Crypto Investors Expect Bitcoin ETF to Boost Demand and Liquidity

A Bitcoin ETF could open up the crypto market to millions of new investors and improve price discovery, according to Coinbase.

Spot bitcoin ETFs have the potential to boost crypto adoption and innovation by expanding the access, the credibility and the utility of bitcoin for a new class of investors and institutions, according to a Coinbase recent analysis.

The leading US-based crypto exchange believes that a Bitcoin ETF would create a massive opportunity for the wealth management industry, which handles over a third of all wealth in the US. The company affirmed that a Bitcoin ETF would enable a new class of investors who rely on ETFs to build their investment strategies. “These are not market participants that would otherwise buy and custody bitcoin independently, but instead rely on ETFs to build their unique investment strategies,” the report said.

David Duong, Coinbase’s head of institutional research, said that a Bitcoin ETF would not only bring more capital into the crypto market, but also improve the market efficiency and intelligence. “ETFs will ease the restrictions for large money managers and institutions to buy and hold bitcoin, which will improve liquidity and price discovery for all market participants,” he said. Additionally, the report said that a Bitcoin ETF would allow investors to access other Bitcoin-based products, such as lending, futures, and options, which could offer higher returns and diversification benefits.

“Bitcoin ETFs could add billions of dollars to the total crypto market cap as well as spark new potential investments for the asset class. While this will take time, we expect ETFs to lay the foundation for a more regulated environment, greater inclusion and a material growth in demand,” the report states.

However, the approval of a Bitcoin ETF is not guaranteed, as the SEC has been cautious and skeptical about the crypto industry. The SEC has delayed or rejected several Bitcoin ETF applications in the past, citing concerns over market manipulation, fraud, and investor protection. The crypto community is hopeful that the SEC will change its stance, as the industry has grown more mature and regulated. Some analysts, such as JP Morgan, expect the SEC to approve a Bitcoin ETF by January 10. However, if the SEC decides to deny the applications, the crypto market could face a sharp correction, as investors lose confidence and optimism.

The crypto market has been on a bullish run in anticipation of a Bitcoin ETF approval by the SEC. A Bitcoin ETF would allow investors to buy and sell Bitcoin through a regulated fund, without having to deal with the technicalities of custody and security. Bitcoin has surged from below $27,000 in October to above $37,000 by Nov 10, breaking out of a months-long consolidation range. The overall crypto market cap has also increased by $366 billion since October, reaching a new all-time high of over $1.2 trillion.