Blackrock and others are applying with the Securities and Exchange Commission to start ETFs that track the spot price of Bitcoin. There are already ETFs that track Bitcoin and Ether futures. The new ETFs, if approved, will offer a simpler approach by simply tracking the spot price of the token itself. When the Bitcoin futures ETFs were started in early 2021 they had a lot of interest and may have contributed to the peak Bitcoin price that year, before the token fell into the abyss of crypto winter. This time around the response to a spot Bitcoin ETF is a big yawn from the crypto community.
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Interest in Crypto Has Narrowed Since 2021
Before crypto winter nearly sucked the life out of cryptocurrencies, you could hardly avoid conversations about Bitcoin and the rest. People were doing things as extreme as putting second mortgages on their homes in order to buy Bitcoin. A Bitcoin futures ETF was new, bright, and shiny. It offered the ability to buy and sell futures on an extremely volatile and potentially profitable pair of crypto tokens, Bitcoin and Ether. The newness of this vehicle for potential Bitcoin profits probably outweighed its utility for many who bought in. When those who bought in realized that this was not a path to magical profits, interest fell off. Flagging interest got worse as the price of Bitcoin plummeted.
Is a Spot Bitcoin ETF a Good Idea?
From our viewpoint, an ETF that tracks the spot price of Bitcoin makes more sense for most folks than an ETF that tracks Bitcoin futures. The point is to make it easier to invest in Bitcoin without having to get a wallet, learn about blockchains, and come up with tens of thousands of dollars. There is one big problem for this vehicle, providing that the SEC lets Blackrock, Fidelity, and others start one or more of them. Interest in Bitcoin has fallen dramatically since the first Bitcoin futures ETF opened its doors.
Who Is Interested in Bitcoin These Days?
Investors in general are less comfortable with cryptocurrencies that they were before crypto winter. From 2021 to 2022 the percentage of American adults who felt comfortable with cryptocurrencies fell from 35% to 21% and had not made a big recovery in 2023. Every investment has a story. The average person who became interested in Bitcoin wanted to get in on the profits as they saw it go from pennies and dollars per token to tens of thousands of dollars.
The back story for Bitcoin had to do with its original purpose as a way for people to do business on the internet without paying middlemen. It was supposed to be a way to avoid being watched by governments and other agencies thus providing financial privacy. As Bitcoin soared in value the rationale evolved that crypto was a way to protect against inflation, social unrest, war, and other perils. During crypto winter the dollar went up in value while Bitcoin fell. All of the hype around Bitcoin was stripped away when its value fell like a rock. Many who saw easy money in Bitcoin lost money and then lost interest. This is why a new Bitcoin spot price ETF will be used by the investors who have stayed and not by a whole herd of bright-eyed and excited folks chasing magical profits like before.
Spot Bitcoin ETF Yawn – SlideShare Version