There has been much discussion about whether the launch of a Bitcoin (BTC) spot exchange-traded fund (ETF) will lead to a price correction once the initial investor excitement subsides. While some arguments are valid, they overlook a broader perspective. The approval of a spot Bitcoin ETF will represent a turning point in various aspects, including volatility, correlation with traditional financial assets and market liquidity.
Identify the outlook for Bitcoin ETFs. Source: Eric Balchunas/Bloomberg
Arbitrage houses and ETF providers have likely created a buffer to support initial demand and prevent front-running of the market. However, whether it takes a few hours or several months, this buffer will eventually run out. When looking at a longer time horizon – months rather than days – the price of Bitcoin is determined by the balance between immediate demand and supply of coins at a specific price level.
Bitcoin is validated, boomers enter the market, and issuers compete for dominance
The initial question to consider is why anyone would wait for the price of Bitcoin to surpass its all-time high to start investing. Most people are lazy or cautious, meaning they are hesitant to open a trading account or invest in anything that hasn't received approval from their broker. Although Grayscale offers Bitcoin-backed trust funds, traditional investment brokers have little incentive to offer such products.
It's important to note that the average retirement savings for North Americans under 34 is $17,600, while those between 35 and 64 have amassed a substantial $142,100, according to Vanguard. This data suggests that Millennials and Generation Z will not be the ones pushing the price of Bitcoin to $100,000 and above. In essence, the first reason why the Bitcoin spot ETF is crucial lies in the minimum effort required.$BTC