NDAX OTC Market Update: Special Edition - BTC Spot ETF Approval

Bitcoin Spot ETF Approval: The Game-Changer That Could Bring ‘Billions in Investments’ into Crypto

“We are so early…” is a phrase that has become synonymous with crypto and the digital asset space. Repeated by everyone from blockchain devs to retail traders, it's a phrase used to describe how much upside there still is in crypto despite all the millionaires (and a few billionaires) crypto has created since the Bitcoin whitepaper was released in 2008. If analysts are correct, the approval of a spot Bitcoin ETF will have a positive effect on the entire crypto industry and will result in the mainstream adoption crypto investors have been waiting for.

2024 is off to an exciting start for cryptocurrency investors, with reports from Reuters, CNBC, and Bloomberg suggesting that the approval of a bitcoin spot ETF is imminent. This development has been long-awaited by crypto enthusiasts, and it could end up being a game-changer for the crypto market.

The U.S. Securities and Exchange Commission is set to decide by January 10, and if the ETF is given the green light, it is expected to be a watershed moment for crypto adoption. According to Reuters, the approval would "throw open the market to millions more investors and draw billions in investments".

What is a Bitcoin Spot ETF?

While there are already various avenues for gaining exposure to Bitcoin, such as purchasing it on platforms like NDAX or investing in 'blockchain-related stocks' like MicroStrategy and Hut 8 Mining, the imminent arrival of spot ETFs is expected to create new and significant opportunities for institutional investors to engage with cryptocurrencies and other digital assets.

Spot ETFs, unlike their futures counterparts, directly hold Bitcoin as an underlying asset and track its prices. This means that investors in these funds would have greater exposure to the underlying asset and not be exposed to the mechanics of the futures market. It also means that the funds themselves will have to purchase spot Bitcoin as money enters the fund.

Finance giants like BlackRock and Fidelity, which manage over $8.5 trillion and $4.5 trillion in assets respectively, have applied for their own spot Bitcoin ETFs, it is clear that the concept is moving into the institutional mainstream. The implications of this shift are far-reaching, and the industry is poised for a significant transformation.

Potential Impact of a Bitcoin Spot ETF on the Cryptocurrency Market

Similar to the GLD ETF's impact on the gold market, a Bitcoin spot ETF could make it significantly easier for a broader range of investors to gain exposure to Bitcoin. It could eliminate the need for investors to directly buy and store Bitcoin, which can be a complex and daunting process for many.

Analysts predict that Bitcoin ETFs could see $14.4 billion of inflows in their first year of trading. Galaxy Digital research associate Charles Yu added “the price of bitcoin could increase by 74% in the 12 months following approval”.

The Launch of the GLD ETF and Its Impact on the Gold Market

Before the launch of the GLD ETF, exposure to gold was primarily through physical bars, coins, certificates, savings plans, or shares in gold-mining companies. The GLD ETF revolutionized gold trading by making it significantly easier for a broader range of investors to gain exposure to gold without the need to directly buy and store it.

The GLD ETF was launched on November 18, 2004, when gold was trading at roughly $443. Since then, the price of gold has increased by approximately 340%, to about $1,946. The GLD ETF reached more than $1 billion in assets in just three days after its debut. By August 2023, the GLD ETF held roughly 29 million ounces of gold, with a net asset value (NAV) of over $56 billion.

Bitcoin Halving: The Next Milestone

Bitcoin's potential for 2024 is not solely hinged on the approval of a spot bitcoin ETF. Another significant factor is the upcoming halving event, expected around April. These events play a crucial role in controlling the finite supply of 21 million bitcoins by halving the amount of crypto rewards distributed to miners.

The last halving event occurred in May 2020, reducing mining rewards to 6.25 bitcoin per block from 12.5 bitcoin per block. Referred to as "halvenings," these events occur after every 210,000 bitcoins are mined, approximately every four years. Historically, the price of bitcoin has surged in the months following halving events as the creation of new bitcoins slows.

Data provided by CCData shows that in the two months following historical halvings, Bitcoin returns averaged around 16%. After the first halving in 2012, Bitcoin rallied by nearly 153% after the first three months.

As always, our team is here to assist you and provide services tailored to your specific needs. If you would like to discuss these topics further, we invite you to book a meeting with our team. To schedule a meeting, please visit NDAX OTC | Bitcoin and Crypto OTC Trading Desk or contact your OTC representative directly. We look forward to assisting you on your investment journey.

Disclaimer:

This newsletter is for informational purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy any securities or other financial instruments. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. Past performance is not a guarantee nor a reliable indicator of future results. Please consult your financial advisor before making any investment decisions.