June 14, 2024
Spot Bitcoin ETF, Retail Investor Concerns
Bitcoin ETF

Spot Bitcoin ETF: Retail Investor Concerns?

The green light for the inaugural spot Bitcoin (BTC) exchange-traded funds (ETF) in the United States is poised to pave the way for institutional funds worth billions to enter the market.

Data from public trading indicates that the collective volume of ten spot Bitcoin ETFs surpassed $4.5 billion on the first day of trading in January 2024. Grayscale Investments’ Bitcoin ETF, in isolation, reportedly managed a volume exceeding $2 billion.

As the influx of institutional capital into the Bitcoin market is anticipated to surge, concerns arise regarding the potential ramifications of a spot Bitcoin ETF for smaller investors.

Industry executives and analysts hold divergent views on the impact of a spot Bitcoin ETF on retail investors. Some view it as an ideal entry point for non-institutional investors, while others argue that ETFs are unsuitable for retail investment, advocating for actual Bitcoin ownership with self-custody.

“A spot Bitcoin ETF is strictly good for retail investors,” stated Bitwise Chief Investment Officer Matt Hougan in an interview He emphasized that such an ETF would reduce the costs of accessing Bitcoin, thereby enhancing the efficiency of the Bitcoin market.

“Even if you never plan to use the ETF, its existence will likely make it cheaper for people to acquire Bitcoin through other means — causing brokerage commissions to go down, etc.”

Jan3 CEO Samson Mow advised retail investors to adhere to purchasing the underlying asset, real Bitcoin held in self-custodial wallets, to benefit from Bitcoin price appreciation amid institutional capital inflow. Mati Greenspan, founder of Quantum Economics, echoed a similar sentiment, stating, “There are zero advantages and plenty of disadvantages for retail investors to hold Bitcoin ETFs. Way better to just hold Bitcoin.”

Valkyrie co-founder and CEO Leah Wald urged retail investors to approach the launch of a spot Bitcoin ETF with a balanced perspective. She emphasized that while it provides a convenient investment avenue without the complexities of self-custody, it also introduces typical counterparty risks associated with ETFs.

Leah Wald, CEO and co-founder of Valkyrie, pointed out, “There’s no conflict between self-custody and ETFs, but a matter of preference.” She further explained, “If you are someone who wants to self-custody, then spot Bitcoin ETFs may not be for you. If you’re looking for easy access to a highly transparent, institutional-grade fund to potentially capitalize on the price movement of Bitcoin, then an ETF could be a great solution.”

“I’m not sure it creates actual new demand for Bitcoin. But I don’t think it would reduce demand for Bitcoin.”

Regardless of whether spot Bitcoin ETFs are deemed a good or bad investment option for retail investors, they are unlikely to diminish the demand for BTC, according to David Gerard, author of the book and crypto blog “Attack of the 50 Foot Blockchain.”

ARK Invest CEO and founder previously forecasted that the approval of a spot Bitcoin ETF in the U.S. could trigger short-term selling but remains optimistic about BTC’s long-term price trajectory.

Photo by Karolina Grabowska

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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