. As governments piece together the full picture Regulatory regimes, and as bureaucrats decide how to interpret the law, agencies will assess their responses and move forward accordingly,” Gardner said.
MicroStrategy, a leading investor in Bitcoin and one of the driving forces behind institutional adoption of BTC in 2020, continues the Bitcoin buying spree in 2023. As the company faced major losses as BTC prices fell below $16,500, CEO Michael Saylor insisted that the company had no intention of selling and would continue to add more bitcoin to its vaults. MicroStrategy currently holds 152,333 bitcoins worth approximately $4.52 billion, with an average price of $29,668 per bitcoin.
Institutional inflows revive bullish optimism
While the 2017 bull market was sparked by retail interest, the 2020-2021 bull market has been sparked by institutional inflows, with the likes of MicroStrategy and Tesla, among several other public companies, adding Bitcoin to their balance sheets.
Gracy Chen, managing director of cryptocurrency exchange Bitget, told Cointelegraph that once “stable and predictable retail interest” was observed, institutions acted quickly. “The cumulative influence of institutions exceeds that of individual investors, and as such, they will continue to be the driving force behind cryptocurrency market capitalization growth,” Chen said.
She also highlighted that growing institutional interest could further drive cryptocurrency adoption, helping spark the next bull run:
“Analysts predict that if BlackRock’s ETF application is approved, the price of Bitcoin could triple. Given BlackRock’s potential institutional investor base and influence, the approval of its spot BTC ETF will have a positive effect on cryptocurrencies. The growth of the market has a greater impact. Through the application of BTC spot ETF, they may stimulate competition among related financial companies. This will guide more funds from traditional markets to Web3.”
In addition to the institutional push, the retail market has also seen significant development, with Hong Kong opening the doors for cryptocurrency exchanges to serve retail clients. Ben Caselin, vice president of cryptocurrency exchange MaskEX, told Cointelegraph that during the last bull market, “U.S. institutions were the main drivers of the gains, but arguably they weren’t ready to get deeply involved, behaving no differently than retail investors, essentially Chasing yield and acting on hype.”
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“I expect this bull market to be driven by Asia again, and maybe Hong Kong will take the helm in that region, but I also expect a major boost from the Middle East, especially from the Middle East, based on my personal observations on the ground. United Arab Emirates, Saudi Arabia and other oil-rich jurisdictions,” he added.
With the next Bitcoin halving scheduled for April 2024, a rise in institutional investor interest is seen as a bullish sign for the price of Bitcoin and the broader crypto market. Historically, bull markets started before the Bitcoin halving event, where the amount of Bitcoin rewards per block is cut in half every four years. The scarcity factor is driving the price surge as retail traders and institutional giants scramble to add to their bitcoin portfolios.