Cryptocurrency links market sells overhyped Bitcoin ETF prospects

Bitwise Chief Investment Officer Matt Hoogan recently pointed out excessive expectations surrounding the approval of Exchange-Traded Funds (ETFs) as the main driver of the price falls on cryptocurrencies.

Contrary to popular belief, Hugan argues that the sales pitch is not directly tied to the ETFs, but rather that the market is awaiting their approval and subsequent responses.

Hugan warns of the short-term effects of overestimating the market

Hugan shared his opinion in a post on social media platform X, saying, “This doesn't strictly speak to an ETF-led sell-off,” suggesting that there was more bullishness going into ETFs than it did, reversing that assumption.

This is not strictly speaking an ETF-led sell-off. ETFs are net buyers of Bitcoin (GBTC included).

This is an ETF expectations-led sell-off. The market has processed the approval of the ETF by lining up Bitcoin and Bitcoin derivatives into place. He expected large net flows…

— Matt Hougan (@Matt_Hougan) January 23, 2024

In conclusion, “IMO, just as the market has overestimated the ETF's short-term impact, it has been overestimating its long-term impact.

In a recent interview with “The Defiant” podcast, Hugan further elaborated on the potential impact of the US-listed Bitcoin ETF on the cryptocurrency market.

He described a short-term reaction to the identification of Bitcoin ETFs, including the market's approval of these products, resulting in volatile prices. Investors have argued that they have overestimated the immediate impact, leading to volatility and large price changes.

Looking ahead, Hugan's 2016 Similar to the introduction of gold ETFs in 2004, he emphasized the long-term impact of spot Bitcoin ETFs. He pointed out that these ETFs could attract significant investments, which would significantly increase the value of Bitcoin, a trend that is currently undervalued in the market.

Hugan highlighted a critical shift in investor demographics, where introducing Bitcoin ETFs could attract the remaining 80% of assets under the control of financial advisors, a shift that has yet to be fully recognized and could significantly affect BTC's price.

Industry experts weigh in.

Gabor Gurbach, a digital assets consultant at VanEck, feels the same way. Drawing parallels with gold, he suggests that the long-term impact of spot Bitcoin ETFs can be underestimated, and the broader implications for BTC capital markets and financial products should be fully appreciated in the current market assessment.

People tend to emphasize the present but remain puzzled about the bigger picture. Bitcoin is forcing its own capital market systems and products beyond ETFs and this is not worth it. The question is not whether BlackRock will accept it, but what is the next BlackRock, a Bitcoin company?

— Gabor Gurbacs (@gaborgurbacs) December 31, 2023

Echoing these views, Bloomberg Intelligence ETF analysts Eric Balchunas and James Seifert agree with Gurbach's analysis.

They emphasize the importance of looking beyond rapid growth and focusing on the long-term impact that Bitcoin can have in shaping the financial landscape.