OGUN, Nigeria(VOICE OF NAIJA) – At last, there is a Bitcoin exchange-traded fund (ETF). The much-awaited SEC approval is expected to inject billions of dollars in new capital into the cryptocurrency industry in the upcoming years, much to the delight of a market that has seen the price of Bitcoin soar in recent months.
But the introduction of Bitcoin ETFs is expected to have a positive effect on even the most remote areas of the cryptosphere in a variety of distinctive ways, far beyond just bringing in fresh capital.
Traditionally, an exchange-traded fund (ETF) is a pooled investment that follows price indices of different commodities. Like mutual funds, exchange-traded funds (ETFs) let investors profit from changes in the value of the underlying assets without having to deal with them directly.
The primary cause of the recent years’ great demand for a Bitcoin ETF is the latter. A Bitcoin-based ETF might allow regulated entities to invest in Bitcoin indirectly, without ever having to handle the cryptocurrency itself, even though its legal status is still not entirely clear. ETFs can also be freely traded on stock exchanges, unlike mutual funds.
Up until now, the vast majority of regulated financial entities were precluded from investing in Bitcoin, relegating the first cryptocurrency to that of a relatively niche asset.
With the launch of the first ETF, however, IRAs, 401Ks, pension funds, and prominent institutional players have gained the ability to invest in BTC, opening up the door for mass adoption on an unprecedented scale.
Now, this is one of, if not the most important milestone for legitimization of Bitcoin, officially making the crypto a real and widely recognized asset that can be leveraged by regulated institutions.
While many crypto enthusiasts have never doubted the value or tangibility of BTC, the SEC’s approval of a Bitcoin ETF has enormously boosted the crypto’s legitimacy and credence.
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As a result, this will likely have a ripple effect across the whole blockchain industry, placing it under the global spotlight like never before.
In the first year alone, the Bitcoin ETF could generate at least $14.4 billion in inflows from big institutional investors, according to a recent research report from crypto firm Galaxy Digital.
While this is a stellar figure by itself, it becomes even more impressive considering that existing traditional products like trusts and futures have a total value of roughly $21 billion today.
This means that in just one year, institutional BTC investments could reach heights comparable with proven traditional instruments that have existed for decades. Moreover, Galaxy predicts that inflows in Bitcoin ETFs could reach $27 billion in the second year and $39 billion in the third.
Meanwhile, analysts at CryptoQuant noted that approval of Bitcoin ETFs could add $1 trillion to the overall market capitalization of all cryptocurrencies combined.
While still predictions, these colossal figures show that not only will the SEC’s approval of the Bitcoin ETF give a tremendous boost to the price of BTC itself, but it could also positively affect the whole sector thanks to a massive influx of institutional capital.
Following such a seismic shift, Bitcoin, in particular, and the blockchain industry will turn much more than just investors’ heads. Countless talented developers who were perhaps apprehensive of web3 will start embracing decentralization, bringing their vast web2 experience and expertise to blockchain.
Consequently, the first Bitcoin ETF will probably lead to greater adoption and rapid growth of industries like Decentralized Finance (DeFi), GameFi, and real-world asset tokenization, among others, as well as a significant expansion and acceleration of Layer-1/2 network development, by reviving the blockchain space.
Source: Forbes