April 19, 2024
Analyst says, Spot Bitcoin ETF Approval Threatens Crypto Exchanges
Bitcoin News

Analyst: Spot Bitcoin ETF Approval Threatens Crypto Exchanges

The potential approval of a spot Bitcoin ETF may pose challenges for crypto exchanges like Coinbase due to lower transaction fees, according to ETF analysts.

Anticipation surrounds the approval of a spot Bitcoin ETF in the United States, with industry observers predicting trading could commence in early 2024. Blockstream CEO Adam Back suggests this, coupled with Bitcoin’s block reward halving in April, could drive BTC to $100,000.

Jan3 CEO Samson Mow goes further, asserting that a U.S.-approved spot Bitcoin ETF could propel Bitcoin to $1 million within “days to weeks.”

However, the outlook for centralized crypto exchanges is less optimistic, warns ETF Store president Nate Geraci and Bloomberg ETF analyst Eric Balchunas. Geraci suggests that once approved, a spot Bitcoin ETF in the U.S. could be a “bloodbath” for exchanges, as retail users benefit from institutional trade execution and lower commissions.

Balchunas underscores that the cost of trading a spot Bitcoin ETF would be 0.01%, the average fee for ETF trading. In contrast, exchanges like Coinbase charge up to 0.6% in trading costs, depending on the cryptocurrency and transaction size.

A spot Bitcoin ETF’s approval is expected to intensify price competition in the crypto industry, potentially redirecting funds from exchanges investing heavily in advertising, such as during events like the Super Bowl.

Balchunas suggests that introducing ETFs might signal the conclusion of the ‘Crypto Super Bowl’ because the ETF sector is intricate, and some crypto exchanges gained significantly from substantial fees and populist marketing strategies.

In 2022, Coinbase derived 77% of its $3.1 billion total net revenue from transaction fees, amounting to $2.4 billion. While actively diversifying revenue streams, Coinbase remains focused on reducing its dependence on fees through initiatives like subscription services.

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