A plethora of investment funds is on the verge of flooding the cryptocurrency market contingent on the expected approval of bitcoin ETFs from numerous firms by the U.S. Securities and Exchange Commission. This could open up the world of bitcoin [BTC] to virtually everyone, from crypto-savvy individuals to those new to the concept.
ETF issuers such as BlackRock, Grayscale, Fidelity, and Galaxy/Invesco are facing the prospect of scrambling to procure tens of billions of dollars worth of BTC to meet the amplified demand anticipated from retail investors. The existing leading bitcoin investment vehicle, Grayscale Bitcoin Trust, commands a staggering $26 billion in assets, indicating the existing appetite for BTC even before a potential influx of investment.
Market Players Confident in Handling Potential Influx
Industry leaders are unequivocal in their confidence that the bitcoin trading sphere possesses the requisite liquidity to seamlessly accommodate substantial purchases such as those necessitated by the arrival of bitcoin ETFs.
Two pivotal entities, authorized participants (APs) and market makers, are essential to ensure the efficient trading of large capital volumes. APs are responsible for creating and redeeming ETF shares, thereby directing investor funds in and out of the fund, crucial for maintaining the ETF price in close alignment with the fund’s underlying holdings. Market makers, on the other hand, are needed in the “secondary” market, especially on exchanges, where the majority of trading transpires.
Several major Wall Street firms such as JPMorgan Chase, Jane Street, and Cantor Fitzgerald have already committed to serving as APs for bitcoin ETFs, with others likely to follow suit.
Big Players Gearing Up
DRW, one of the largest liquidity providers globally, and its crypto division, Cumberland DRW, have been diligently preparing for the advent of bitcoin ETFs. They are onboarding issuers and sourcing bitcoin to ensure readiness when orders from APs begin flowing in once the new investment vehicles are available in the market.
Traders firmly believe that the market is robust enough to absorb the colossal volume of bitcoin orders, expressing certainty that “if there is demand, there’ll be supply” according to Rob Strebel, Cumberland DRW’s head of relationship management.
Bitcoin ETFs hold appeal for investors due to their ease of access and their tendency to closely track the value of the assets they hold, offering a level of consistency akin to conventional ETFs and stocks in the U.S.
The Bustling Bitcoin Market
Over the past 45 days, daily bitcoin trading has averaged about $22 billion on major exchanges, with occasional spikes to around $40 billion. This robust volume is widely believed to be sufficient to meet the demand expected from bitcoin ETF issuers.
Laurent Kssis, director at financial services firm CEC Capital and former managing director at 21Shares, shared optimism about the market’s capacity to absorb the potential surge in demand.
While the potential influx of funds is seen as beneficial for the overall health of the market, it remains uncertain whether it will impact the price of bitcoin itself, contingent on the demand for the ETF and its rate of growth.
“Not all ETFs will get that kind of traction,” Kssis noted. “I strongly believe the investment demand will be skewed towards BlackRock.”
Read more: Goldman Sachs Eyeing Bitcoin ETF Role Via BlackRock and Grayscale: Sources
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