The approval of spot Bitcoin ETFs in the United States earlier this year has paved the way for the cryptocurrency market to be much smoother than what we were used to a few years ago.
What I'm telling you may not seem very new. After all, we've already seen a good ten months of trading in these regulated funds. But there's much more behind these financial products than meets the eye.
For those who don't know me yet, I'm Ricardo Dantas, CEO of Grupo Foxbit since 2019. I've been following and working in the market since 2016 and, I'll admit, I've seen a lot. And that's why the approval of ETFs caught my attention.
So, I am very grateful to the folks at BeInCrypto for the space in this monthly column to present some of my experiences.
History of many years
If you’re new to the cryptocurrency market, you should know that Bitcoin ETFs are anything but new. Ever since I’ve heard about Bitcoin, the so-called “regulated exchange-traded funds” have been on the agenda.
I just didn't expect it to happen so “soon”.
Much of the crypto market is decentralized. And this ends up scaring away some investors and also opening space for malicious agents. So, regulation can be annoying and bureaucratic, but it is necessary in the world we live in.
The problem was that these ETFs were never approved. There was always a missing document here, a justification there, and the processes continued like this for years on end.
The fact is that institutional investors and large companies were still just beginning to crawl into the cryptocurrency market, while the government – especially the US government – did not make any effort to listen to their demands.
On the contrary, the authorities have been quite disruptive. Just like China did in 2021 with its ban on cryptocurrency mining and trading – which didn’t work out so well, but that’s not our focus today!
Read more: What is a Bitcoin ETF?
Cryptocurrencies for whom?
The game began to change when some exchanges – and without a doubt, I mention Binance – began to gain a lot of space within the North American financial sector. After all, if the demand for cryptocurrencies is strong today, until last year the scenario was even more intense.
It was then that the “banks” began to see that institutional investors – companies with a lot of money – also wanted to participate in this market. However, there was a lack of that dose of regulatory security that this type of player requires.
The authorities, of course, were not going to hand this over to foreign companies. That's when the "old friends", such as BlackRock, decided to take the lead and file their applications for approval for a spot Bitcoin ETF.
This, in fact, happened a week after Binance was sued by the United States Securities and Exchange Commission (SEC).
I don't want to get into the merits of whether the SEC is right or not, but the institutional game is very strong in the country, and more consolidated players have a certain “advantage” against markets considered emerging.
So, the decision to approve a Bitcoin ETF did not come from a demand from the global financial market, but rather from a strong institutional demand in which the traditional environment accepted or would be replaced by companies in the sector.
A very predictable act
Even in 2023, I heard from many people saying that these ETFs would not be approved or that they would not be successful and would die in a few weeks.
Not wanting to be a prophet here, but, modesty aside, I have experienced a lot in this market. That is why I have said that this was a path of no return. ETFs would indeed be approved, and there would be a much larger injection of capital than analysts were imagining.
And why do I say this?
Well, starting with the negotiation structure for the formalization of the funds. There has been a lot of controversy surrounding these products, with a certain bias towards traditional companies, rather than crypto-natives.
More than that, let's be honest: BlackRock doesn't enter the field to lose. They knew that there was a huge pent-up demand there and that, with their name in the market, they would have a good share of that capital.
More than that, Larry Fink's pre-approval interviews were a declaration of power for Bitcoin that had never happened before.
In this scenario, it is important to understand that institutional investors do not want to hold custody of their money. But they also do not want to leave their money with just anyone. That is why there are specific products for this audience, such as – believe it or not – ETFs.
That's why I've been insisting that 2024 would start off strong for the cryptocurrency market and that the SEC wouldn't postpone the decision once again. January would be the official month for the approval of Bitcoin ETFs... Said and done!
Read more: Bitcoin ETF: Advantages and Disadvantages of Investing in ETFs
Ten months of capitalization
And just as many thought that ETFs would not survive, today we see the potential that these funds brought to the cryptocurrency market.
In the first few days of trading, ETFs saw a significant inflow of capital. It is no surprise that it took two months for cryptocurrency funds to reach $10 billion, compared to two years for gold.
Today, what we see is an accumulation of ETFs that hold more than $66 billion in Bitcoin. And in the last 30 days alone, more than 65,900 units of the cryptocurrency were injected – which, despite being smaller than the beginning of the year, is still quite significant.
The fact is that there is no tendency for this movement to slow down. On the contrary, the perspective is that this market will develop more and more, as was the case with the arrival of Ethereum ETFs and, why not, those of Solana.
It's the same, but not quite
What I wanted to bring to this first article is to show that the cryptocurrency market has certain similarities to the traditional environment. There are, indeed, policies, interests and a lot of capital surrounding cryptocurrencies.
However, unlike what we see with stocks, big techs and any other player of this type, Bitcoin – and many other digital currencies – is an extremely valuable technology and is still decentralized.
All these financial movements, whether from institutions or whales, are fully traceable. It is possible to anticipate, monitor and see the final destination of each of these investors' transactions.
This transparency is not seen anywhere else in the world. At the same time, censorship of this type of asset is only consistent with authoritarian environments, where the internet is completely suppressed.
Otherwise, Bitcoin is free, you are free, and your money is free too!
I would like to thank the BeInCrypto team once again for the space and you who followed this article. Next month I will be here with you, sharing my experiences and news about the cryptocurrency market.
The article What nobody understands (yet) about Bitcoin ETFs was first seen on BeInCrypto Brasil.
