In an interview with CNBC on 2 January 2024, Hassan Ahmed, the Country Director for Singapore at Coinbase, shared his thoughts on the potential impact of U.S. SEC-approved spot Bitcoin ETFs on the cryptocurrency market.
Ahmed emphasized the foundational nature of a U.S. spot Bitcoin ETF, describing it as a “structural market change” for cryptocurrencies. He noted the increasing attention and anticipation surrounding the ETF’s approval, suggesting that it signifies a major shift in the asset class’s recognition and acceptance. He pointed out that the approval of this ETF would likely lead to substantial demand and fund inflows into Bitcoin:
“So this spot Bitcoin ETF (exchange-traded fund) for the US markets is really as foundational and as big a deal as people are making it out to be. It’s a structural market change for this asset class that’s coming into its being. The noise and chatter around sort of this approval is certainly intensifying and we’ll see how things play out. But the way we see it is that there’s going to be secular demand and fund flows that are going to be coming into this asset class and this asset in particular.“
Ahmed also mentioned that the upcoming Bitcoin halving event — which is expected to reduce the block subsidy by half — combined with the widely expected approval of spot Bitcoin ETFs could make a significant increase in demand for Bitcoin.
Another key aspect Ahmed discussed was the increase in Bitcoin’s transaction fees since 2020, attributing it to the growing demand for Bitcoin block space. This demand, he says, has been driven by developments like inscriptions and ordinals within the crypto-native space. He explained that these factors are contributing to additional miner revenue and enhancing the long-term security of the Bitcoin blockchain.
Addressing the regulatory landscape in the wake of the FTX collapse, Ahmed agreed that a robust regulatory framework is essential for the influx of institutional investments that spot Bitcoin ETFs could bring. He observed that spot Bitcoin ETFs’ emergence, despite the evolving regulatory conversation in the U.S., indicates the overwhelming demand and significance of this asset class. He believes that such ETFs will further legitimize and destigmatize cryptocurrencies, providing a compliant and familiar channel for asset managers and allocators.
Regarding the timeline for the the approval by the SEC, Ahmed noted that the industry has been advocating for it for nearly a decade. He recalled the approval of Bitcoin futures ETFs a few years ago and mentioned that legal opinions had highlighted the structural similarities between futures ETFs and spot ETFs, pushing the SEC towards this decision. The deadline everyone is watching is January 10, by which the SEC is expected to formally approve or defer the ARK 21Shares Bitcoin ETF. Ahmed highlighted the extensive technical diligence by the SEC as a positive sign of progress.
Ahmed also pointed out that the $30 trillion U.S. wealth management industry is currently unable to invest in Bitcoin. He believes that the approval of spot Bitcoin ETFs would enable wealth managers to include Bitcoin in their portfolios, responding to client demands for exposure to cryptocurrencies for price appreciation, fiat hedging, or inflation hedging. He anticipates that this development will lead to more efficient portfolios and increased recommendations for cryptocurrency exposure.
Featured Image via Coinbase
