After initial fake news and approvals, the ETFs received official regulatory approval on January 10 and were available for trading the very next day. Previously, those interested in cryptocurrencies could only invest through the direct purchase of "coins" or bitcoin futures ETFs. Bitcoin spot ETFs now offer an investment alternative that can significantly reduce the concerns associated with traditional cryptocurrency purchases in a positive way. According to information published by Reuters, these ETFs could bring an estimated $100 billion in bitcoin investments by the end of 2024. It is important to note, however, that so far only US ETFs have been approved, which do not meet regulatory requirements within the EU.

Spot bitcoin ETFs are changing the game

ETFs bring more regulatory safeguards over traditional bitcoin purchases and allow interested parties to invest through major market players such as BlackRock, Grayscale Investments, Fidelity, Invesco and others. This may significantly attract the attention of individuals who are interested in cryptocurrencies but have so far held off purchasing them due to the complexity involved in creating a crypto wallet and secure storage. At the same time, the new way of trading helps to consolidate and increasingly establish cryptocurrencies in the world of "traditional" investments.

Advantages and disadvantages

Thus, the advantages brought by bitcoin spot ETFs include better accessibility for investors, ease of buying and selling. In addition, there may be tax advantages over direct ownership of cryptocurrencies in some countries due to the long-established tax regime for ETFs. Of course, there are two sides to every coin. Trading ETFs can involve potential price tracking bias due to market liquidity, exchange rate risk, as well as operational fees.

Expectations for 2024

The king of cryptocurrencies has boasted a sharp rise in value in recent months in anticipation of the approval of a bitcoin spot ETF, but has seen a slight correction since January 11. However, in light of the new developments, this year could be expected to be particularly positive for cryptocurrencies and could reach new all-time highs. [1] One notable moment will be "halving", the halving of the reward for mining bitcoin that occurs every four years. This is a process designed to keep the supply of bitcoins under control and ensure their gradual release into the market, and we know from historical data that it has had a mostly positive effect on the price of bitcoin.

Olivia Lacen, principal analyst at Wonderinterest Trading Ltd.

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. These statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.