Why is a Bitcoin ETF a milestone?

According to CNBC, the Bitcoin ETF has entered its final stage, and a number of fund houses have submitted plans and undergone multiple rounds of revisions. Bitcoin ETFs are likely to be approved as soon as January 2024. For long-term holders, Bitcoin ETFs are currently the most direct and optimal solution in the US financial market. And all other solutions in the market, including GTBC, CME’s BTC contracts have varying degrees of problems and weaknesses.

Bitcoin ETFs first solve the problem of how Wall Street banks deal with and trade. Most mainstream banks’ systems are backward because they pursue security and stability, and newer systems come with greater risks. Therefore, it is very difficult to get these outdated systems to handle new business. When there is no Bitcoin ETF, banks need to arrange teams to deal with Bitcoin-related issues, and the cost of all aspects is very high. At the same time, Compliance is a mandatory condition that all banks must meet. After '08, the exposure that banks can hold is very strict under the Basel Accord, so banks need to manage their own risks at all times while providing services. Banks urgently need a product that makes it easy for banks to process and trade Bitcoin, and Bitcoin ETFs perfectly meet the needs of banks. Similar to the pre-processed dishes in the supermarket, ETF fund companies handle all the difficult fish, and busy office workers only need to cook them, which is a great process simplification. As a trader who has experienced many years of dealing with the market, compliance, risk control, and middle and back office communication, ETFs are too useful tools and targets. Otherwise, everyone has to be like Chef Wang Gang, starting from fishing for fish to make sauerkraut fish, and it will be too troublesome for Mrs. Wang.

Bitcoin ETF completes the necessary channel to open up Bitcoin to a wider range of people, so that all processes can be turned at high speed. Based on Bitcoin ETFs, Wall Street banks can provide high-quality delta 1 services such as forwards, futures, swaps, etc., without worrying about whether the bank’s middle and back office departments can handle these transactions and asset custody. With sufficient delta 1 services as a basis, all delta non-1 services can be provided, such as Options, structured products, exotic Derivatives, etc. A whole ecosystem can be built.

From the user side, the Bitcoin ETF opens the channel for pension 401k to invest in Bitcoin. Some people will ask, GBTC has been around for a long time, what is so special about the new batch of ETFs? Because GBTC is a close-ended fund, it cannot be added and redeemed at any time, and there is a large difference between the trading price and NAV, which is obviously not suitable for passive investors, such as pension funds. The new batch of Bitcoin ETFs are all open ended funds, which are truly benchmarked against the price performance of Bitcoin, open for subscription and redemption. From now on, long-term holding by retail investors became possible, and as a permissionless currency, it appeared on the Holdings list of a large number of users.

From the perspective of execution, a large number of investments in the United States are recommended and executed by financial advisors. There is no commision income for financial advisors to recommend Bitcoin, but there will be ETFs that recommend Bitcoin, so their motivation will increase. Human society is a society driven by interests, and interests are the lubricant of all human activities.

At the overall environmental level, the world is in a big cycle of interest rate cuts. There is currently a large amount of funding that needs to be allocated. They used to stay on a large scale in the money market funds, which invested in short-term Treasury bonds to generate income. But as the dollar Intrerest Rate falls, these funds need to find other allocation channels, totaling more than $6 trillion. A small part of this into the Bitcoin ETF will be a terrifying magnitude. For details, please refer to:

Therefore, it is impossible to overstate the importance of Bitcoin ETFs, which will open a new chapter in the integration of Crypto Assets into mainstream society. As the saying goes: fit in, stand out. Integrate into traditional finance while providing unique features that traditional finance cannot. This is a landmark event that will go down in history. However, we should still look at Bitcoin ETFs with a long-term mindset. Even if it is approved as scheduled, it will still be just one note in Bitcoin’s magnificent history. Bitcoin’s achievements are a long-term story. Over the past decade or so, Bitcoin’s codebase has undergone constant development and iteration. The acceptance of Bitcoin by traditional finance is essentially the result of Bitcoin itself withstanding the test. But Bitcoin’s goal will still take longer to achieve. The influx of users and the entry of Bitcoin into more people’s mainstream investment accounts will take time and will not happen overnight. Advantageously, time is on Bitcoin’s side.