First Futures Bitcoin ETF: Spot Crypto ETFs on the Fast Track?

The recent approval and launch of the first futures-based Bitcoin ETF were months in the making — and years of waiting for such a fund in the US stock market. But it marks just the start of others like it to come.

The pioneering ProShares Bitcoin Strategy ETF will allow crypto enthusiasts to ride the coin’s price action without holding the underlying asset. The product enables retail and institutional investors to gain indirect access to the crypto space by investing in BTC futures contracts. Here is a detailed look at how the much-awaited ETF approval could impact retail interest and subsequently spot trading of cryptocurrencies.

The ProShares Bitcoin Strategy ETF saw record trading volumes on its debut on the New York Stock Exchange, bringing in a whopping $1.01 billion in traded shares on October 19, per data from MorningStar. That figure represents the second-biggest first day on record for ETFs.

Market sentiment turned bullish immediately after the ETF listing. Investors welcomed a new way to trade crypto via regular investment accounts while circumventing the hassle and cybersecurity issues inherent in crypto exchanges.

The ETF approval elicited a wave of excitement in the market, propelling BTC into price discovery. The “king coin” jumped into uncharted territory on October 20, hitting a then all-time high above $66,000 on the day.

The price surge above the previous mid-April record capped off a period of sustained bullish momentum fueled by the crypto community’s anticipation of the ETF launch, itself seen as a turning point for several reasons.

Firstly, the SEC’s approval was eight years in the making and represents a significant step forward for the crypto industry. Mounting pressure from traditional financial institutions seeking easy access to the crypto space finally pushed the SEC to warm to a futures-based model for Bitcoin investment.

Secondly, the ETF approval effectively managed to draw significant investor appetite into the digital currencies space. Since its launch in the US, billions of capital inflows have come in from investors seeking alternative opportunities in the fast-developing virtual currencies market.

The newly launched ETF has also placed Bitcoin in the spotlight once again and will undoubtedly create more awareness of the asset class as a whole. Consequently, more investors could start exploring convenient ways to buy and sell Bitcoins and altcoins on leading exchanges.

Importantly, the first Bitcoin ETF approval points to a shift in the regulatory stance of financial watchdogs in the US that could influence the thinking of authorities elsewhere. The crypto investment vehicle comes after a continued push for blockchain and crypto advocates to rectify the industry’s regulatory ambiguity.

In April, newly appointed SEC Chair Gary Gensler hinted at the approval of an ETF product that tracks Bitcoin futures. The eventual acceptance of the financial instrument promises to at least chip away at regulatory barriers that have long impeded the widespread adoption of cryptocurrencies.

Market experts view the BTC ETF launch as bullish for crypto, as it will offer unprecedented exposure to the asset class, albeit indirectly. Analysts from Fundstrat Global Advisors, a New York-based research firm, recently noted that the new US-listed ETF could help boost Bitcoin’s price significantly by the end of the year and boost even more interest in crypto markets overall.

They expect the ProShares ETF to pave the way for other upcoming funds, with nearly a dozen other filings for futures-based ETFs under SEC review. For now it is already attracting a fresh wave of inflows from retail and institutional investors. Fundstrat projects that the new ETF could bring more market demand, ultimately also boosting spot buying and trading on crypto exchanges.

Many analysts and investors are excited about the new futures-based Bitcoin ETF. However, as much a breakthrough as it is, it isn’t precisely the ETF the crypto community has been waiting for. Many crypto investors long for an instrument that allows them to track the BTC spot price directly.

Unfortunately, spot-based Bitcoin ETF products continue to face pushback from regulators globally. The SEC cites possible price manipulation, hacking issues, insufficient liquidity, and the lack of data transparency as reasons not to approve a proper Bitcoin ETF.

Top financial watchdogs like Gary Gensler favor approving an ETF that tracks Bitcoin futures rather than one based on spot Bitcoin prices. Authorities argue that ETFs tracking futures markets are a less risky way to gain exposure to crypto markets.

Crypto proponents remain optimistic that the SEC will eventually approve a spot-based ETF product that allows them to invest in Bitcoin. Meanwhile, Australia’s financial regulator — the Australian Securities and Investments Commission (ASIC) — gave the green light for spot ETFs for Bitcoin and Ethereum. Although actual trading may still be a few months away, the approval would enable the country’s large pension system to access the crypto market.

In the long run, the first futures-linked Bitcoin ETF in the US and regulatory milestone for spot Bitcoin ETFs in Australia will open the door for more regulatory clarity, already fueling investors’ excitement and momentum for digital assets adoption.

For now, the futures Bitcoin ETF will serve as the best entryway for more investors to access cryptocurrencies through traditional capital markets. It has also drawn more retail investments into crypto markets, creating a new buzz that is likely to grow participation in spot markets across crypto exchanges.

END.