The Bitcoin Spot ETF marks a pivotal moment in the history of the Web3 industry. In this article, we examine market developments since the adoption of the Bitcoin Spot ETF and the implications for the future of the Web3 industry. From the first Bitcoin Spot ETF application over 10 years ago to now breaking record numbers in the financial landscape, the future of the industry only grows in strength.
Leading Up To The Bitcoin Spot ETF Approval
For almost eleven years now, since 2013, the Winklevoss twins have been looking to introduce the first Bitcoin ETF. Initially named the Winklevoss Bitcoin Trust, their attempt came at a time when Bitcoin was trading at just $90, a contrast to its value of $50,000 in February 2024. The United States SEC rejected their proposal twice, citing concerns about the risks associated with the then-emerging Web3 market. This trend of rejecting Bitcoin ETF applications continued for 10 years, with multiple issuers seeing no regulatory developments.
In June 2023, BlackRock caught the spotlight by revealing its aim to introduce a Bitcoin Spot ETF, alongside several other issuers. With over $9 trillion in assets under management, the fund management’s decision turned heads, especially given its history of experiencing just one SEC rejection for a proposed ETF.
Starting in November 2023, there was a shift in Bitcoin Spot ETF applications, with issuers offering more concrete details about how the funds would operate. This shift in filings created much anticipation in the market, as bitcoin surged over 50% in the final quarter of 2023. On January 10th, the SEC granted regulatory approval for 11 Bitcoin exchange-traded funds (ETFs). This approval covered 11 applications from leading financial institutions including ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, and Grayscale. These approvals stand as a significant milestone for the Web3 industry and pave the way for increased institutional investment and greater mainstream adoption.
Approval Sparks Surge in Inflows
For years, the Web3 markets have primarily relied on retail buying pressure to drive growth and adoption. However, with the entrance of institutional investors into the market through Bitcoin ETFs, we are witnessing a major shift. Following the regulatory green light, the market saw a significant influx of institutional interest. In the first few days, Bitcoin Spot ETFs attracted about $US2 billion, a figure significantly higher than the typical influx seen with newly launched ETFs.
Investor excitement overpowered and carried throughout the early weeks of January. Bitcoin proceeded to surpass silver to outperform, becoming the second-largest ETF commodity asset class in the US. The only commodity asset class that remains more popular than Bitcoin is its physical brother, gold,. with roughly $95 billion. After only two weeks, the BlackRock iShares Bitcoin Trust (IBIT) emerged as one of the top five exchange-traded funds (ETFs) of 2024 based on inflows, surpassing the cash intake of 99.98% of other ETFs.
Inflows showed no signs of abating at February’s launch, with nine Bitcoin Spot ETFs attracting more than $8 billion in net inflows. Data from BitMEX Research highlights a preference in inflows into BlackRock and Fidelity’s ETFs compared to other Bitcoin Spot ETFs.
Bitcoin ETFs have experienced significant growth, with a notable influx of $1.1 billion, bringing the cumulative total since their launch on January 11th to $6.72 billion (as of February 27th, 2024). This surge represents the highest weekly inflow level observed since the inception of Bitcoin spot ETFs. Over the period since January, these new ETFs have collectively acquired over 300,000 BTC in their custody. This accumulation trend, coupled with strong inflows, propelled Bitcoin (BTC) to surpass $50,000 on February 12th for the first time in over two years.
Wall Street’s evident interest in Bitcoin is underscored by the fact that Bitcoin is being acquired at a rate 12.5 times higher than the network’s daily production. Despite their relatively short time on the market, these ETFs have attracted billions of dollars, indicative of the growing mainstream acceptance of digital assets. The market’s positive response to the Bitcoin Spot ETF signifies a promising outlook for the Web3 industry.
What does this mean for the future of the Web3 industry?
As institutional interest continues to surge in Bitcoin, investors are directing their focus towards the developments within the broader Web3 ecosystem. With Ethereum seeing similar regulatory advancements and institutions showcasing their optimism with adoption, the sentiment in the Web3 market is undeniably positive.
Ethereum, as the second-largest digital asset by market capitalization, is next in line for regulatory approval with a deadline of May 23rd. Familiar names like; BlackRock, Fidelity, Ark and 21 Shares, Grayscale, VanEck, Invesco and Galaxy, Franklin Temple and Hashdex, have all filed applications for spot Ethereum ETFs in the recent months. The approval of an Ethereum ETF is not only seen as a regulatory milestone but also as a crucial validation of the broader Web3 ecosystem, which encompasses decentralized applications, smart contracts, and other emerging uses cases. Analysts compare Ethereum’s current price trend to what happened to Bitcoin before ETF adoption. They think and expect the price of Ethereum to also go up as the approval deadline approaches.
The approval of Bitcoin Spot ETFs sets the stage for further development of the Web3 landscape. As Larry Fink, the CEO of BlackRock, the world’s largest asset manager, pointed out, the ETF approval serves as a “stepping stone” towards the tokenization of assets. This sentiment reflects a growing recognition among industry players in understanding the benefits that blockchain technology can offer. Similarly, Major asset management fund, Ark Invest, also released a January report that advocates for 20% Bitcoin allocation for optimal portfolio management. The growing optimism among major players reinforces institutional confidence in the Web3 industry.
The Bitcoin Spot ETF was just the first step, with major developments happening within the Web3 industry. As we continue to monitor developments in this sector, the momentum toward widespread acceptance is becoming increasingly clear. With Ethereum’s regulatory approval on the horizon and industry leaders such as BlackRock and Ark Invest expressing optimism, the market sentiment is overwhelmingly positive. These advancements in January and February signal a bullish outlook and herald a new chapter in the Web3 industry.
Six Capital’s Approach Moving Forward
In light of the approval of Bitcoin Spot ETFs, Six Capital has positioned itself to capitalize on the expanding opportunities within the market. The approach extends beyond investments in Bitcoin (BTC) and Ethereum (ETH) to include exposure to 25 to 30 other tokens. This diversified strategy allows for leveraging the momentum generated by the approval of Bitcoin Spot ETFs while also capturing potential growth in other segments of the Web3 market.
By combining both established and emerging tokens, the Core Fund is able to ensure flexibility while still effectively managing risk. At Six Capital, we invest in various narratives such as DePin, real world assets, Web3 gaming and AI have emerged with notable corporations expressing their willingness to adopt Web3 technology. In order to capitalise on these emerging narratives in Web3, active fund management is done via continuously monitoring market dynamics, regulatory developments, and emerging trends. By embracing the opportunities presented by the approval of Bitcoin Spot ETFs and maintaining a diversified portfolio of projects, we look to fully capitalise on the exciting development of the Web3 landscape.
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