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Analyst: Bitcoin ETFs Democratize Access to Markets

11 Jan, 2024 Coin news

Analyst: Bitcoin ETFs Democratize Access to Markets

Both the traditional finance (TradFi) and decentralized finance (DeFi) sectors have been eagerly awaiting the United States Securities and Exchange Commission (SEC) decision to approve the country's first spot Bitcoin exchange-traded funds (ETFs).

This historic decision has generated interest in its potential impact on the markets and, notably, on Bitcoin itself.

However, in Europe, the excitement surrounding a Bitcoin ETF has already faded as the continent welcomed its first spot Bitcoin ETF on August 15, 2023.

The Jacobi FT Wilshire Bitcoin ETF made its debut on the Euronext Amsterdam stock exchange more than a year after its originally planned launch. This ETF was issued by London-based Jacobi Asset Management.

The Jacobi Bitcoin ETF was promoted as the first physically-backed Bitcoin fund, offering investors exposure to a financial product backed by BTC

It was also categorized as an "environmental investing" or Article 8 fund, emphasizing its alignment with environmental and/or social principles.

As the U.S. takes steps toward introducing spot Bitcoin ETFs, Grzegorz Drozdz, a market analyst at the European Union-based financial services platform Conotoxia, discussed the potential market impacts, particularly from a European Union (EU) perspective.

Drozdz noted that the introduction of Bitcoin ETFs in general has "significantly democratized" access to the market, extending beyond traditional cryptocurrency exchanges and wallets.

However, he pointed out that these ETFs' current size remains relatively small compared to the overall financial and crypto market.

The total capitalization of the cryptocurrency market stands at $1.78 trillion, and existing investment funds in the crypto sector account for only 2.9% of this total value.

In terms of the EU, Drozdz mentioned that the European Economic Area appears to be more receptive to institutional investment in cryptocurrencies with the launch of its Bitcoin ETFs.

However, these European ETFs have not yet attracted significant institutional inflows.

At present, market expectations primarily revolve around the approval of such instruments in the United States, which could potentially impact the long-term development of the crypto ecosystem.

Nonetheless, Drozdz anticipates challenges in accurately gauging the scale of capital ready to invest in this market with financial products representing only 2.9% of the total capitalization.

Overall, he highlights the potential for a "rapid increase" in the influx of new funds into the crypto market through Bitcoin ETFs, which could even signify the beginning of a new bull market.

Similar speculations about a new bull market have been shared by analysts and social media communities in the lead-up to the SEC's decision.

Considering that Bitcoin still holds a significant share, accounting for 53.7% of the market's capitalization, Drozdz suggests that Bitcoin's success could have a substantial impact on the broader digital currency landscape.

Sources:

https://cointelegraph.com/news/bitcoin-etfs-market-access-democratization

https://coinmarketcap.com/currencies/bitcoin/

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