- Senior ETF analyst at Bloomberg Intelligence predicts crypto exchanges like Coinbase could suffer when the SEC finally approves spot bitcoin ETFs.
- According to Eric Balchunas, an approval will threaten exchanges’ business on metrics of cost, because of affordability.
- A BTC ETF will trade with a 1 bp spread, and fees similar to Gold ETFs, making them a more appealing proposition.
Coinbase, and exchanges just like it, could suffer when the US Securities and Exchange Commission (SEC) approves a spot Bitcoin Exchange-Traded Fund (ETF), according to Eric Balchunas in an interview with Laura Shin.
Also Read: Spot Bitcoin ETF has a 75% chance of approval in 2023, analysts say
ETF specialist and analyst at Bloomberg Intelligence has said that Coinbase and its peer exchanges will likely suffer once the much-anticipated approval for spot Bitcoin ETFs comes about. His opinion stems from the fact that an approval would make it possible for users to invest in a “liquid cheap BTC ETF,” instead of purchasing BTC itself from exchanges, thereby threatening their business model.
Crypto exchanges like Coinbase will likely suffer when the SEC finally approves a spot bitcoin ETF, says @EricBalchunas, senior ETF analyst at Bloomberg Intelligence.
— Laura Shin (@laurashin) September 1, 2023
Do you agree?
Full episode: https://t.co/8qZzjKFHhj pic.twitter.com/Oq9oAhsSQJ
More broadly, the ETF specialist says exchanges will be undercut on price. A Bitcoin ETF will trade for a one basis point (1bp) spread (the difference between the bid and ask). For the layperson, a bid-ask spread defines the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. It is one of the ways brokers make money from trading activity.
In addition, investors will have to pay a “fee” of between 35 to 40 bps – going on similar costs to buy a Gold (GLD) ETF – but this will still make them “very appealing”, according to Balchunas.
Why there would be a demand for spot BTC ETF, Balchunas
ETFs will also attract investors who want a break from the tediousness in the crypto sphere, says the Bloomberg analyst. The fact that ETFs trade like equities is a desirable aspect, given the tax efficiencies, and other benefits. Specifically, the ETF specialist says the product is “five evolutionary steps ahead of mutual funds.” Given their advantages, ETFs will likely “take the lion’s share of the money.”
More interestingly, the spot BTC ETF issuer, if approved, would do all the “leg work” for investors. When purchasing from an exchange, investors are responsible for storing their cryptos securely in ‘wallets’. In the case of an ETF, however, the fund would take care of this problem. They would also streamline the taxation processes. In so doing, ETF funds would deliver a better value proposition, argues Balchunas, which exchanges like Coinbase may not be able to match.
His comments echoed what former SEC official, John Reed Stark said, concerning political influence in the spot BTC ETF topic. According to Balchunas, two out of the three judges in the Grayscale vs. SEC case were Democrats. The main judge, however, was a Republican, appointed by former US President Donald Trump. The fact that the three judges presented a united front against the SEC is also crucial, increasing the odds for approval.
Meanwhile, the argument the SEC is presenting now after the previous manipulation concern, according to Balchunas, is the question of custody and therefore safety. Nevertheless, he says BlackRock and Fidelity are likely to take precedence in approvals owing to the conservative nature of the SEC because they comprise big players in TradFi, representing “gigantic trading firms that the SEC likely trusts,” and the fact that they have launched many ETFs in the past is a bonus. Ark Invest could also feature because of how early they applied.
The comments come after the court’s recent decision, conferring victory to Grayscale asset manager in its longstanding case against the US SEC. The decision brought hope to crypto enthusiasts who interpreted it as a sign that a spot BTC ETF approval could come soon, bringing more investors to the Bitcoin market.
In light of the approval, Balchunas and colleague, James Seyyfart tweeted that they are increasing their prediction of a spot Bitcoin ETF approval, with odds moving from 65% to 75%.
NEW: @JSeyff & I are upping our odds to 75% of spot bitcoin ETFs launching this yr (95% by end of '24). While we factored Grayscale win into our prev 65% odds, the unanimity & decisiveness of ruling was beyond expectations and leaves SEC w "very little wiggle room" via @NYCStein pic.twitter.com/IyEGmWjuHa
— Eric Balchunas (@EricBalchunas) August 30, 2023
The same optimism caused a surge in Bitcoin price, which broke out of consolidation to approach the $28,000 level. Notably, the price has since retracted, breaking below the consolidation level to trade in the $25,600 range, with experts attributing this to the SEC’s decision to delay feedback concerning the BTC ETF applications.
Crypto ETF FAQs
What is an ETF?
An Exchange-Traded Fund (ETF) is an investment vehicle or an index that tracks the price of an underlying asset. ETFs can not only track a single asset, but a group of assets and sectors. For example, a Bitcoin ETF tracks Bitcoin’s price. ETF is a tool used by investors to gain exposure to a certain asset.
Is Bitcoin futures ETF approved?
Yes. The first Bitcoin futures ETF in the US was approved by the US Securities & Exchange Commission in October 2021. A total of seven Bitcoin futures ETFs have been approved, with more than 20 still waiting for the regulator’s permission. The SEC says that the cryptocurrency industry is new and subject to manipulation, which is why it has been delaying crypto-related futures ETFs for the last few years.
Is Bitcoin spot ETF approved?
Bitcoin spot ETF has been approved outside the US, but the SEC is yet to approve one in the country. After BlackRock filed for a Bitcoin spot ETF on June 15, the interest surrounding crypto ETFs has been renewed. Grayscale – whose application for a Bitcoin spot ETF was initially rejected by the SEC – got a victory in court, forcing the US regulator to review its proposal again. The SEC’s loss in this lawsuit has fueled hopes that a Bitcoin spot ETF might be approved by the end of the year.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Crypto Today: Bitcoin, Ethereum and XRP gain on Friday, meme coin NEIRO erases recent gains
Bitcoin steadies above $60,000 on Friday, gains over 1% on the day. Ethereum trades above $2,400, while BlackRock Spot Ethereum ETF sees a $17.8 million inflow on Thursday. XRP is back above $0.5300 as Ripple files cross-appeal in SEC lawsuit.
Cardano celebrates milestone: Hosts Argentina’s first legally enforceable smart contract
Cardano ambassador Mauro Andreoli recently announced Cardano’s milestone of Argentina’s first legally and judicially enforceable contract. The first loan agreement in Cardano under Argentine law involves a loan of 10,000 ADA tokens, currently valued at $3,380.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC finds support around $60,000
Bitcoin is finding support around the key level, and a close below this level could signal a decline. Ethereum is approaching a critical resistance barrier; rejection from this level suggests a decline ahead. Meanwhile, Ripple is stuck in a range, reflecting a period of indecision among traders.
SEC sues Cumberland DRW for acting as an unregistered securities broker, Solana ETFs at risk
SEC sued crypto trading company Cumberland DRW for allegedly acting as an unregistered broker. Solana was among five cryptocurrencies the SEC alleged to be securities sold via the platform.
Bitcoin Weekly Forecast: Will BTC decline further?
Bitcoin’s (BTC) price fell over 6% at some point this week until Thursday, extending losses for a second consecutive week, as it faced rejection from a key resistance barrier.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.