5 reasons why a Bitcoin ETF approval could send the price of BTC over $100K

After initial investor excitement subsided, there was widespread debate over whether the launch of a spot bitcoin (BTC) exchange-traded fund (ETF) would lead to a price correction. While some of the arguments have value, they take a broader view. Position approval Bitcoin ETF is a game changer in several aspects, including volatility, correlation with traditional financial assets and market efficiency.

Arbitrage desks and ATAF providers may have created buffers to support initial demand and prevent market runs. However, whether it takes a few hours or several months, this buffer will eventually disappear. When examining a longer time frame – months instead of days – the price of Bitcoin is determined by the balance between the immediate demand and the supply of coins at a certain price level.

Bitcoin is vindicated, boomers enter the market, and issuers compete for dominance.

The first question to consider is why someone would wait until the price of Bitcoin has passed all-time highs to start investing. Most individuals are either lazy or cautious, which means they hesitate to open an exchange account or invest in anything that doesn't have their broker's endorsement. While Greyscale offers a Bitcoin-backed trust fund, there is little incentive for traditional investment brokers to offer such products.

The average retirement savings for North Americans under 34 is $17,600, while those between 35 and 64 have accumulated $142,100, Vanguard reports. This data suggests that Millennials and Generation Z are not the ones driving the price of Bitcoin to $100,000 and beyond. Basically, the first reason the bitcoin ETF space is so important is because of the minimal effort required for baby boomers to invest.

More importantly, by offering products where the asset manager retains the management fee, the incentives to offer the product are greatly increased. This means sales teams at BlackRock, Fidelity, Ark Invest, Bitwise, VanEck and other issuers are fully engaged in attracting internal and external clients. Other funds managed by these multi-trillion dollar asset managers may also be encouraged to invest in the newly launched Bitcoin ETF.

Historically, the ETF industry has seen a concentration of assets between the two major issuers. For example, SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) represent over 85% of industry assets under management. Additionally, market leader State Street GLD has an expense ratio of 0.4%, which is significantly higher than many competitors. This data highlights the importance of early leverage relative to ETF holdings.

Bitcoin will receive regulatory approval and the spot ETF will ease the concerns of investment advisors

In terms of regulation, there has never been a definitive statement from the US Securities and Exchange Commission (SEC) about the legality of Bitcoin, let alone from lawmakers. In fact, US Senator Elizabeth Warren announced on December 11 that five more senators have agreed to support one of her bills that would outlaw cryptocurrencies for money laundering and terrorist financing. In this regard, the support of BlackRock and Fidelity legitimizes the asset class.

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Although the decision to limit the creation and redemption of Bitcoin ETFs in the SEC space may not be a suitable tax solution for investors, regulatory concerns are rejected, each Bitcoin held by these funds must first be obtained from intermediaries pre-approved by the SEC. Basically, spot ETF adoption significantly reduces regulatory risk.

This distinction benefits investment advisors, as it keeps potential investors away from Bitcoin transactions. Investors themselves often choose instruments that do not require certain tax rules, which makes ETFs a much easier option compared to direct cryptocurrency investment.

These changes may seem like they don't happen at first, with Bitcoin spot ETF approval not necessarily happening in the first few hours or days. However, when these five favorable trends take full effect, Bitcoin is unlikely to trade below $100,000 again – it's only a matter of time.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.