3 reasons why a Bitcoin ETF approval will be a game-changer for the BTC price

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Some financial experts believe that the price of cryptocurrencies is solely determined by investor speculation, and in recent years critics have suggested that fixed income instruments such as Treasuries bear no relation to digital assets. This point of view is quite accurate because, at present, most investors in the asset class are not allowed to invest in Bitcoin (BTC) and altcoins.

Public pension funds, pension plans, fixed income securities and most unleveraged and multi-market mutual funds can only invest in certain asset classes. These limits result from the regulations of the fund category, the fund’s own statutes and the administrator’s risk assessment.

Not all funds can invest in the Grayscale GBTC Trust

Unbeknownst to most, the mutual fund manager does not have absolute control over the investment decision. The fund administrator is a third party company that acts as an intermediary between the fund manager and the investors to verify and distribute the assets related to the investments.

Therefore, the fund administrator can decide that a particular instrument presents a significant risk and limit the exposure or deny access to it. The trust fund, in this example, is the investment vehicle used by the Grayscale Bitcoin (GBTC), and it involves issuer credit risk.

Breakdown of Amundi funds by asset class. Source: Amundi.com

Global asset managers will typically have 30% to 60% exposure to fixed income securities, so they are very unlikely to be exposed to cryptocurrencies. Amundi, the leading European investment firm with more than $ 2.1 trillion in assets under management, is a good example.

According to BCG Group, the global asset industry has exceeded $ 100,000 billion, with North America holding nearly 50% of that figure. Unfortunately, these astronomical numbers lead analysts to incorrectly associate these numbers with the Bitcoin ETF instrument.

#Grayscale has partnered with BNY Mellon, the world’s largest custodian bank with $ 41 trillion in assets under custody. In February 2021, #BNYMellon announced its entry into the #Crypto space. Grayscale’s big step in the battle for an ETF # Bitcoin. @ Grayscale @BNYMellon #etf #bitcoinetf pic.twitter.com/RfSO7UOKGS

Thinking Crypto – YouTube Channel and Podcast (@ ThinkingCrypto1) July 13, 2021

According to Reuters, more than half of all euro area investment grade corporate bonds are now trading at negative yields. This includes $ 7.7 trillion in public debt and represents 70.8% of the total.

The Financial Times reported that the value of negative-yielding global debt has exceeded $ 16.5 trillion, fueled by the more pessimistic outlook for investors and bond purchases by central banks.

Investors will gradually exit bond strategies

There is reason to believe that investors earning negative returns will eventually turn to riskier assets, although it is unlikely that a full switch to cryptocurrencies will occur. However, the most likely beneficiaries are non-leveraged multi-assets and alternative investments, as these instruments generally carry lower risk than stocks and high-yield structured assets and bonds.

Therefore, a possible Bitcoin ETF approval by the United States Securities and Exchange Commission (SEC) will open the doors to a wide range of funds that are currently excluded from exposure to cryptocurrencies.

Even though the ETF is exclusively reserved for a portion of stocks and multi-asset classes, the new instrument does not need to capture $ 500 billion to propel Bitcoin’s market cap above $ 2 trillion. . Less than 2.5 million coins are deposited on exchanges, which equates to $ 125 billion readily available for trade.

Commodity funds are the best candidate

According to iShares, the value of global products traded on the exchange stands at $ 263 billion. Since not all mutual funds are listed, it is reasonable to assume that the actual number exceeds $ 500 billion.

This means that an allocation of just 1% of that specific asset class equates to $ 5 billion, and such an investment would surely be enough to propel the price of Bitcoin above its all-time high of $ 65,000.

If and when a BTC ETF is approved, traders will handle the potential influx as soon as approval is announced, as products only capture $ 5 billion in the first two months.

As long as governments and central banks continue to inject liquidity, buy bonds and issue stimulus packages, there will be a gradual inflow of riskier assets, increasing demand for the ETF.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.

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