After ten years of denied applications, the SEC is about to approve the first bitcoin exchange-traded fund (ETF) in the United States.

On the Bitcoin blockchain, this week celebrates the 15th anniversary of the genesis block’s mining. A U.S. spot bitcoin exchange-traded fund (ETF) has been pushed for approval by industry experts for more than ten years; this action is anticipated to trigger a surge of institutional participation. Analysts now expect that at least one of the many current plans could eventually be approved as early as Friday, despite being rejected repeatedly.

Mixed Opinions on Market Impact

There are differing views on what will happen in the cryptocurrency market if the SEC approves a spot bitcoin ETF. While a spot ETF will generate “trillions in value” in the long run, according to VanEck’s director of digital assets strategy, Gabor Gurbacs, initial effects may have been overstated, with first flows perhaps amounting to just “a few hundred million (mostly recycled) money.”

However, other analysts argue that approval may force ETF issuers to buy bitcoin valued at tens of billions of dollars in order to satisfy institutional demand, which might result in a dramatic change in the dynamics of supply and demand. Given that exchange holdings dropped to a five-year low in October, suggesting holders are shifting bitcoin to personal wallets and are less likely to sell, some experts even forecast a “supply shock”.

Historical Data from Other ETFs

Gaining insights into possible outcomes is possible through the analysis of past data from other ETFs. According to Coinbase, the first spot gold ETF in the United States, the SPDR Gold Shares ETF (GLD), amassed $1.9 billion in inflation-adjusted terms in its first four weeks and reached $4.8 billion at the conclusion of the first year. After its launch in October 2021, the ProShares Bitcoin Strategy ETF (BITO), which is based on bitcoin futures, raised around $1.5 billion in inflation-adjusted terms in just 30 days.

Although BITO invests in regulated CME futures rather than real cryptocurrency, it is nevertheless a good choice for people who want exposure to bitcoin without the hassles of ownership and storage due to its tight tracking of the spot price since its founding.

Regarding the robust mainstream adoption of spot ETFs, there are worries given the current state of the global economy, which includes rising risk-free interest rates and worsening household finances globally. The macroeconomic climate might not be favorable to a situation in which spot ETFs are widely accepted.

Expected Response of the Market

Since the beginning of October, Bitcoin has increased in value by 61%, mostly due to the anticipation of SEC approval for spot ETFs. But once the ETFs go live, several analysts predict a sell-the-news pullback. When the confirmation of the approval news is confirmed, investors may sell to lock in profits, which could explain the expected price decline.

Analysts warn against assuming a straightforward upward trajectory for bitcoin post-ETF approval, drawing comparisons to historical events like the launch of CME bitcoin futures in 2017 and the listing of Coinbase on Nasdaq in 2021, wherein bitcoin rallied before suffering significant corrections thereafter.

In conclusion, given the conflicting views and historical precedents, market players should exercise caution and weigh a variety of eventualities, even though the SEC’s approval of a spot bitcoin ETF has the potential to drastically alter the cryptocurrency environment. Since the cryptocurrency industry has shown itself to be so volatile, any major advancement is probably going to bring with it both opportunities and threats.