Spot ETFs to Accelerate Bitcoin Use Cases, Act as Tailwind for Crypto Industry
The January 11 launch of spot Bitcoin exchange-traded funds (ETFs) on Wall Street's major exchanges is expected to have a major impact on the crypto industry, introducing new businesses and attracting more and more developers to the Bitcoin ecosystem.
Opportunities are expected to spread across a range of sectors, and while predicting their full impact may be premature, experts anticipate rising demand, particularly in areas such as decentralized finance and measurement solutions.
Bitcoin-backed loans, for example, are one of the crypto products that the Lied platform expects to see greater adoption following ETF approvals. “EFFs formalize the concept of borrowing against your Bitcoin, and lend your Bitcoin or ETF shares to earn additional interest. Most of the world doesn't have access to US-listed products, but they still need and want to borrow with their bitcoin and earn interest on it, Lidn CEO Mauricio Di Bartolomeo told Cointelegraph.
In the first minutes after Wall Street's opening bell, Bitcoin ETFs pumped $1.6 billion in volume, confirming strong demand. Bloomberg analyst James Seifert believes there will be $10 billion in revenue for Bitcoin ETFs in the first year.
As companies look at product opportunities tied to Bitcoin, leveraged and short ETFs are also expected to emerge. “After the location of Bitcoin ETFs, we will likely see competition for the location of Ethereum ETFs, variations on Bitcoin ETFs, 2X long ETFs, short Bitcoin ETFs, and more,” Bartomeo predicts.
Another positive development could come from additional projects focusing on zero-knowledge applications of Bitcoin, said Kurt Hemacher, CEO of the Mina Foundation, which runs the Mina protocol.
“It creates new opportunities that people don't immediately recognize, for example, zero-knowledge projects can work as a big advantage.”
Zero-Knowledge technology enables the underlying information to be verified anonymously to verify transactions or data, thereby maintaining confidentiality and privacy. Haymaker believes ZK's data sovereignty features can boost technology adoption as businesses try to stay compliant with regulatory requirements. “ZK offers compliant privacy on-chain, thus preserving the blockchain ethos and allowing institutions to easily participate,” he commented.
Despite the enthusiasm surrounding Bitcoin-based products, challenges remain. Experts say these challenges are similar to those faced by the broader industry due to the ambiguous regulatory environment in the United States. I am very skeptical of the net-benefit of this development without implementing a regulatory framework at the outset. It seems like a cart before the horse situation,” said Tyler Adams, founder of Web3 software community COZ.
Another point of concern comes from the Bitcoin network. Core DAO contributor Brendan Sedo points out that while Ordinals has demonstrated the potential to integrate directly with the Bitcoin blockchain, it has also exposed its limitations.
“By shutting down the ordinary network and increasing fees, it has shown the limitations of building in the Bitcoin blockchain. By 2024, by adopting Bitcoin-aligned scaling solutions, Bitcoin utility can be expanded significantly without burdening the main Bitcoin blockchain.”
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