Market Reaction and Historical Comparison After Approval of Bitcoin Spot ETF

After the approval of the Bitcoin Spot ETF, the market did not experience a significant rise as expected, but may instead face a new round of adjustments. As of now, the price of Bitcoin has fallen below 43,000 USD, quoted at 42,635 USD. The latest data shows that a large asset management company took advantage of the dip to buy 11,439 Bitcoins. Just last Thursday and Friday, all Bitcoin ETF issuers, including that company, collectively purchased 23,000 Bitcoins.

On January 11, the U.S. securities regulator approved 11 Bitcoin Spot ETF applications. Data shows that on the first trading day, these ETFs attracted a net inflow of $655 million, reflecting strong interest from investors.

From the perspective of capital inflow, the best performer is a certain Bitcoin ETF, which attracted $238 million. This fund had promised to launch with up to $200 million in seed capital, exceeding other disclosed funds. Following closely are two other ETFs, which attracted $227 million and $112 million in funds, respectively.

At the same time, a Bitcoin trust fund that has been established for 10 years experienced a net outflow of $95 million, which is widely regarded as one of the reasons for the decline in Bitcoin prices.

Industry experts point out that people often overestimate the short-term impact of Bitcoin Spot ETFs and underestimate their long-term impact. By comparing the history of the approval of Gold and Silver Spot ETFs, we may gain some insights.

On November 18, 2014, after the approval of the gold ETF, the gold price did not immediately reach a new high. However, in the following 8 years, the gold price rose from $400 to $1,800, and the market value increased from about $2 trillion to about $10 trillion.

Similarly, when the silver ETF was first launched in April 2006, it did not immediately trigger a price surge, but became part of the price peaks in the following months.

These historical cases indicate that prematurely expecting a large demand before regulatory changes is not always advantageous for pioneers. Although the approval of ETFs did not lead to a permanent price peak, it did create noteworthy stage highs.

The approval of the Bitcoin ETF provides investors with a more convenient way to participate in the Bitcoin market. Compared to directly purchasing cryptocurrencies, ETF investments offer several advantages, such as not having to manage cryptocurrency storage, enjoying clearer regulatory and tax guidance, and more. However, ETFs also have some limitations, such as being restricted to securities exchange trading hours, charging management fees, and the need to trust third-party custodians.

Overall, the launch of the Bitcoin ETF marks the entry of the cryptocurrency market into a new phase, which is expected to attract more traditional investors, but its long-term impact remains to be seen.