By Frances Yue, Crypto and Markets Reporter
Today is a significant day for the crypto industry as the U.S. Securities and Exchange Commission (SEC) has approved several spot bitcoin exchange-traded funds (ETFs) for the first time. This approval opens the door for a new class of investors to enter the market and potentially drive up the price of the world’s most popular digital asset.
Implications for the Crypto Space
Bitcoin has experienced a 0.8% increase over the past 24 hours, reaching approximately $45,984 on Wednesday. On the other hand, ether has rallied 7.9% during the same period, reaching around $2,507, according to CoinDesk data.
According to Mark Connors, Director of Research at 3iQ, the approval of bitcoin ETFs was already anticipated by the market. These ETFs are set to begin trading on Thursday. Investors are now eagerly awaiting the potential approval of an ether ETF, although it is advised not to get ahead of those expectations.
What to Watch
In the first 24 to 48 hours after the launch of bitcoin ETFs, investors will closely monitor the initial flows. An important comparison will be made to the Proshares Bitcoin Strategy ETF BITO, which was the first bitcoin futures ETF and gathered $1 billion in its first two days after its launch in October 2021. In contrast, the SPDR S&P 500 ETF SPY reportedly accumulated $20.8 billion in a single day in December.
Previous market analysis suggests that initial inflows into spot bitcoin ETFs could range from $1 to $2 billion.
Analysis of the Crypto Market
“It’s essential to exercise caution and consider that immediate flows may largely comprise early adopters, primarily retail investors,” warns Rousseau at TradeStation. He suggests that the current influx of investment into cryptocurrencies may consist of recycled money, potentially failing to meet the high expectations set for them.
Rousseau further notes that while there might be an overestimation of the immediate impact of new Exchange-Traded Funds (ETFs) on the crypto market, their long-term implications for bitcoin could be underestimated. The introduction of these ETFs could open the doors for more investors to access bitcoin. Even if only a small percentage of the $100 trillion global assets managed by financial institutions is allocated to bitcoin, it has the potential to significantly boost its price. This factor has not yet been fully reflected in bitcoin’s current valuations.
The process of institutions incorporating bitcoin into their investment strategies can be extensive and may take several months, says Rousseau. It’s crucial to recognize that institutions must follow due process and navigate regulatory hurdles to do so.
The Role of Bitcoin ETFs
Investors are also closely observing the fees associated with bitcoin ETFs offered by different issuers and whether they will trade at a premium or a discount to their net asset value, according to James Harte, an analyst at Tickmill Group.
Key Price Levels to Monitor
Traders should carefully watch out for potential downside levels of $43,015 and $40,345 for bitcoin, advises James Harte. On the other hand, there is a top-side resistance at approximately $48,350.
Recent Performance of Bitcoin and Ether
Over the past seven days, bitcoin has experienced a 6.1% increase, while ether has gained about 7.2%, as per CoinDesk data.