Today’s headlines were all about the approval of Bitcoin spot ETFs.
We have witnessed history, as this is the day a new asset class was inducted into the financial system.
Investors and their advisors can now conveniently build portfolios that include allocations to Bitcoin using the spot ETFs, which are regulated by securities law.
For example, one can decide to invest 60% in stocks, 30% in bonds, and 10% in Bitcoin.
The significance of this development is that it could unlock financial assets for allocation to Bitcoin. In the US, households hold $112 trillion in financial assets. Of this, $43.1 trillion is in stocks and another $10.71 trillion in bonds, with $17.8 trillion in cash. The remainder is in other financial assets, such as pension schemes.
It’s conceivable that a portion of these trillions might flow into Bitcoin or other cryptocurrencies. Currently, the entire crypto market cap stands at $1.8 trillion, with Bitcoin’s market cap exceeding $900 billion.
If Bitcoin were a stock, it would rank as the 8th largest in the world. The prospect of Bitcoin crossing over to become a trillion-dollar market cap seems likely, and if this happens, the ‘Magnificent 7’ might expand to include Bitcoin, forming a new ‘Magnificent 8.’
This is precisely why crypto supporters are eager for the approval of Bitcoin spot ETFs, as it would allow crypto to tap into this vast wealth.
How will centralized exchanges like Coinbase fare now that investors can buy Bitcoin via ETFs in their stock accounts?
Surprisingly, business might actually improve for Coinbase. This is because Bitcoin is just one of many cryptocurrencies. Ethereum, the second largest by market cap, is not yet available as a spot ETF.
Investors who speculate that Ethereum spot ETFs might be next for approval could choose to ‘front run’ the market by purchasing Ethereum on Coinbase or other exchanges before widespread adoption occurs.
This logic applies to other major cryptocurrencies as well, in anticipation of their own spot ETF approvals.
Furthermore, if Bitcoin’s bullish trend continues, it could spark greater investor interest in other cryptocurrencies, potentially leading to increased trading volumes for Coinbase.
Therefore, the approval of Bitcoin spot ETFs could positively impact the entire crypto ecosystem, boosting Coinbase’s trading volume rather than taking away its business.
This was evidenced when Coinbase’s stock rose by 5% during after-market hours, and Ethereum surged by 10%, following the approval of Bitcoin spot ETFs.
The approval of Bitcoin spot ETFs has unleashed a substantial amount of wealth that could be allocated to Bitcoin, potentially kickstarting a series of other crypto spot ETFs to be listed in the future. The historical significance of this milestone cannot be understated.
