Bitcoin Price Prediction 2024: What Happens If Spot Bitcoin ETFs Are Approved by the SEC?

2024/01/08 11:37:57

As the January 10 deadline nears, the global crypto market is on the brink of a potential watershed moment, with the US Securities and Exchange Commission (SEC) contemplating approving a spot Bitcoin Exchange-Traded Fund (ETF). This move could mark a significant milestone in the journey of Bitcoin from a niche digital asset to a mainstream financial instrument.

Bitcoin currently operates in a market significantly different from traditional financial instruments. The lack of a Bitcoin ETF in the U.S. means that investors often have to navigate the cryptocurrency exchanges and wallets to invest in Bitcoin.

The approval of a spot Bitcoin ETF is expected to affect Bitcoin's price substantially. It would allow investors to gain exposure to Bitcoin through traditional investment channels, potentially leading to increased demand and liquidity.

Here’s all you need to know about a Bitcoin ETF.

The Significance of a Bitcoin Spot ETF Approval by the US SEC

Unlike their futures-based counterparts, Spot Bitcoin ETFs are backed by actual Bitcoin holdings, offering a more direct exposure to the asset's price. The approval of such ETFs by the SEC would not only validate the legitimacy of Bitcoin in the eyes of traditional investors but also potentially unlock a new era of liquidity and market maturity.

Such a move is expected to fuel a rally in Bitcoin prices, encouraging institutional investment into Bitcoin and driving retail investors' interest in trading and HODLing this digital gold. In addition to the excitement in the market surrounding spot Bitcoin ETF approvals, 2024 is a significant period for Bitcoin investors due to the upcoming Bitcoin halving event in April. Let’s take a look at how a Bitcoin spot ETF approval by the US SEC and the upcoming Bitcoin halving could influence Bitcoin’s price in the coming months.

A Brief Lookback at Spot Bitcoin ETF Applications Before the SEC

For years, the crypto industry has been engaged in a prolonged battle with the SEC to get a spot Bitcoin ETF approved. Time and again, proposals have been submitted, only to face rejection or delay. These denials often stemmed from concerns over market manipulation, volatility, and the SEC's stringent standards for investor protection. However, the persistent efforts of industry players signify the high stakes involved and the transformative potential of an approved Bitcoin ETF.

Several spot Bitcoin ETF applications have been submitted to the US SEC at the time of writing. These include:

ARK 21Shares Bitcoin ETF (ARKB) by 21Shares & ARK
iShares Bitcoin Trust by BlackRock
Bitwise Bitcoin ETP Trust by Bitwise
VanEck Bitcoin Trust by VanEck
Wisdomtree Bitcoin Trust (BTCW) by Wisdomtree
Invesco Galaxy Bitcoin ETF by Invesco & Galaxy
Wise Origin Bitcoin Trust by Fidelity
Valkyrie Bitcoin Fund (BRRR) by Valkyrie

Each of these applications represents a significant effort by financial institutions to bridge traditional investment mechanisms with the evolving world of digital assets.

BTC Price Predictions by Experts

Predicting Bitcoin's price trajectory in light of a potential ETF approval is a subject of heated debate among experts. Some believe an ETF would unleash a significant influx of institutional money into the Bitcoin market. This could increase trading volumes, enhance market efficiency, and potentially stabilize the notoriously volatile BTC price.

Several experts from the crypto and mainstream industries have made various predictions regarding how the approval of spot Bitcoin ETFs by the US SEC could impact Bitcoin's price. Here's a summary of some of the top predictions:

Adam Back, the CEO of Blockstream, has predicted that Bitcoin will likely exceed $100,000 before halving in 2024. This optimistic outlook was expressed in a Twitter bet he engaged in, where he predicted Bitcoin would reach this value by March 31, 2024.
Bitwise predicts that the price of Bitcoin will reach $80,000 by the end of 2024.
Major English bank Standard Chartered foresees Bitcoin ending 2024 at $100,000.
Venture capitalist Tim Draper has a more bullish view, predicting Bitcoin’s price will reach $250,000 by the end of the year.
Founder of Edelman Financial Engines, Ric Edelman, believes the Bitcoin value will be $150,000 within two years, aligning with a prediction from AllianceBernstein.
JPMorgan has forecast a price of $150,000 for Bitcoin following the SEC's approval of Bitcoin spot ETFs.
ARK Invest has one of the highest predictions, anticipating Bitcoin to be $1.48 million.
Matrixport believes Bitcoin could surge to $56,000 if a spot Bitcoin ETF is approved in 2024.
Lark Davis expected Bitcoin would hit $48,000 in 2023, with the potential to surpass $100,000, reaching possibly $150,000 by the 2024-2025 cycle peak.
Fundstrat’s Tom Lee predicts that Bitcoin could explode above $150,000 by the end of 2024, possibly going as high as $180,000.
Ernst & Young’s Paul Brody predicts a significant increase in Bitcoin’s price due to massive pent-up demand from institutional investors. However, he has not provided a specific number.
Crypto analyst Alex Krüger suggests we could see daily +20% moves in the price of Bitcoin following the ETF approval.
Anthony Scaramucci, the CEO of Skybridge Capital, expects the price of Bitcoin to grow as high as $300,000 by 2028. This prediction is based on his bullish outlook for the digital asset over the coming years, considering factors like the rapid adoption of Bitcoin, improvements to the Lightning Network, and increased commercial activities happening on the blockchain.

On the other hand, some analysts caution against overestimating the short-term impact of such an approval. High-profile predictions range widely, with Blockstream CEO Adam Back suggesting a surge to unprecedented highs and analyst Alex Krüger pointing to a more conservative yet substantial increase.

Bitcoin ETF Price Prediction vs. Gold ETF

History offers valuable lessons on the impact of ETFs in other markets. For example, the launch of the first spot gold ETF had a notable effect on the gold market, suggesting a potential parallel for Bitcoin.

The approval of the first spot gold ETF in November 2004 significantly impacted gold's value and outlook among investors. Following the approval of the first spot gold ETF, gold prices experienced a substantial increase of over $370% from around $700 per oz. in November 2004 to over $2,100 in December 2023.

Gold price rally after Gold price rally after Gold ETF launch in Nov 2004 | Source: BusinessInsider

The approval of the first spot gold ETF allowed easier access to gold as an investment, leading to increased demand. The ETF mirrored real-time price fluctuations of gold, providing a more direct and efficient way to invest compared to buying physical gold. This accessibility and liquidity brought in more institutional and individual investors, which helped increase the price of gold over time. This dramatic rise can be attributed to the ETF providing investors with a more fluid and convenient investment pathway in gold, moving away from less liquid options like buying physical gold.

While the specifics of the gold and Bitcoin markets differ, the underlying dynamics of increased accessibility, liquidity, and investor interest following an ETF approval seem to hold a common potential for significant price increases in both assets. The historical precedent set by gold provides a tangible framework for understanding the possible implications of a Bitcoin ETF approval.

Impact of Bitcoin Halving on Bitcoin Price Predictions in 2024

The upcoming Bitcoin halving in 2024 adds another layer of complexity to price predictions. Historically, Bitcoin halvings, which reduce the rate at which new bitcoins are created, have preceded significant bull runs. This cyclical event, combined with the possible approval of a spot Bitcoin ETF, could have a synergistic effect on Bitcoin's price, propelling it to new heights.

Here’s how a combination of a spot Bitcoin ETF approval and the upcoming Bitcoin halving could affect Bitcoin’s price in 2024:

Synergistic Effect: The combined effect of a Bitcoin halving and the approval of a spot Bitcoin ETF could be synergistic. On one hand, the halving reduces supply, and on the other, the ETF could increase demand by providing an accessible, regulated investment avenue.
Increased Demand Against Limited BTC Supply: If the ETF attracts more institutional and retail investors, the demand for Bitcoin could rise significantly at a time when the rate of new Bitcoin creation is halved. This supply-demand dynamic could lead to a significant increase in price.
Fueling Market Sentiment and Level of Speculation: These events could also drive speculative interest and positive market sentiment, further fueling price increases. Historically, the anticipation of halving and major regulatory approvals has led to speculative rallies in Bitcoin's price.
Increased Volatility in the Market: It's important to note that while these factors could lead to price increases, they could also contribute to increased volatility in the Bitcoin market. Investors might react strongly to news and developments related to the ETF approval and the halving event, leading to sharp price movements.

Countdown to the Next Bitcoin Halving

Potential Challenges and Risks of Bitcoin ETF Approval

The potential approval of spot Bitcoin ETFs by the U.S. SEC could bring about several opportunities for investors. Still, it also comes with its own set of challenges and risks. Here are some key points that you should be aware of:

1. Market Volatility

High Volatility: Cryptocurrencies, including Bitcoin, are known for their high price volatility. Introducing a Bitcoin ETF could exacerbate this volatility, especially if large numbers of retail and institutional investors enter the market.
Impact of External Factors: Bitcoin prices are influenced by various factors, including regulatory news, technological developments, and macroeconomic trends. This makes predicting price movements challenging.

2. Regulatory Risks

Changing Regulations: The cryptocurrency market is still in a relatively nascent stage, and regulatory landscapes can change rapidly. Future regulations could impact the performance and legality of Bitcoin ETFs.
Compliance and Legal Risks: The management of a Bitcoin ETF must navigate complex and evolving compliance requirements, which can affect the ETF's performance and operations.

3. Liquidity Concerns

Market Depth: While a Bitcoin ETF would increase market accessibility, there could still be concerns about the liquidity of the underlying Bitcoin market, especially during periods of high volatility or market stress.
Redemption Risks: In times of market turmoil, the ability to redeem ETF shares for the underlying asset (Bitcoin) could be tested, potentially leading to price discrepancies between the ETF and Bitcoin itself.

4. Valuation Complexities

Price Discovery: The price of Bitcoin can vary across different exchanges. This disparity could pose challenges in accurately valuing ETF shares.
Impact of Large Trades: Large trades by institutional investors could significantly impact Bitcoin's price, affecting the valuation of the ETF.

5. Technology and Security Risks

Cybersecurity Risks: The digital nature of Bitcoin exposes it to unique cybersecurity risks, including hacking and fraud.
Operational Risks: The ETF's infrastructure, such as digital wallets and transaction systems, must be robust to prevent technical failures or security breaches.

6. Investor Understanding and Sentiment

Knowledge Gap: Investors might be drawn to a Bitcoin ETF without fully understanding the complexities and risks of cryptocurrency investments.
Speculative Bubbles: Increased accessibility to Bitcoin through ETFs could fuel speculative investment, potentially leading to asset bubbles.

7. Counterparty Risks

Reliance on Issuers and Managers: The performance and security of a Bitcoin ETF depend on the expertise and stability of the issuing and managing entities.
Custodial Risks: Safeguarding the Bitcoin underlying the ETF involves custodial risks, including the potential loss of funds through mismanagement or security breaches.

Closing Thoughts

As we edge closer to the final deadlines of some of the spot Bitcoin ETF applications before the US SEC, the anticipation for approvals grows higher among enthusiasts and investors. If it happens, this pivotal event will have far-reaching implications for Bitcoin and the entire crypto market. Whether it leads to a new era of institutional adoption or a reconfiguration of market dynamics, the journey of Bitcoin continues to be an extraordinary chapter in the annals of financial history.

While a spot Bitcoin ETF could provide a regulated and accessible means for investing in Bitcoin, it also carries various risks associated with market volatility, regulatory changes, liquidity, valuation, technology, investor sentiment, and counterparty reliability. Potential investors should conduct thorough due diligence and seek advice from financial professionals before investing in such ETFs.