As we stand on the precipice of a potential approval of a spot Bitcoin (BTC-USD) ETF in the United States, it is imperative to delve into the historical context and future prospects of Bitcoin. The approval of a BTC ETF in the US market is likely to herald a significant shift in the perception and utilization of this digital currency. It is reasonable to expect a surge in BTC prices this year and beyond, driven by the anticipation of higher adoption, liquidity, and credibility associated with an approved ETF.
Bitcoin: A Double-Edged Sword
Bitcoin was envisaged as a means for peer-to-peer transactions, akin to digital cash. However, the persistent scalability issues have plagued its growth, particularly exemplified by the surge in average transaction fees during late 2023. The average transaction fee reaching $19 in December rendered the network uneconomical for smaller value holders, posing a significant hindrance to mainstream adoption. Unlike its blockchain peer Ethereum (ETH-USD), Bitcoin’s layer 2 scaling opportunities are relatively limited, leading to the prevalence of custodial solutions as a more viable option for peer-to-peer transactions.
The bifurcation in the Bitcoin community resulting from the scalability debate culminated in the emergence of Bitcoin Cash (BCH-USD) in 2017. While the camp favoring smaller blocks has witnessed a surge in wallet addresses over the years, a startling revelation surfaces: 18.7 million of the 52 million BTC addresses hold less than $10 each, rendering 35% of the wallet addresses effectively dormant. This dichotomy is emblematic of Bitcoin’s intrinsic conundrum – a currency with immense potential, yet mired in operational obstacles.
Despite these challenges, Bitcoin functions adeptly as a decentralized ledger and settlement layer, with a daily dollar-denominated value of $32.3 billion traversing the network in December. However, while the recent price surge and ETF optimism have instilled fervor, the transfer volume is yet to reclaim its previous peaks, suggesting a potential discord between anticipation and actual adoption.
Survey Insights: The ETF Conundrum
Bitwise Investments and VettaFI’s survey during Q4 2023 unveiled a compelling narrative. Despite Bitcoin’s price surge during the period, a mere 39% of advisors believed in the approval of a spot Bitcoin ETF in 2024, contrasting sharply with Bloomberg ETF analysts’ optimistic projection of a 90% likelihood. Notably, 88% of advisors eyeing BTC investments await the ETF approval, while only 19% currently have the means to purchase BTC in client accounts.
Regulatory concerns surrounding crypto ETFs have emerged as a prominent deterrent among financial advisors, with a significant 42% citing the lack of an ETF as a barrier to larger allocations. This sentiment marks a marked increase from the 2022 survey, signifying a growing impetus for regulatory clarity to underpin augmented crypto investments.
