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If we were to judge the immediate effects of the SEC approving 11 spot Bitcoin ETFs in January as a bellwether for its long-term price response, HODLers probably would have been let down by the price only rising six percent in a little over a month. While the approvals brought a new wave of positive attention and robust institutional activity in the crypto market, the instant price jump everyone predicted didn’t come to fruition.
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Of course, we’re now witnessing Bitcoin climb to record-smashing prices and the beginnings of a full-scale bull market unfolding right before our eyes. With major asset managers like BlackRock and Fidelity bringing crypto to their clients, the attention has paid off in a big way, even if it momentarily stalled right at the beginning.
But are the ETFs the sole reason for BTC’s significant price jump? Yes, the convenience of ETFs has unlocked new demand, but it’s delaying the actual adoption of BTC as a sovereign store of value.
The ETF’s X factor
What the ETF approvals have brought the industry in spades is a revitalized sense of confidence in the crypto market after a harrowing crypto winter. We can attribute this renewal to the more sure-footed embrace from trusted financial institutions and having them guide the way toward broader adoption.
The more professional image is truly welcomed and sets out a clear roadmap for how massive institutions and the general public can incorporate crypto and other facets of blockchain technology without completely reorienting their financial reality.
While this does risk creating a situation where a majority of BTC is held in spot ETFs, thereby consolidating a decentralized financial instrument within the confines of traditional, centralized control—the odds of that happening are pretty slim as of now.
It’s also inaccurate to say that ETFs are the sole contributor to the bullish momentum the crypto market finds itself in today. Although they do likely play a massive role thanks to all its contributions both monetarily and image-wise, it’s reductive to say that other factors are not at play here.
Can we only thank ETFs for this boom?
The Bitcoin ETFs play a dual role in both bringing attention and funds to BTC itself and also sharing the spotlight with other sectors of the industry.
The bear market helped facilitate a critical momentum for crypto projects to step away from the limelight and focus on rebuilding and developing products that could withstand any sort of regulatory, technological, or institutional scrutiny. Ignoring the strides that creative projects made in infrastructure that are now contributing to this revival would be detrimental.
In fact, many of these developments would not be possible if they were not explicitly for the immense strides made in blockchain’s ecosystem. While many blockchain builders were aware of the need to build a framework that allowed for sustainable growth, it did take a while to see this come to fruition.
Now, blockchain infrastructure is a cornerstone of the ecosystem’s growth. Since the start of 2024 alone, infrastructure projects have raised some $800 million in equity funding, and last year saw over $1.1 billion in the same quarter. Although the numbers this year do represent a decline, it shows how proactive funding in these infrastructure projects is paying off now through institutional interest.
Likewise, the rapid development of layer-2 projects for Bitcoin also planted the seeds of scalability. And that’s before even diving into the weight pulled by the Ethereum ecosystem and various other altcoins that are witnessing an uptick in activity and development as well. Think about where the industry and development would be without something as instrumental as, say, zero-knowledge rollups (zk-rollups) or other scaling technologies.
In such a short period, it’s hard to say if the ETFs are responsible for the market turnaround we’ve been witnessing. Did they draw attention to developments that would have happened regardless, even if the ETFs were rejected? Or did they spark a breakthrough beyond what the industry could have imagined of its own volition?
Bitcoin ETFs will provide value to the broader crypto ecosystem and promote adoption by giving the industry a more professional image—which will compel retail investors to learn and understand the asset class over time. Even with recent negative net inflows of BTC ETF activities, the outlook remains resoundingly positive on the effect these advancements and more will bring to the space.
Yes, we can probably expect more price swings, and it would be wrong for HODLers to assume that they’ll achieve quick gains because of the ETFs alone. But what they do achieve is creating a new, foundational pillar for institutional attention and investment that will ultimately bolster Bitcoin and all of crypto in the long term.
Read more: Spot Bitcoin ETFs are here. What’s next? Regulating defi? | Opinion James Wo
James Wo, a seasoned entrepreneur and crypto space investor, established DFG in 2015. He currently manages a portfolio exceeding one billion USD in assets. With a track record as an early investor, James has supported companies such as LedgerX, Ledger, Coinlist, Circle, and ChainSafe. Furthermore, he has been an early investor and advocate for protocols like Bitcoin, Ethereum, and Polkadot.