A bitcoin spot ETF could open the floodgates for wider crypto demand
Years after it got initial approval, Jacobi Asset Management’s bitcoin spot exchange traded fund (ETF) went live this week, making it the product the first of its kind in Europe.
This is only the latest sign that Europe is making steady progress towards integrating crypto assets inside traditional financial instruments. Meanwhile, the U.S. Securities and Exchange Commission (SEC) is dragging its feet by delaying deadlines for similar applications.
That’s not to say there hasn’t been any progress state-side. According to Eric Balchunas, senior ETF analyst at Bloomberg, bitcoin futures ETFs do exist in the United States, but they only account for about $1 billion in total AUM, “So that does exist, but the spot is the holy grail. The spot bitcoin ETF [will be] major,” he said on TechCrunch’s Chain Reaction podcast.
The difference between a spot ETF and a futures ETF is that the former actually purchases and holds the underlying assets. It’s a more popular approach than futures-related ETFs. Spot gold ETFs, for example, Balchunas said, have consumed the majority of gold ETF activity, and bitcoin could be traded similarly if it gets regulatory approval.
For an advisor, a bitcoin spot ETF wouldn’t be the main part of their portfolio; it would be like hot sauce — a small bit on top. Eric Balchunas, senior ETF analyst, Bloomberg
Lots of money is potentially up for grabs. “The stakes are high” for the various entities working to bring a spot bitcoin ETF to the American market, Balchunas argued. About 10 firms are competing to get the first bitcoin spot ETF approved in the U.S., and BlackRock, which has more than $9 trillion in assets under management, filed for its own offering in June.
BlackRock also partnered with Coinbase in 2022 to provide its institutional clients with access to cryptocurrency, and later launched its own spot bitcoin private trust for U.S. institutional clients.
“The question is, will [the SEC] approve [a bitcoin spot ETF], when will they approve it and how many they’ll approve at once,” Balchunas said. Right now, he and other Bloomberg analysts estimate 65% odds that the regulator will approve one or more by the end of the year. The odds are even higher for next year.
“Everything is evolving towards that,” Balchunas added. “I don’t think it’s going to completely change the face of crypto. I think what it does is offer a portal for a big lump of money that largely would not probably deal with bitcoin, [but] might now. That would be the $30 trillion that financial advisors manage in America.”
In other words, a bitcoin spot ETF could be considered the bridge that connects trillions of dollars to crypto. “Not everyone is going to cross that bridge, but you’ll certainly find some traffic there,” Balchunas said.