Financial Giants File Applications for Spot Bitcoin ETF Amid Institutional Interest Revival
As the Bitcoin (BTC) halving event approaches, several financial giants have submitted applications for a spot Bitcoin exchange-traded fund (ETF), signaling a resurgence of institutional interest in the cryptocurrency market. This development echoes the scenario witnessed before the bull run of 2020 to 2021.
Institutional interest waned during the crypto winter of 2022, as major crypto giants like FTX collapsed, and cryptocurrencies, including Bitcoin, traded mostly sideways amidst regulatory scrutiny of several crypto exchanges.
However, the news of applications filed by prominent financial institutions such as BlackRock, Fidelity, Valkyrie, and others to list a spot Bitcoin ETF has sparked a recovery in the price of BTC, crossing the $30,000 mark and reigniting investment in the crypto market.
Previously, various institutional giants filed spot Bitcoin ETF applications with the United States Securities and Exchange Commission (SEC), only to either withdraw the applications or face outright rejections from the regulator. The SEC did approve the first Bitcoin futures ETF, the ProShares Bitcoin Strategy ETF, in October 2021, which debuted on the New York Stock Exchange on October 19, 2021.
The recent filing of a spot Bitcoin ETF by asset management giant BlackRock has increased the likelihood of the SEC approving the first spot Bitcoin ETF, according to Bloomberg senior ETF analyst Eric Balchunas. He gives BlackRock a 50% chance of securing approval for its spot Bitcoin ETF.
The recent wave of ETF filings began with BlackRock’s submission on June 16, followed by filings from WisdomTree, Invesco, and Valkyrie in subsequent days and weeks.
On June 28, ARK Invest amended its filing for a spot Bitcoin ETF, aligning it with BlackRock’s proposal. The next day, Fidelity Investments also filed an application for a spot Bitcoin ETF. To date, seven institutional giants have filed for a spot Bitcoin ETF.
Industry observers believe that 2023 to 2024 will be a critical period for approving a spot Bitcoin ETF. Robert Quartly-Janeiro, chief strategy officer of the cryptocurrency exchange Bitrue, stated that the timing is favorable due to rampant inflation, mixed money supply, high interest rates, and businesses witnessing substantial revenues, making crypto’s performance crucial in an economic environment where rates and inflation are significant considerations.
Bitcoin has withstood the challenges of 2022 remarkably well and has recovered over half of its price decline during the bear market, largely thanks to continued institutional interest. The crypto market now boasts significantly more institutional investors compared to a year ago. Previously, institutions kept their distance from the market, even with MicroStrategy halting its routine BTC purchases.
Currently, many large funds and companies are exploring the potential of cryptocurrencies for investment purposes. Global institutions continue to show a steady interest in cryptocurrencies, despite the market’s volatility. Paolo Ardoino, the chief technology officer of Bitfinex, noted that Bitcoin’s utility and unique nature as a perfectly scarce asset that cannot be debased represent significant value recognized by traditional financial institutions. He emphasized that the new ETF applications reflect increased institutional and issuer demand for Bitcoin, which will attract retail investors and encourage broader participation.
While many institutions distanced themselves from crypto in the past year, mostly due to adverse PR caused by FTX, along with bank failures, Richard Gardner, CEO of Modulus, stated that they foresaw the simmering issues in the crypto industry and decided to wait and reassess their decision before the market surged again. He added that institutions will likely be cautious, guided by the regulatory environment and government decisions on interpreting the law.
MicroStrategy, a leading investor in Bitcoin and a driving force behind institutional adoption of BTC in 2020, continues to accumulate Bitcoin, even in the face of major losses caused by a price plunge. Currently holding 152,333 BTC acquired for approximately $4.52 billion at an average price of $29,668 per Bitcoin, MicroStrategy plans to add more BTC to its treasury.
The previous bull run in 2020 to 2021 was fueled by institutional inflows, with companies like MicroStrategy and Tesla, as well as various publicly-listed firms, adding Bitcoin to their balance sheets. Gracy Chen, managing director at crypto exchange Bitget, stated that institutions will act swiftly once stable and predictable retail interest is observed. She emphasized that the cumulative impact of institutions outweighs that of individual investors and will continue to drive the growth of the cryptocurrency market.
Chen also noted that growing institutional interest could promote crypto adoption and contribute to the next bull run. She cited analysts’ expectations of a twofold increase in Bitcoin’s price in the event of BlackRock’s ETF approval, attributing it to the potential investor base and influence of BlackRock.
Apart from institutional involvement, major developments in the retail market, particularly in Hong Kong’s opening of crypto exchange services to retail customers, contribute to the overall growth and adoption of cryptocurrencies. Ben Caselin, vice president at crypto exchange MaskEX, predicted that this bull market would be driven by Asia once again, particularly with Hong Kong leading the way. He also mentioned the Middle East, specifically the United Arab Emirates and Saudi Arabia, as potential contributors to the market surge due to their oil-rich economies.
As the next Bitcoin halving approaches in April 2024, the rising interest from institutional investors bodes well for Bitcoin’s price and the wider crypto market. Historical trends indicate that bull runs usually begin before the halving event, with the reduction in BTC rewards creating scarcity and driving up prices as retail traders and institutions rush to add to their Bitcoin portfolios.