- The crypto market’s anticipation of spot-based Bitcoin ETFs has already been factored into Bitcoin’s price, suggests Coinbase Institutional.
- While the crypto community eagerly awaits the potential floodgate of mainstream money, Coinbase believes the inflow will be a gradual process.
Anticipating the Bitcoin ETF Wave
In the complex dance of the financial markets, news and speculation often drive asset prices. A notable instance is the recent performance of Bitcoin (BTC), which seems to have factored in the anticipated approval of spot-based exchange-traded funds (ETFs). This observation comes directly from the analysis at Coinbase Institutional.
Amidst the macroeconomic turmoil, Bitcoin has managed to outshine other cryptocurrencies. David Duong, head of institutional research at Coinbase Institutional, notes,
“The discrepancy in Bitcoin’s performance vis-a-vis other tokens perhaps signifies the market’s pre-emptive reaction to the potential nod for spot Bitcoin ETPs.”
Bitcoin’s Dance with Macroeconomic Indicators
Post the ETF filings by financial titans like BlackRock in mid-June, Bitcoin saw an appreciation of 8%. In contrast, ether, its closest competitor by market value, dipped by 7.5%. Such divergent paths weren’t solely due to market speculations around the ETFs. Other macroeconomic indicators, especially the U.S. Treasury yield curve’s term structure, played a role.
Understanding the U.S. Treasury yield curve can seem intricate. It essentially reflects the interest rates on debt for various maturities, and its shape can indicate economic direction. Since mid-June, the difference in yields between 10-year and three-month notes (termed as the 3m10y slope) has widened by nearly 70 basis points to -0.8%. Interestingly, Bitcoin’s price rose, while ether dropped, maintaining an inverse relationship with the term structure of this yield curve.
Duong’s insights further delve into this relationship. He explains,
“There’s a discernible difference in how Bitcoin and Ether relate to the U.S. 3m10y slope.”
To quantify, Bitcoin‘s correlation coefficient with the yield spread is 0.45, indicating a relatively weak linear relationship. Ether, in contrast, showcases a stronger inverse bond, with a coefficient of 0.76.
A Glance at Historical Precedents
The crypto world has long yearned for a Bitcoin spot-based ETF, foreseeing it as the key to mainstream adoption. Predictions suggest such an ETF could usher in a staggering $30 billion demand for the premier digital asset.
Reflecting on history, the aftermath of the futures-based ETFs’ launch in October 2021 suggests Bitcoin might temporarily lose its market advantage once the spot-based ETF sees the light of day. To draw a parallel, the SPDR Gold Shares ETF (GLD) – the first spot gold ETF in the U.S. and an instrument that many view in the same light as Bitcoin – amassed just $1.9 billion (adjusted for inflation) in its initial month post-launch, reaching $4.8 billion by the end of its debut year.
While the crypto sphere buzzes with anticipation, Duong iterates the importance of patience, emphasizing that the eventual impact of these spot-based ETFs would symbolize a profound shift in the regulatory landscape, promising favorable implications for market valuations.