Spot Bitcoin ETFs are Here

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After over a decade of waiting, the first spot Bitcoin ETFs were finally approved in the US by the Securities and Exchange Commission in a monumental decision. On Wednesday, January 10th, the SEC greenlit 11 spot Bitcoin ETF applications that began trading the following day. Although the writing had been on the wall for months that these approvals were only a matter of time; the history of the hostility and incompetence of the SEC in regulating the entire crypto space remained a mental drag on investors until the word became official. 

Despite the reluctance from Gensler and his political agenda to approve these ETFs, several losses in court against crypto firms such as Grayscale and Ripple in recent months forced his hand to give the go ahead finally. 

SEC Commissioner Hester Peirce also published a statement opposing many of Gensler’s sentiments and commending the approval. Peirce said that prior ETF rejections and delays resulted in investors having less efficient access to bitcoin exposure while unnecessarily consuming the SEC's time. (Galaxy)

If the SEC was already a joke before, their own Twitter/X account was hacked and a fake approval tweet was sent out on January 9th, only to be redacted minutes later by Gary Gensler himself. The SEC is now reportedly going to be launching an investigation for market manipulation of… the SEC. Tax dollars hard at work.

You can’t make this up.

Although this moment was long overdue, the significance of these spot Bitcoin ETF approvals is massive for the evolution and legitimacy of the crypto space as a whole. The entire crypto market cap has grown from zero to almost $2 Trillion in less than 15 years, but most of the traditional financial world has historically been unable to invest in crypto assets directly due to various regulations and restraints. These new and highly regulated investment products that unlock enormous amounts of capital from outside the existing crypto market.

A spot bitcoin ETF fundamentally alters the crypto landscape in the United States. It enhances accessibility for both retail and institutional investors and paves the way for financial advisors to guide their clients towards investing in it. Moreover, it lends bitcoin greater legitimacy, both by addressing the regulatory and compliance concerns that previously deterred institutions from holding it and by solidifying its role as a genuine asset class that can offer portfolio diversification and enhanced returns. (Galaxy)

Since going live, these new ETFs have seen significant inflows and trading volume despite the recent lackluster price action of $BTC. The ‘Cointucky Derby’ amassed $10 billion in total trading volume in just the first three days, shattering previous records and making it the most successful ETF launch in history. The attention of Wall Street has been captured, even if they don’t believe in the asset itself, they will certainly have to care now.

Although there is still a sizeable regulatory hill to climb, this process has paved the way for additional crypto assets to follow suit in the future. These TradFi players are not just going to stop with Bitcoin. Ethereum currently has active spot ETF applications from many of the same firms, with deadlines for approval approaching within the coming months. BlackRock’s Larry Fink has also talked at length about the future of tokenization and the use of blockchains in preventing fraud.

Wall Street’s marketing machine is just starting to ramp up as well, with Bitcoin ETF advertisements already plastered over just about every financial media source over the past couple of months. These efforts will only increase as the momentum and popularity behind these products build. Franklin Templeton, a 77-year-old institution, has officially changed their social media profile pictures to Benjamin Franklin with laser eyes and is posting memes about crypto. It is safe to say that the suit and ties are finally embracing magic internet money, for the better.

The Return of the Money Printer in 2024

Volatility in crypto is inevitable and some wild price swings should always be expected, but there are significant tailwinds for crypto assets that will continue to drive momentum moving forward.

Financial markets are forward-looking and highly sensitive to changes in liquidity. When the Fed announced at the end of 2021 that they would begin raising interest rates to combat inflation, crypto and stocks took a sharp dive that lasted most of the following year as liquidity was drained out of the financial system. The spigot of money in the form of near-zero interest rates and stimmy checks that had helped pump-up asset prices since mid-2020, was turned off.

Now that inflation is finally cooling, interest rates are expected to start coming down in 2024, so we should experience the reverse effect. Global liquidity has already begun to increase in the past few months, hence the rally in crypto and the US stock market back at all-time-highs. With a return to Quantitative Easing (Fed speak for money printing) the best performing monetary debasement hedge in history, Bitcoin and other crypto assets, should benefit handsomely.

The Halving

The Bitcoin Halving, the most anticipated catalyst from within the crypto space, is slated to occur in April 2024. Roughly every four years, the Bitcoin block reward paid out to the miners who secure the network and validate transactions, gets cut in half. The halving was programmed into the original Bitcoin code in order to increase the scarcity of new Bitcoins released over time, thus making the existing supply of Bitcoins more valuable.

Inflation occurs when governments print too much new money as it reduces scarcity and devalues our money. The Halving is intentionally used as a tool to achieve the opposite effect. 

Historically, halvings have been major catalysts for significant price movements in Bitcoin's value. A new all-time high in Bitcoin’s price has occurred roughly one year after every previous Halving.

The Halving, unlocked demand created from spot Bitcoin ETFs, a changing interest rate environment and an election year; are all setting the stage for a monumental 2024 and beyond. test

-Tommy Sullivan