The potential approval of a Spot Bitcoin Exchange-Traded Fund (ETF) in the United States has generated excitement in the cryptocurrency market, with predictions of Bitcoin's price surging to $100,000 or even $1 million after the approval. However, concerns have arisen about the impact on centralized crypto exchanges, with some fearing a "bloodbath" as ETFs offer institutional-grade trade execution and lower commissions. A denial of the ETF application by the U.S. Securities and Exchange Commission (SEC) could also have adverse effects on the crypto market, with potential significant repercussions. Meanwhile, 7RCC, an ESG-focused crypto asset manager, has entered the Bitcoin ETF race with a unique blend of Bitcoin and carbon credits futures in its ETF offering.
Bitcoin ETF Approval Could Cause Exchange Bloodbath?
The cryptocurrency market has been buzzing with anticipation over the potential approval of a Spot Bitcoin ETF in the United States, which could coincide with the Bitcoin block reward halving that is expected to happen in April of 2024. This dual event has led to speculation about the impact it could have on the price of BTC, with predictions ranging from $100,000 to as high as $1 million in the days to weeks following approval.
Blockstream CEO Adam Back and Jan3 CEO Samson Mow are among those who have weighed in on the matter. Back believes that the convergence of these events could propel BTC to $100,000, while Mow goes even further by suggesting that the approval of a Spot Bitcoin ETF could drive the cryptocurrency to as high as $1 million. While these predictions are exciting to consider, they also raise questions about the potential consequences for the cryptocurrency ecosystem.
One concern that has emerged is the potential impact on centralized crypto exchanges. Nate Geraci, the president of ETF Store, expressed his doubts on social media, warning of a potential "bloodbath" for these exchanges. The crux of his argument lies in the disparity between retail Spot Bitcoin ETF buyers and sellers, who would benefit from institutional-grade trade execution and lower commissions, compared to retail users of cryptocurrency exchanges who would continue to experience "retail trade execution and commissions."
Geraci's concerns highlight the fact that it will be crucial for cryptocurrency exchanges to step up their game and enhance their services to remain competitive with the efficiency and cost-effectiveness that a Spot Bitcoin ETF would offer. Eric Balchunas, a Bloomberg ETF analyst, echoed this sentiment by highlighting that a spot Bitcoin ETF would carry a mere 0.01% trading cost, significantly lower than the average fees associated with ETF trading on centralized exchanges.
The potential for a spot Bitcoin ETF to offer a more cost-effective and streamlined trading experience is indeed an important consideration. Investors are always looking for ways to reduce transaction costs and improve execution quality, and a well-regulated ETF could provide just that. However, the impact on centralized exchanges might not necessarily be a "bloodbath" as Geraci suggests.
However, it is also important to remember that cryptocurrency exchanges have been at the forefront of the crypto ecosystem for years, providing essential services and liquidity for a number of digital assets. While a spot Bitcoin ETF might introduce a new investment vehicle, it does not necessarily spell the end for exchanges. Instead, it presents an opportunity for them to adapt and innovate.
What Will the Impact of a Bitcoin ETF Denial Be?
Although the consequences of a Spot Bitcoin ETF approval might not be what many hoped it would be, the same could be said for if the SEC decides to deny Bitcoin ETFs. Nate Geraci also recently shared his opinion on this issue, predicting dire consequences if the SEC were to reject the ETF applications. He warned that a denial could lead to one of the most significant "rug pulls" in the history of the crypto market.
Despite the ominous warning, Geraci remains convinced that the odds of the SEC greenlighting a Bitcoin ETF are close to 100%. This optimism is shared by many within the crypto industry, who have witnessed a recent surge in the price of Bitcoin, reaching $45,000 for the first time since 2022. This rally has been largely attributed to the widespread belief that the SEC will grant approval to the ETF application filed by big players in the industry.
The approval of a Bitcoin ETF would undoubtedly be a game-changer for the crypto industry. It would provide a significant boost to the market, which is still in the process of recovering from the collapse of the FTX exchange in 2022. However, as with any pivotal moment in the world of cryptocurrencies, there are concerns and risks to consider. The SEC's rejection of the ETFs on the table could trigger a substantial downturn in the market.
The cryptocurrency industry is currently at a critical juncture, with the SEC's decision holding the potential to either bolster or collapse the nascent market. If approval is granted, it would signal further mainstream acceptance and potentially attract a flood of new investors. Conversely, a rejection could dampen sentiment and lead to a temporary market setback.
Another Entrant to the Bitcoin ETF Race
7RCC, a relatively small crypto asset manager focused in environmental, social and governance investing (ESG), has thrown its hat into the ring for a coveted spot in the world of Bitcoin ETFs. Founded in 2021, 7RCC has embarked on a mission to provide ESG-focused investors with an avenue to explore crypto and blockchain-related assets.
What sets 7RCC's crypto ETF apart from the crowd is its unique composition. While many other ETF applicants are primarily focused on Bitcoin, 7RCC takes a more diversified approach. Their ETF will consist of 80% Bitcoin, aligning with the crypto mainstream, but it will also allocate a portion of its holdings to carbon credits futures. Essentially, the 7RCC ETF aims to provide investors with a unique opportunity to balance "the innovative nature of Bitcoin with the progressive realm of Carbon Credit Futures."