Introduction

Interest in crypto has skyrocketed, and it’s a hot topic today. With cryptocurrency reaching all-time highs and facing significant drops, the crypto space is becoming more intriguing. It’s no wonder that people are increasingly curious about crypto trends to find out its momentum in 2024.

Cryptocurrency is electronic money stored in e-wallets or computer files. It can be transferred and tracked using blockchain technology, which helps keep track of all updates chronologically. Furthermore, it stores information cryptically, making it visible to everyone. The existing data cannot be changed.

One of the most well-known cryptocurrencies is Bitcoin, and one can find thousands of different cryptocurrencies available, each serving different purposes.

What is a Bitcoin ETF?

An ETF is an easy way to invest in assets or a group of assets without having to directly buy the assets themselves. For example, the SPDR Gold Shares ETF allows anyone to invest in gold without having to find a place to store a bar or protect it. It’s a way for investors to get exposure to the value of the underlying asset without directly owning it. ETFs can also be easily traded on stock exchanges. Since bitcoin’s inception, anyone wanting to own one would either have to adopt a digital wallet or open an account at a crypto trading platform like Coinbase or Binance. Cryptocurrency advocates say the development will thrust the once-niche and nerdy corner of the internet even further into the financial mainstream.

ETFs trade on traditional stock exchanges, and their value should rise when the underlying asset increases in price, or fall if it decreases. The decision to approve the ETFs is a major win for huge fund managers like BlackRock, Fidelity Investments, and Invesco, who will manage the funds – and have pushed hard to get the SEC to approve them.

As crypto investors look to assess what the market impact of a bitcoin ETF might be, many are comparing Wednesday’s news to the greenlighting of the SPDR Gold Shares ETF — the first-ever spot gold ETF — in 2004. The total gold market capitalization was worth around $1 trillion to $2 trillion before the gold ETF was approved, and this subsequently ballooned to $16 trillion in a few years after, according to Vijay Ayyar, vice president of international markets for Indian crypto exchange CoinDCX. “Bitcoin’s adoption will be much faster and bigger than that,” Ayyar told CNBC via WhatsApp. Ayyar said the story for bitcoin and crypto will “accelerate” in 2024, as the approval of a spot bitcoin ETF could spark interest from retail investors who were previously sitting on the sidelines.

What does a Bitcoin ETF mean for investors?

A bitcoin ETF opens up the audience of people and institutions that can buy and sell bitcoin to those with little experience trading cryptocurrency. “This ETF has two main impacts: increased distribution in the US (a moderate impact, as there have been ETFs outside of the US for years) and increased credibility of crypto as an ‘asset class’ (a very high impact),” Kevin de Patoul, co-founder and CEO of crypto liquidity provider Keyrock, told CNBC. “There is now a U.S. bitcoin spot ETF, and bitcoin is no longer considered shady or infamous. This significantly changes the perception for the mainstream public.” It also means that bitcoin could start appearing in mainstream portfolios, where many more retail investors can gain exposure. Big institutional fund managers can add it to their investment funds. Retirement planners can now include it in employer-sponsored 401(k) plans. This makes it much easier to own bitcoin, as you don’t have to rely on a vulnerable piece of hardware for storage. Investors don’t need to tackle the difference between “hot” and “cold” wallets, which store digital tokens. Instead, they can just buy an ETF from one of the many regulated asset managers that are set to go live with their own ETFs.

“The approval of a Bitcoin ETF has huge implications for US investors because they can now hold crypto in their brokerage account, which they couldn’t do before,” Timo Lehes, co-founder of blockchain firm Swarm Markets, told CNBC. “This gives the green light for portfolio diversification into the asset, and we expect major inflows of capital into the market, as a result.” A bitcoin ETF could bring the cryptocurrency exposure to a more diverse set of holders with different levels of size and experience in the market. Ayyar said the approvals Wednesday “mark a key moment in the maturity of the crypto asset class.” “Mass retail now has an easy, safe way to gain exposure to the asset class through their brokerage account,” Ayyar told CNBC. “The ETF approval also provides a credible stamp of approval for large institutions and market participants that were waiting for an easier way to access the asset class rather than buying crypto directly, which always has inherent price and custody risks.”

What has the SEC said?

Despite approving the new ETFs, the SEC said it was still deeply skeptical about cryptocurrencies and that its decision did not mean it approves or endorses bitcoin. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” said Gary Gensler, the agency’s chairman. Other commissioners expressed alarm that the SEC agreed to approve the funds. “I am concerned that these products will flood the markets and land squarely in the retirement accounts of US households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets,” Commissioner Caroline Crenshaw said in her dissent.

What does this mean for the price of Bitcoin?

After nearly two years of turmoil that has seen the price of bitcoin plummet and the failure of several crypto firms, Wednesday’s announcement will come as good news to many investors in the crypto market. The green light from regulators had been anticipated for several months, and the price of bitcoin has jumped about 70% since October as crypto investors speculated the broad use of bitcoin ETFs would drive up demand for the cryptocurrency. The price had sunk as low as $16,000 in November 2022 after the bankruptcy of the crypto exchange FTX. It was trading at $46,500 in the hours after the SEC announcement. Standard Chartered analysts this week said the ETFs could draw $50bn to $100bn this year alone, potentially driving the price of bitcoin as high as $100,000. Others have said inflows will be closer to $55bn over five years. Other analysts have been more cautious in their predictions, saying that ETFs may actually help stabilize crypto prices by broadening their use and potential audience. Most, however, remain concerned that the broad use of crypto ETFs could put too much risk and volatility into Americans’ retirement accounts – the price of bitcoin is known to fluctuate wildly, often without warning or explanation. “The notorious price volatility of bitcoin … could expose mainstream investors to a less familiar spectrum of investment risks,” said Yiannis Giokas, senior director of Moody’s Analytics. The price of Ethereum, the second-most popular cryptocurrency, has also risen on speculation that fund managers will create ETFs around it.

Bottom line

With the rapid growth in cryptocurrencies throughout 2021, it is critical to watch for crypto trends. One can expect a more well-defined regulatory framework to emerge, with a single-minded objective to bridge the crypto world with the traditional financial systems.

However, cryptocurrencies will become the norm. So, one must seize the opportunity!