What the Approval of Bitcoin ETFs Mean for the Crypto Industry
This might also have implications outside the market. As more and more establishments and countries are learning to accept cryptocurrencies as modes of payment, we can expect ETFs to influence this positively.
The thing about Bitcoin (BTC) that scares newcomers away is the same thing that attracts the attention of investors, crypto traders, and the like—volatile prices. While most would fear for their investment, crypto analysts would see this as an opportunity.
In 2021, Bitcoin would find its price climbing rapidly, hovering past 60,000 USD. BTC would reach an all-time-high (ATH) for 2021 in November, breaching the USD 67,000 mark. During all this activity, talks of Bitcoin exchange-traded funds (ETFs) would begin to circulate around crypto circles.
Traditional ETF vs. Bitcoin ETF
Before we go any further, let’s first define what a traditional exchange-traded fund (ETF) is. A traditional ETF is a security investment, much like other stocks being sold on the market.
These ETFs can track commodities, indexes, sectors, or other forms of assets. The advantage to doing so is that you can then have a combination of different securities, like a fruit basket. As a bonus, the fact that they offer a combination makes them easy to buy or sell as well.
A Bitcoin ETF is similar but its price will fluctuate alongside the coin. As Bitcoin prices go up, the ETF’s value will as well and vice-versa. The advantage of this is that you won’t need to be familiar with how crypto trading works to participate. That’s because these stocks will be on the public market and not in the crypto space—which will, in turn, help make Bitcoin more accessible to newcomers.
The possible impact of BTC ETFs
As ETFs become more popular among investors, we can expect them to have an effect on the crypto market. It is only natural given that it can allow more people to participate and will also allow for more opportunities to be creative with their investments. We can expect to first see an impact among the following:
Government regulation
When they were first introduced to the crypto space, ETFs were met with a lot of hesitation both from consumers and regulatory agencies alike. It was understandable given the decentralized nature of cryptocurrencies makes them susceptible to fraud schemes. A notable example is that of the Winklevoss Bitcoin Trust. In 2017, this trust was declined by the U.S. SEC when it first applied for approval for its ETF.
That said, it has finally reached a point where the U.S. SEC sees a possible future for ETFs in the crypto market. This is thanks to the fact that ETFs let investors invest in BTC without having to learn how to trade crypto per se. Given this situation, we can expect more and more regulatory boards from other countries to follow suit.
Price
As more traditional traders are given opportunities to participate in the crypto market, we can expect Bitcoin prices to fluctuate accordingly. What a lot of people agree on is that all this potential can increase the overall value of Bitcoin.
The best part about this situation is that given that Bitcoin value stands to gain a lot with this integration. It is also likely that the ETF space will be filled with accessible investment opportunities for those unsure of what moves they should make.
Cryptocurrency adoption
All this would also mean that cryptocurrency adoption will not require potential traders to learn how cryptocurrencies work. Thanks to their accessibility on the public market, BTC ETFs can be the first step for many into the world of crypto trading.
It should be noted that ETFs are to be traded on regular exchanges. This avoids the problem of cryptocurrencies being traded on decentralized exchanges which have given some people causes for concern.
This might also have implications outside the market. As more and more establishments and countries are learning to accept cryptocurrencies as modes of payment, we can expect ETFs to influence this positively.
The Legitimacy of Crypto As Investment Tools
All this works together to help BTC, and cryptocurrencies in general, become a more approachable investment opportunity for both experienced and inexperienced traders.
The advantages work to BTC’s benefit here. Since people don’t even have to take time to study how the crypto space works and how cryptos function, we can expect more investors to participate a lot more confidently than they would have without them.
Similarly, the fact that ETFs are in regulated spaces makes investors feel more secure with their investments. Given that the decentralized nature of crypto is what scares a lot of investors away, it should be easy to understand how this can become a fruitful venture.
Where ETFs are headed
At the end of the day, what is clear is that the future of crypto is bright. While ETFs aren’t anything new, they will be a welcome addition to the crypto ecosystem, helping more people find better ways to invest their money. They act as a bridge for those who want to get into crypto but are scared of crypto’s decentralized nature.
With the right steps, we should see steady growth thanks to Bitcoin ETFs. As we continue to see signs of these changes in the near future, you can expect the offers available on peer-to-peer platforms like Paxful to be affected as well. At this point, what’s best is to keep yourself updated with news about ETFs.
*Disclaimer: The content of this article is for informational purposes only. The opinions expressed here are not meant to be taken as financial, investment, or any other advice, nor do they express the opinion of Paxful.