The price of bitcoin has appreciated by more than 26% in just two weeks, surpassing US$35,000. The main factor that has fuelled this rise is the emergence of a bitcoin-related ETF on the Depository Trust & Clearing Corporation (DTCC) website called ISHARES BITCOIN TR SHS (IBTC), managed by BlackRock. The official approval of this fund by the Securities and Exchange Commission (SEC) is still pending, but the matter seems only a matter of time. Let's now take a look at why this is important and how it could affect cryptocurrency listings.
Table of contents:
- Bitcoin ETF what is it?
- What impact will the introduction of an ETF have on the bitcoin exchange rate?
Bitcoin ETF what is it?
The introduction of an ETF on bitcoin would be the first fund to enable investment in this cryptocurrency on the spot (underlying) market. With such a fund, it would be possible to invest in bitcoin, for example, without setting up a cryptocurrency account or trading on a cryptocurrency exchange. This is critical information, as it would open up the possibility of exposure for many institutions to this market. The current situation at the SEC in the context of a cryptocurrency ETF seems significant in that the first listing of such a fund could be just around the corner, as evidenced by the listing of the Depository Trust & Clearing Corporation (DTCC). When the DTCC adds an ETF to its website, it means that information about that particular fund is publicly available to investors, brokers and other financial institutions. This is part of the registration and clearing process for ETFs. Therefore, hopes are growing for a final decision on this fund.
According to Statista, the value of assets in ETFs was as high as $9.5 trillion, and the value of this market is growing at an average annual rate of 22%. The share of the value of ETFs in the global market from the latest Ishares report is around 5%, which may illustrate the potential that lies in this market.
Source: Statista
What impact will the introduction of an ETF have on the bitcoin exchange rate?
In our previous article on bitcoin, we highlighted suspicious purchases of this cryptocurrency. These may be the result of the actions of individuals who had access to information about the status of the launch of the ETF issue. Unfortunately, due to the lack of regulation in the cryptocurrency market, such actions remain possible and happen from time to time with various cryptocurrencies. Nevertheless, we do not yet have a final decision on the ETF, so we must treat this kind of conjecture as speculation.
It is worth recalling here the stock market saying "buy the rumours, sell the facts," which states that when the majority of market participants expect an event, such as the introduction of an ETF for bitcoin, there is a tendency to overestimate these expectations. Even if the expected event actually happens, it could lead to a significant price drop. Therefore, it is possible that before the introduction of a bitcoin ETF, the price of bitcoin will rise, and after the introduction of this product we will see investors realise their gains. Nevertheless, the long-term impact of the introduction of an ETF could be positive for the market, as we have seen in the case of, for example, shares or companies that have joined major indices.
Source: Conotoxia MT5, BTCUSD, Daily
In addition, an artificial intelligence-based tool from Sentistocks, which specialises in studying current emotions in the cryptocurrency market, predicts that the bitcoin exchange rate could continue to rise in the near future. The noticeable increase in the level of optimism may be indicative of the high level of expectation surrounding this event in the market. However, it is worth keeping an eye on how these expectations and emotions will change.
Source: https://sentistocks.com/predictions/
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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