BTC ETF (Photo illustration Avishek Das/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
After waiting for so many years, Bitcoin has got approval before the US Securities and Exchange Commission.
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In a market that has been eagerly anticipating Bitcoin’s price skyrocketing in recent months, the much-anticipated green light from the SEC is set to bring billions of dollars of new funding to the cryptocurrency sector in the coming years.
But more than just providing a new flow of funding, the emergence of Bitcoin ETFs is poised to positively impact even the most far-flung corners of the cryptosphere in a number of unique ways.
What is a Bitcoin ETF?
Traditionally, an ETF is a pooled security that tracks a price index of various assets such as commodities. Similar to mutual funds, ETFs allow investors to benefit from the price movements of their underlying assets without interacting with them directly. The latter is the main reason why Bitcoin ETFs have been so coveted over the years. While Bitcoin’s legal status is still somewhat opaque, Bitcoin-based ETFs could enable regulated institutions to invest in it indirectly – without the need to handle Bitcoin. Furthermore, unlike mutual funds, ETFs can be freely traded on stock exchanges.
why it matters
Until now, most regulated financial institutions were barred from investing in Bitcoin, turning the first cryptocurrency into a relatively niche asset. However, with the launch of the first ETF options, IRAs, 401Ks, pension funds, and major institutional players have gained the ability to invest in Bitcoin, opening the door to mass adoption on an unprecedented scale.
Now, it’s one of these, if not The most important milestone for the legalization of Bitcoin, officially making the crypto Real And a widely recognized asset that can be leveraged by regulated institutions. While many crypto enthusiasts have never doubted the value or tangibility of BTC, the approval of a Bitcoin ETF by the SEC has significantly boosted the validity and credibility of the crypto. As a result, it is likely to have a massive impact on the entire blockchain industry, putting it in the global spotlight more than ever.
Institutional adoption is skyrocketing
According to a recent research report from crypto firm Galaxy Digital, in the first year alone, Bitcoin ETFs could generate at least $14.4 billion in inflows from large institutional investors. While this is a spectacular figure in itself, it becomes even more impressive when taking into account that existing traditional products like trusts and futures have a total value of approximately $21 billion today. This means that in just one year, institutional BTC investments could reach heights comparable to proven traditional instruments that have existed for decades. Furthermore, Galaxy estimates that inflows into Bitcoin ETFs could reach $27 billion in the second year and $39 billion in the third year.
Meanwhile, analysts at CryptoQuant reported that the approval of a Bitcoin ETF could add $1 trillion to the total market capitalization of all cryptocurrencies. Still despite the predictions, these huge figures suggest that the SEC’s approval of a Bitcoin ETF will not only cause a tremendous increase in the price of BTC, but it could also positively impact the entire sector due to the massive influx of institutional capital. .
Promoting Blockchain Innovation
After such a seismic shift, Bitcoin, in particular, and the blockchain industry will change more than just investors’ minds. Countless talented developers who were perhaps skeptical of Web3 will begin to embrace decentralization, bringing their vast Web2 experience and expertise to the blockchain.
As a result, reinvigorating the blockchain space, the first Bitcoin ETF, will result in increased adoption and explosive growth of areas like decentralized finance, gamification, and real-world asset tokenization, as well as massive expansion and acceleration of the blockchain. -1/2 Network development.
In particular, Web3 games are often considered the “next big thing” in the world of blockchain, with this sub-sector being one of the fastest growing in the past year. Notably, even the dreaded “Crypto Winter” had much less impact on GameFi than other aspects of Web3 due to the specificity of its offerings.
An important part of this is the nature of gaming-focused collectibles. This is because, unlike “traditional” digital offerings like artworks or loyalty rewards, gaming NFTs provide real utility and value to players, making their speculative aspects more of an afterthought. Thus, Web3 gaming is poised to become even more popular as the launch of the first Bitcoin ETF will lead to exponentially more popularity and subsequent adoption of Web3.
Bitcoin ETFs and Real-World Asset Tokenization
Asset tokenization in the real world is one of the most promising use cases emerging from the crypto sector and it is of interest to mainstream institutional players the most – as evidenced by the work done in this area by Goldman Sachs, JP Morgan, Citi, Franklin Templeton. Shows encroachment. Serious efforts.
Tokenization enables fractional ownership of real-world assets like art, real estate, precious metals and more, allowing these assets to be divided into smaller, more affordable units that average investors can easily access. RWA tokenization may soon be ingrained in the public consciousness as curiosity about complex financial instruments like ETFs signals market readiness for similar financial products.
Additionally, smaller financial service providers beyond major institutions may be encouraged to explore tokenization due to the increased visibility and credibility brought about by the success of Bitcoin ETFs.
Supercharging Web3 Adoption
This lightning-speed development will be applicable to our everyday lives as well. As Bitcoin and, by extension, Web3 quickly become mainstream, many next-generation decentralized solutions will gain momentum, introducing millions and billions of new users to the countless benefits that decentralization can provide. This involves full ownership of people’s personal data in the form of self-sovereign digital identities, allowing them to always be in control of their information and choose who they want to share it with. Web3 will also become much easier to access for the general public, giving the emerging sector a chance to compete with the legacy Internet.
That is, this new discovery could take Web3 domains to new heights, allowing the decentralized iteration of the Internet to truly spread its wings and eventually take its rightful place alongside the traditional DNS system. As more websites and platforms become increasingly decentralized, they no longer have to rely on single third-party entities with their own biases and security risks – making the Internet significantly more accessible, democratic, and inclusive .
How ETFs will impact public perception about crypto
It’s likely that much of the fear and uncertainty surrounding the cryptocurrency will be removed since its launch thanks to a Bitcoin ETF, which offers a risk-free, regulated approach to cryptocurrency investing for the first time.
In turn, this could change the perception of Bitcoin as a risky, speculative asset class along more traditional lines, while elevating the concept of Bitcoin into a household name, thereby raising public awareness of cryptocurrencies in general. And understanding may increase.
Following a tumultuous 18 months in which the cryptocurrency industry was rocked by a series of scandals, such as the collapse of crypto exchange FTX, the collapse of stablecoins Terra/Luna, and the implosion of Silicon Valley Bank (SVB)
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what the future holds
While the immediate impact of the SEC approving the first Bitcoin ETF will undoubtedly be strictly financial, the move is likely to have a far more far-reaching impact on the blockchain industry. By legalizing BTC and allowing large institutional players to invest in it, the regulator has provided a tremendous boost to the entire blockchain sector, including DeFi, Web3 gaming, digital IDs, real-world asset tokenization, and many more sectors. More.
