Yesterday (11th), the cryptocurrency market witnessed a historic moment as the U.S. Securities and Exchange Commission (SEC) finally approved 11 Bitcoin spot ETFs. This approval also signifies that investment products that were previously considered high-risk by traditional finance are now included in traditional financial portfolios. Will this wave of institutional involvement in the cryptocurrency market lead to an “institutional bull”?
(Recap:
Analysis on Trading Strategy after ETF Approval: Analysts Predict Profit-Taking and Signs of Bitcoin Topping Out
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(Context:
Female Stock Guru’s 25% Fortune “Bets on BTC”: Bitcoin ETF Pushes Bitcoin to $1.5 Million by 2030
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In the early morning of January 11th, the U.S. Securities and Exchange Commission (SEC) approved 11 Bitcoin spot ETFs, including BlackRock, Fidelity Funds, ProShares, Grayscale, and other traditional and emerging capital firms, allowing them to enter the cryptocurrency market through Bitcoin spot ETFs.
SEC Chairman Gary Gensler continued to emphasize the risks associated with Bitcoin, stating, “While we have approved the listing and trading of certain Bitcoin ETP shares today, we have not approved or endorsed Bitcoin itself. Investors should exercise caution with respect to the countless risks associated with products related to Bitcoin and its value relative to cryptocurrencies.”
1. Participation of Various Traditional Asset Management Giants
According to SEC filings, the 11 Bitcoin spot ETFs approved by the SEC include institutions such as BlackRock, Fidelity, VanEck, Bitwise, Franklin Templeton, Valkyrie, Hashdex, ARK 21Shares, Grayscale, WisdomTree, and ProShares.
The approved financial institutions range from emerging funds focusing on cryptocurrency assets, such as Grayscale, to traditional financial institutions such as BlackRock, Fidelity, and ProShares.
Grayscale, established in 2013, is a cryptocurrency asset management fund under the Digital Currency Group. As one of the famous Bitcoin whales, Grayscale has approximately $36 billion in assets under management and manages multiple single-asset trust funds, including BTC and ETH, as well as management funds focused on large-cap cryptocurrencies.
ARK Invest, known for its bets on Tesla and Bitcoin, is an investment management company founded in 2014 by Cathie Wood, also known as the “female version of Buffett.” ARK Invest focuses on disruptive innovation opportunities in areas such as artificial intelligence, robotics, energy storage, DNA sequencing, and blockchain technology. Currently, ARK Invest has over $11 billion in assets under management, a significant portion of which is invested in cryptocurrencies, such as multiple increases in Coinbase stock (COIN) over the past year.
Compared to emerging investment institutions focusing on the cryptocurrency field, the participation of traditional Wall Street institutions such as BlackRock, ProShares, and Fidelity has excited cryptocurrency investors, as it is believed to bring more traditional capital into the cryptocurrency field.
These institutions have had many connections with cryptocurrency assets before this.
BlackRock, founded in 1988, is one of the world’s largest asset management giants. BlackRock has approximately $9 trillion in assets under management, covering equities, fixed income investments, cash management, alternative investments, and advisory strategies.
BlackRock has entered the cryptocurrency field through providing cryptocurrency trading and custody services, investing in Bitcoin and other cryptocurrencies, and holding stocks of Bitcoin-related companies.
Fidelity, managing $4.5 trillion in assets, was founded in 1946 and is one of the top ten asset management giants globally in terms of asset management scale.
In 2018, Fidelity announced the launch of Fidelity Digital Asset Services, providing custody and trading execution services for digital assets. In addition to targeting institutional investors such as hedge funds, family offices, and market intermediaries, Fidelity also opened cryptocurrency trading positions to retail investors.
WisdomTree, established in 1985, is also a well-known asset management company in the United States. WisdomTree launched its first ETF in June 2006 and has become one of the major ETF providers in the United States. Currently, WisdomTree manages total assets exceeding $100 billion. WisdomTree has a deep layout in tokenized U.S. bonds, with multiple tokenized U.S. bond fund products in its portfolio.
VanEck, known for investing in foreign growth stocks and gold, was established in 1955 and also aims to get a share in cryptocurrency investments. VanEck manages over $760 billion in assets.
In November 2021, VanEck launched a Bitcoin futures ETF, XBTF, which currently has assets under management exceeding $59 million. VanEck’s Ethereum futures ETF (EFUT) is also set to trade starting from October 2023. In addition, VanEck has invested in well-known cryptocurrency companies such as Binance.US and Gemini.
Invesco, founded in 1978, is also one of the well-known comprehensive asset giants in the United States. Invesco currently manages funds with a total scale of over $1.5 trillion and manages over 200 ETFs. Invesco is known for its ETF, Invesco QQQ, which tracks the Nasdaq 100 index. In 2022, Invesco launched an investment fund focused on the metaverse to enter the blockchain and metaverse hardware fields. It is also one of the LPs behind the cryptocurrency fund Dragonfly Ventures III.
Franklin Templeton, established in 1947, is an old asset management institution known for its bond funds under the Franklin brand, international funds under the Templeton brand, and value funds under the Mutual Series brand. Currently, it manages $1.4 trillion in assets. Franklin’s government money market fund FOBXX is also the largest player in the tokenized U.S. bond market. In addition, Franklin launched a metaverse ETF in 2022.
As Bitcoin and other cryptocurrencies have transitioned from being niche investment categories to something global investors cannot ignore, these traditional asset management giants have officially entered the field and are determined to promote wider acceptance of Bitcoin.
2. Is a New “Institutional Bull” Coming?
It is well-known that since its inception, cryptocurrencies have been labeled as “high-risk” and separated from traditional financial products, which has deterred the financial industry. With Bitcoin evolving from an obscure “virtual currency” to a cryptocurrency investment product that now has a value of up to $40,000, its wealth-generating potential has become evident to traditional finance. This has made the cryptocurrency market an enticing prospect for traditional financial players.
For the traditional financial industry, the approval of Bitcoin ETFs will provide an opportunity for legitimate involvement in the cryptocurrency industry. Traditional financial giants will be able to launch Bitcoin ETF businesses with legitimacy, and institutions can invest directly through trading platforms and brokers without having to interact with cryptocurrency exchanges.
The simplification of capital entry will also attract more funds into the cryptocurrency market.
On January 11th, Eric Balchunas, a senior ETF analyst at Bloomberg, stated that BlackRock may inject $2 billion in assets on the first day of Bitcoin spot ETF trading, breaking the record for first-day flows.
Bloomberg’s ETF analyst predicts that the inflow of Bitcoin ETFs is expected to reach $15 billion. Meanwhile, Standard Chartered Bank provides even more astonishing predictions, stating that if the Bitcoin ETF is approved, it is expected that $100 billion will flow into the Bitcoin ETF market by the end of this year.
If these predictions hold true, with a large influx of funds, the liquidity of the cryptocurrency market will greatly increase. Trading volume and activity will also rise, and market vitality will be stimulated, driving the development and innovation of the entire industry.
The approval of Bitcoin ETFs is an important milestone for the cryptocurrency market, signifying that cryptocurrencies are officially entering the mainstream financial market. This is not only a victory for Bitcoin but also a victory for the concept of “cryptocurrency” as it gains recognition from mainstream society to some extent and begins to be regulated and protected by laws. This will drive the development of the entire industry towards maturity, standardization, and transparency.
The regulation and transparency of mechanisms related to cryptocurrencies will also contribute to the development of the cryptocurrency market and drive the entire market towards maturity.
During the previous Bitcoin bull market, driven by capital such as Grayscale, it was known as the “institutional bull.” However, the bubble fueled by high leverage ultimately led to a liquidation, followed by a prolonged bear market.
With the anticipation of Bitcoin spot ETFs, Bitcoin has already risen over 160% by 2023. With more traditional capital entering the market, will a new “institutional bull” be far behind?
Institutions have already made price predictions for Bitcoin by the end of 2024: Standard Chartered Bank predicts that it will hit $100,000.