From Groundhog Day to Green Light, Spot Bitcoin ETFs Break the Loop

• SEC authorized the launch of spot bitcoin ETFs after a decade of denials
• Bloomberg predicted $4 billion bitcoin ETF inflows for first trading day
• Ether rallied as traders anticipate potential ETF proposals following spot bitcoin ETF approval

A decade-long bitcoin odyssey comes to fruition, from rejection to redemption

This week marked a pivotal moment in the crypto industry as the SEC approved the ETFs (exchange-traded funds) tracking the spot market price of bitcoin, a milestone more than a decade in the making. This week, the crypto markets experienced an uptick, posting a 7.9% increase in total market capitalization. Bitcoin dominance edged higher but fell just short of 52%. Among the blue chips, bitcoin showcased an 8.8% rally while ether shone with an impressive 16.8% weekly gain. The liquid staking protocol names closely followed ether's price movements and Lido Finance took the lead with a standout 23.1% rally week on week.

Around a dozen firms including prominent names like BlackRock, Fidelity, and Grayscale, have been vying to launch spot bitcoin ETFs. In recent days, these companies have made announcements with some even reducing fees, indicating an intense competition to attract investors. These ETFs are spot-based, holding actual bitcoin, unlike the previously approved bitcoin futures ETFs which deal in derivative contracts tied to BTC. The SEC's approval follows years of delays and the rejection of various attempts to launch spot bitcoin ETFs, and it comes on the heels of a significant court ruling against the SEC's rejection of Grayscale's bid to convert its Grayscale Bitcoin Trust (GBTC) into a spot ETF. Notably, brokerages like Fidelity and E-Trade have begun integrating tickers associated with these ETFs onto their platforms. With growing optimism surrounding spot ETFs, the price of bitcoin surged from approximately $27,000 in early October to over $45,000 at the beginning of 2024.

With the recent SEC approval of spot bitcoin ETFs, expectations are soaring for their transformative impact on cryptocurrency investing. Numerous estimates have circulated predicting both the demand for these ETFs and their potential influence on bitcoin's price. Standard Chartered, for instance, anticipates bitcoin reaching $100,000 by the year's end. However, the realization of demand may face delays or extend beyond initial estimates, a factor that will only become clear over time.

Alright, alright, alright: BTC ETF greenlit – what's next?

What remains certain is the palpable excitement surrounding the impending debut of trading these ETFs. Following SEC approval, spot bitcoin ETFs are poised to enter US markets facilitated by NYSE, Cboe Global Markets, and Nasdaq. Major trading firms are ready to provide liquidity to these products and trading may technically kick off as early as 4:00 am ET (09:00 UTC), 5 ½ hours before the traditional daily opening time. The anticipation is high, marking a significant development in the investment landscape.

The price movement of bitcoin after news of the approval was relatively lackluster, suggesting that the market may await the initial days of ETF trading to reassess demand and price impact models. In the wake of these groundbreaking approvals, Bloomberg made a bold prediction anticipating an astounding $4 billion in trading volume on the first day of spot bitcoin ETF trading. Furthermore, their forecast indicates that a substantial portion (around $2 billion) of these inflows could originate from BlackRock's bitcoin ETF alone. The unfolding days of trading will likely provide valuable insights into the actual market dynamics and investor enthusiasm following the introduction of these pioneering ETFs.

As the market eagerly awaits the debut of bitcoin ETFs in their initial trading sessions, ether has emerged in the spotlight, capturing attention in anticipation of potentially becoming the next digital asset to secure spot ETF approval. Over the past 24 hours, ether and native tokens of applications built on the Ethereum platform have experienced a surge, driven by traders speculating on the possibility of a spot ether exchange-traded fund (ETF) proposal following the expected approval of a bitcoin ETF in the US. Notably, the earliest deadline for a decision on spot ether ETFs is in May later this year for VanEck's application, while BlackRock's deadline is set for August.

Happy Approval Day!

Macro pulse 

Among traditional financial assets, the US equities rallied led by big tech names. However, the gains were tempered as market participants awaited Consumer Price Index (CPI) data and major banks earnings, resulting in a modest 1.7% increase compared to the previous week. Oil futures experienced a 2.3% decline due to an unexpected jump in US crude stockpiles, sparking concerns about the demand. Elsewhere, the US Dollar index dipped 10 bps lower and the 10-year US Treasury yields climbed 11 bps while the Gold & Silver dropped 1.5% week on week.

*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on January 11, 2024 

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