Spot Bitcoin ETF will be ‘bloodbath’ for crypto exchange, says analyst
While the crypto community is eagerly awaiting the approval of Bitcoin (BTC) exchange-traded funds (ETFs) in the United States, some analysts are warning that this could have unintended consequences for cryptocurrency exchanges.
Several industry observers have predicted that the spot BTC ETF could start trading as early as 2024, and if it does, with Bitcoin's upcoming block reward expected to halve in April, Blockstream CEO Adam Back believes BTC will rise to $100,000.
According to Bitcoin proponents like Jan3 CEO Samson Mou, the approval of a Bitcoin ETF in the US could push Bitcoin up to $1 million in the next “days to weeks.”
But the forecast is not that bright for centralized cryptocurrency exchanges, according to ETF Store president Nate Geracchi and Bloomberg ETAT analyst Eric Balchunas.
Once approved, a possible spot Bitcoin ETF in the US would be a “bloodbath” for cryptocurrency exchanges, Geraci wrote on X (formerly Twitter) on December 17th.
According to Geraci, buyers and sellers of the retail space Bitcoin ETF benefit from underlying institutional trade execution and commissions. On the other hand, retail users of crypto exchanges get “retail trading performance and commissions,” Gerasi said, adding that those need to improve to compete with Bitcoin ETFs.
It will be a bloodbath for crypto exchanges…
— Nate Geraci (@NateGeraci) December 18, 2023
Bloomberg ETF analyst Eric Balchunas emphasized that it costs 0.01% to trade a Bitcoin ETF, which is the average fee for ETF trading.
In contrast, transaction costs on exchanges such as Coinbase range from 0.6%, depending on the cryptocurrency, transaction volume and trading pair.
Once approved, the One Place Bitcoin ETF will create more price competition in the crypto industry, with exchanges paying large amounts of money back to investors to advertise their services at events like the Super Bowl, Balchunas believes.
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“If they started ETFs, it would be the last ‘Crypto Super Bowl,' because ETFs are a very thin, rough industry, and some of these crypto exchanges were kind of selling populism, making a lot of money with their very high fees,” he said. In a September 2023 interview with industry journalist Laura Shin.
Historically, Coinbase has generated most of its revenue from transaction fees. In the year In 2022, Coinbase made $2.4 billion in transaction fees from institutional and retail investors, which is 77% of its total net income of $3.1 billion. While the company is working to reduce its reliance on subscriptions, it is actively shifting its revenue streams to other revenue-generating services such as subscriptions.
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