With less than a year until the Bitcoin (BTC) halving event, several financial giants have filed applications for a spot Bitcoin exchange-traded fund (ETF). This surge in institutional interest is reminiscent of the period before the 2020 to 2021 bull run.
Institutional interest in the cryptocurrency sector waned after major crypto giants like FTX collapsed during the prolonged crypto winter in 2022. Bitcoin and other cryptocurrencies traded sideways as several crypto exchanges came under regulatory scrutiny. However, when news broke that financial institutions such as BlackRock, Fidelity, and Valkyrie were filing applications for a spot Bitcoin ETF, the price of BTC recovered to over $30,000, reigniting investment in the crypto market.
While various institutional giants have previously filed spot Bitcoin ETF applications with the United States Securities and Exchange Commission (SEC), all of them either withdrew their applications or faced outright rejections. However, the filing by asset management giant BlackRock has increased the chances of the SEC approving the first spot Bitcoin ETF. Bloomberg senior ETF analyst Eric Balchunas gives BlackRock a 50% chance of approval. Other institutional giants like WisdomTree, Invesco, Valkyrie, ARK Invest, and Fidelity have also joined the race, bringing the total to seven so far.
Some industry experts believe that 2023 to 2024 will be crucial for the approval of a spot Bitcoin ETF. Robert Quartly-Janeiro, chief strategy officer of Bitrue, stated that the timing is right, with inflation on the rise and interest rates high. He believes that Bitcoin needs to perform well in an economic environment where rates and inflation are key considerations.
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Bitcoin has demonstrated its resilience despite the challenges of 2022, recovering more than half of its price decline during the bear market. This recovery is largely attributed to the continued interest of institutional investors in the asset. There are now significantly more institutional investors in the crypto market compared to a year ago. Many large funds and companies are exploring the potential of cryptocurrencies for investment. Despite market volatility, global institutions show a steady interest in cryptocurrencies.
Paolo Ardoino, CTO of Bitfinex, stated that traditional financial institutions recognize the value of Bitcoin as a perfectly scarce asset that cannot be debased. With record inflation in major economies, the value of Bitcoin is being better understood by the markets. He believes that the recent applications for Bitcoin spot market ETFs demonstrate increasing institutional demand and will attract new retail investors, leading to broader participation.
Despite institutions distancing themselves from crypto over the past year, much of it was due to the fallout from FTX. Some institutions decided to lay low and wait for the right opportunity, planning to revisit their decision when the crypto market surged again. The regulatory environment will play a significant role in the re-entry of institutions into the market. As governments establish regulatory regimes and interpret the law, institutions will gauge their response and move forward accordingly.
MicroStrategy, one of the driving forces behind institutional adoption of Bitcoin in 2020, has continued its Bitcoin buying spree in 2023, even during major price drops. The company currently holds 152,333 BTC and has stated that it has no intention of selling and will continue to add more to its treasury.
The 2020 to 2021 bull run was fueled by institutional inflows, with companies like MicroStrategy and Tesla adding Bitcoin to their balance sheets. Gracy Chen, managing director at Bitget, believes that institutions will continue to be a driving force for the growth of the cryptocurrency market. She expects institutions to act swiftly once there is stable and predictable retail interest. Chen also emphasized that growing institutional interest could further drive crypto adoption and spark the next bull run.
Besides institutional interest, there have been significant developments in the retail market. Hong Kong has opened the doors for crypto exchanges to offer services to retail customers. Ben Caselin, VP at MaskEX, believes that this bull market will be driven primarily by Asia, with Hong Kong leading the way. He also sees potential for a significant push from the Middle East, particularly the United Arab Emirates and Saudi Arabia.
With the next Bitcoin halving scheduled for April 2024, the increasing interest from institutional investors is seen as a bullish sign for Bitcoin and the broader crypto market. Historically, bull runs have started in the run-up to the halving event, as the scarcity factor drives up prices and attracts retail traders and institutional giants to increase their Bitcoin holdings.
