Investors Showed Just How Much They’d Value A Crypto ETF

Investors Showed Just How Much They’d Value A Crypto ETF
Paul Allison, CFA

about 2 months ago1 min

What’s going on here?

Crypto investors demonstrated just how much they'll value a crypto-focused spot exchange-traded fund (ETF).

What does this mean?

Cryptocurrencies stole some attention from Hallmark movies at the end of the year, with the OG crypto bitcoin climbing over 150% during 2023. That’s at least partly because investors have been enticed by the prospect of a more stable and accessible crypto market: bad actors were locked away last year, regulation was a hot topic, and the Securities and Exchange Commission (SEC) had been expected to approve a spot bitcoin ETF. (You can already buy ETFs that track bitcoin futures, but this new version will track bitcoin itself).

Bitcoin price

Why should I care?

For markets: Gold 2.0.

ETFs do the heavy lifting for their investors. When someone buys into a fund through an exchange, the ETF provider mints new shares, takes the cash, and buys the actual underlying assets. That means investors can own a basket of themed stocks, say, or track one specific commodity – all without having to source and own the asset itself. Now, a laundry list of providers are keen to branch into crypto funds, which would pull in a fresh bunch of crypto enthusiasts who prefer a lower-effort approach. We’ve seen this before: when a major gold ETF started trading in 2006, the precious metal’s price steadily doubled over the following four years.

The bigger picture: Take it to the till.

While ETF approval could make the digital currency more mainstream, the biggest proof of concept would be if crypto coins became legal tender at everyday stores like Walmart and McDonald’s. But ETFs are no use at the checkout, so that price-propelling move will only come with more pushes down the line.

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