Prior to the recent endorsement from the United States SEC, Spot Bitcoin Exchange-Traded Funds (ETFs) attracted considerable interest, offering a convenient entry into the captivating yet volatile crypto space. However, the recent decline in BTC price has unveiled potential risks associated with these investment instruments.
Bitcoin ETFs are deviating from the Intended Trajectory
Recently, crypto exchange-traded funds (ETFs) have surged in popularity as numerous businesses secured trading approval, fostering optimism for Bitcoin’s mainstream adoption. These ETFs, tracking cryptocurrency prices, offer a distinct and seemingly more accessible avenue for investors to engage in the crypto market.
Official trade data reveals that on January 11, 2024, the total volume of the ten approved spot Bitcoin ETFs surpassed $4.5 billion on their first day of trading. Grayscale Investments’ Bitcoin ETF alone reportedly facilitated over $2 billion in trades.
With significant institutional capital poised to enter the Bitcoin market, should smaller investors be wary of potential consequences tied to a spot Bitcoin ETF?
Industry executives and experts hold diverse opinions, with some viewing a spot Bitcoin ETF as an excellent entry point for noninstitutional investors, while others argue that ETFs are unsuitable for retail investment, urging individuals to directly own Bitcoin.
Leah Wald, Valkyrie’s co-founder and CEO, advises retail investors to approach the debut of a spot Bitcoin ETF with a balanced perspective.
ARK Invest’s founder and CEO, Cathie Wood, predicts that the launch of a spot Bitcoin ETF in the United States could trigger short-term selling, despite maintaining optimism about Bitcoin’s long-term price.
Not only has the industry experienced short sales, but the overall market has declined. As of now, Bitcoin (BTC) is priced at $42,753.30, with a 24-hour trading volume of $45,935,934,610.86, reflecting a 6.69 percent decrease in the last twenty-four hours and a 1.96 percent decrease over the past week.
Based on data from the previous week, the fear and greed index have dropped from 76 (improving greed) to 68 (greed).
Presently, Ethereum (ETH) is valued at $2,551.15, with a 24-hour trading volume of $42,578,526,049.92. This reflects a 4.55% price decrease in the last twenty-four hours and a 14.26% increase over the past seven days.
The current global market value of cryptocurrencies stands at $1.76 trillion, indicating a 5.01% day-on-day decrease and a 79.86% year-on-year change. Bitcoin’s market capitalization is currently $837 billion, representing a 47.56% market share.
Stablecoins hold a market capitalization of $135 billion, constituting 7.69% of the total crypto market capitalization.
Hidden Risks and Negative Impacts of the BTC ETFs
Despite expectations that the approval of Spot ETFs would boost the market, it has fallen short, raising concerns among investors. The present market correction reveals a darker truth.
While the cryptocurrency industry aims for decentralized benefits, ETFs are centralized, contradicting the decentralized nature of Bitcoin. They fail to address fundamental cryptocurrency benefits and don’t encourage new participants.
ETFs introduce the concept of “paper” Bitcoin, lacking the ability to withdraw ostensibly owned Bitcoin, raising the risk of future crises. This jeopardizes decentralization and trustless transactions, core concepts of Bitcoin.The regulatory landscape for crypto ETFs poses significant hurdles, creating anxiety among investors. Government agencies, like the SEC, have been cautious about approving ETFs tied to cryptocurrencies, complicating the clearance process.
The recent approval introduces regulatory monitoring, initially focusing on preventing price manipulation. This marks the beginning of broader cryptocurrency regulation.
