NEW YORK, January 5, 2024 – The SEC is on the verge of approving the first spot bitcoin ETF in the U.S., following 10 years of failed applications.

This week marked the 15th anniversary since the first block, the genesis block, was mined on the Bitcoin blockchain. For over a decade, industry leaders have urged the Securities and Exchange Commission (SEC) to approve a U.S. spot bitcoin exchange-traded fund (ETF), a move anticipated to unleash a wave of institutional investment. Until now, the SEC has rejected every application, but that could soon change. Analysts predict that at least one of the current proposals, numbering over a dozen, could be approved as early as Friday.

Opinions on the potential impact of such approval on the crypto market vary.

Gabor Gurbacs, the director of digital assets strategy at VanEck, believes that while a spot ETF will create 'trillions in value' over the long term, the initial impact of U.S. Bitcoin ETFs is often overestimated, with initial inflows likely to be only “a few hundred million of (mostly recycled) money.”

Other analysts argue that approval would necessitate ETF issuers to purchase tens of billions of dollars worth of bitcoin to meet institutional demand, dramatically altering the supply and demand dynamics. Some even predict a “supply shock” after exchange balances fell to a five-year low in October, indicating that holders are storing bitcoin in personal wallets and are less inclined to sell.

An informative comparison can be made with the SPDR Gold Shares ETF (GLD), the first spot gold ETF in the U.S., which launched in 2004. According to Coinbase, GLD amassed $1.9 billion (adjusted for inflation) in its first four weeks, rising to $4.8 billion by the end of its first year. The ETF currently holds $57.37 billion in total assets.

Another relevant example is Invesco's QQQ, an ETF tracking the Nasdaq-100 index of some of the world's most innovative companies. Launched in March 1999, a year before the dotcom bubble burst, QQQ saw inflows of $847 million ($1.6 billion in today's dollars) in its first 30 days.

Closer to home, the ProShares Bitcoin Strategy ETF (BITO), based on bitcoin futures, accumulated around $1.5 billion (adjusted for inflation) in the 30 days following its October 2021 introduction, during a period of high enthusiasm for crypto assets. As of Thursday, the fund held $1.65 billion in total assets. Despite being exposed to rollover costs, BITO, which invests in regulated CME futures rather than actual cryptocurrency, has closely tracked bitcoin's spot price since inception and offers a practical option for those seeking bitcoin exposure without the complexities of ownership and storage.

Another consideration is the global economic environment, characterized by elevated risk-free interest rates and worsening household finances. This macroeconomic backdrop may dampen the prospects for strong mainstream adoption of spot ETFs.

While the potential approval of a spot bitcoin ETF carries significant promise, the actual impact remains uncertain and will depend on a variety of factors, including market conditions, investor sentiment, and broader economic trends.