The long-awaited launch of bitcoin spot ETFs in the United States this year helped engender a wave of optimism that the value of the well-known cryptocurrency would quickly appreciate. The logic was simple: With an easy, low-cost avenue now available for regular investors to purchase bitcoin, the supply-demand curve would shift and the value of each bitcoin would rise.
But the response has been somewhat mixed. While the value of bitcoin has nearly doubled in the past year to around $43,000 today, it has largely traded sideways in recent weeks. Was the hype and ensuing response another example of the old Wall Street maxim, “Buy the rumor, sell the news”?
To be honest, we’re checking the flows into and out of spot bitcoin ETFs more frequently than we want to admit, but we still wanted to learn more. So, we asked TechCrunch readers if they intended to buy bitcoin via one of the new spot ETFs, whether they owned bitcoin elsewhere, and what impact they expected these new investing vehicles to have on its value and on crypto.
https://techcrunch.com/2024/01/10/grayscale-ceo-spot-bitcoin-etf/
Several dozen replies from founders and operators later, we found some interesting trends. About a quarter of respondents to our little, unscientific survey reported that they don’t intend to buy bitcoin via an ETF, and already own bitcoin elsewhere. Where are folks holding their coins? Everywhere, it turns out: Self-custody, Coinbase, KuCoin, all sorts of locations. Rather impressively, Dara Khan, the head of marketing at Decent DAO’s bitcoin, said her wallet ended up at the “bottom of the ocean, lost it in a boating accident :(.”
About one-eighth of the respondents said they won’t buy bitcoin via an ETF and did not own it elsewhere either. Consider these the crypto skeptic crowd, if you will.
Nearly half of the respondents said they do intend to buy bitcoin via an ETF, and they own it elsewhere — making this the most popular answer. The group that intended to buy bitcoin via an ETF but did not own bitcoin elsewhere was the smallest of the crowd.
This data tells us that bitcoin spot ETFs might not be as attractive to folks who do not already own bitcoin as some had hoped. In essence, this survey reveals that spot bitcoin ETFs may juice overall demand, but perhaps won’t oil the gears for former no-coiners.
While there may be some positive price tailwinds from the spot bitcoin ETFs, not everyone agreed that they are going to change the game. Gene Haba Jr., the founder of Pledge Circle, feels the decentralized market will instead find more success with stablecoins and other crypto-money systems that are easier for the mainstream to understand and adopt.
Tom Munson, an analyst at Adit Ventures, expects the impact of spot bitcoin ETFs to be positive — “a rising tide should lift all boats,” in his view — but the insularity of crypto markets means that the profits earned from bitcoin will be reallocated into ether, or stablecoins. We feel that would lead to more general price appreciation but wouldn’t encourage adoption so much.
Read on for more notes from folks like yourself, builders and operators in tech circles keeping crypto in their line of sight.
Editor’s Note: We have only published select responses. Included responses have been edited for length, clarity and readability.
What you said
Do you anticipate spot bitcoin ETFs (or similar for other coins) will have a material impact on the web3/crypto market/industry? Please explain your thinking.
Dara Khan, head of marketing, Decent DAO
Yes. Over time, inflows from TradFi will build overall market caps. ETFs let people get indirect exposure to the price. And like many people, price speculation is one route down the rabbit hole. When people invest in something, they start to learn about it. When they learn, they want to participate. The same cycles that bring people and capital into our space — now at a faster pace. When 100-year-old institutions are putting up laser eyes and contributing to bitcoin core devs, that’s not vapor. It’s quite real.
Scott Jacques, owner, NK Interactive
It will probably result in more people losing more money and gambling on what is still a very speculative and shady asset (many are of the “get-rich-quick scheme”). There is no true utility for it yet that is universally accepted.
Tim Lynn, co-founder, Startup TNT
I don’t know enough about how this interacts with web3, but intuitively, this feels like it will drive demand for bitcoin (and as a second-order effect, the other coins) and move prices up, and it will force the creation of more of a robust financial industry in this space (i.e., more ETFs for other coins?).
But I don’t know about how it will impact any productive uses within the crypto world specifically in terms of company creation or development of additional use cases. More development of a world to facilitate financial speculation is, in some way, productive, but it’s a means to no end; this doesn’t seem to help with any productive development of web3/crypto like all the use cases they purport it to have.
Frank Vergara, Oneblackboard
It will expose people who otherwise would not have been exposed to the asset. And sometimes we forget how powerful repetition can be; it is not only a matter of exposure [but also] a matter of validation and normalization.
Without even realizing it, people start to identify the asset with their day-to-day lives, impacting regulation, adoption and public discourse. If I were to run for public office, I would strongly follow up on crypto now, as there is a chance that speaking positively or negatively, or worse, not speaking at all, may have an impact in public perception of my platform and me as a political product.
Bartley Wilson, founder, Virtual Pictures Corp
Yes. There will be continued disruptions with the well-established cryptocurrencies. I am looking forward to the $1 billion crypto currency from that Colorado company that will be minting $1 billion in actual coins in partnership with the Denver mint. It’s a brilliant idea, as those coins will escalate in value very quickly. Each coin has its own unique blockchain ID, so there will be no fraud, no cryptocurrency mining, etc.
Chris Betti, founder, Simpli Dues
No, cryptocurrencies are still a power-hungry solution in search of problems beyond liquidity under exploitative regimes and short-term hedging against out-of-control inflation.
Shashwath Janardhan, program manager, CoinSwitch
The spot bitcoin ETF gives the industry a huge push for legitimizing crypto as an alternative asset class. It will help with mainstream adoption; massive funds such as BlackRock being involved will help more. It will also give retail users exposure to crypto as an asset class without having to go through the convoluted process of self-custody or by being onboarded on a centralized exchange.
We will have to wait and watch whether other coins will also be listed on spot ETFs. For bitcoin, it’s relatively straightforward because it is considered a commodity; for Ethereum, however, it could be a bit more complicated, as there is a lawsuit that is sub judice if Ethereum is a security. We can expect progress on an Ethereum spot ETF only after the verdict.
Will Tjernlund, CMO and co-founder, Goat Consulting
Yes, I think it is one more thing legitimizing it. People forget bitcoin is a fake and was created out of thin air just a decade or so ago. So my grandma being able to buy magical internet money in her retirement fund is a big deal.
Zach Young, analyst, Trammell Venture Partners
Definitely, and for two main reasons: Large pools of capital will have access to direct spot bitcoin exposure, and the educational component. The ETFs may be interpreted by investors as a validation of Bitcoin’s staying power by the likes of BlackRock, Invesco, Fidelity, etc.
Terrence Yang, Swan
Yes. Whether we like Bitcoiners or not, a successful launch of spot Bitcoin ETFs probably helps:
- Pave the way for spot ETH ETF approval.
- Legitimize, in the minds of many, Bitcoin and, by extension, cryptocurrencies.
- Bring in a fresh source of cash, liquidity and marketing that should all help short-term speculative funding for cryptocurrencies and crypto projects.
Long-term, I expect Bitcoin to outpace and outperform cryptocurrencies.
Jesse Shrader, CEO, Amboss Technologies
Spot bitcoin ETFs don’t move the needle as far as the technology is concerned, but they do provide both depth of liquidity and indisputable recognition within traditional finance of bitcoin as a mainstay of the global financial system.
Having the largest asset managers in the world dedicate countless resources to navigating the complex U.S. regulatory landscape is telling. The market behind bitcoin is growing and is bolstered now by the ETF structure granting access to retirement funds with a clientele deeply concerned about inflation. The spot ETF providers have fought through the SEC’s quagmire and showed their hand with regards to bitcoin: The juice is worth the squeeze.
Ana De Sousa, CEO, Agio Ratings
The spot bitcoin ETF is likely to make the industry less risky, even if ETF trading remains a small percentage of cryptocurrency trading volumes. The most important predictor of default risk in any business is revenues. In crypto, centralized exchanges are the dominant players and their revenues are closely correlated with trading volume.
When CEX volumes were at their 2023 nadir in the spring — following a spate of SEC enforcement actions — the industry’s aggregate default risk was at its peak. ETF trading impacts CEX liquidity because the issuance and redemption of an ETF share requires a corresponding purchase or sale of bitcoin.
Bitcoin trade will likely take place across Bitstamp, Coinbase, itBit, Kraken, Gemini and LMAX, because of the role these exchanges play in supporting the BTC/USD price that ETF issuers use to calculate NAV.
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