- SEC approval of spot bitcoin ETF could validate cryptocurrency and remove barriers for mainstream investors, sparking new demand.
- ETF would allow bitcoin in retirement accounts like 401ks and IRAs, opening huge new pool of potential buyers.
- Massive influx of new demand from institutions and retail could propel bitcoin price to new all-time highs over $100k within a year.
One train of thought says that SEC approval of spot bitcoin ETF will send the market flying. Here’s how that could play out. In a separate post, we review the bear case, where the market may not react with such optimism.
Why a Bitcoin ETF Approval Could Boost the Market
An SEC-approved, physically-backed bitcoin ETF would remove barriers for certain investors and provide validation to skeptics. This influx of new demand could send prices upward.
Some key reasons why approval could ignite a rally:
- Mainstream credibility – An ETF would provide a regulated vehicle for mainstream investors to gain exposure, bringing new money into the market.
- 401k and IRA eligibility – An ETF would allow people to add bitcoin to retirement funds like 401ks and IRAs. This is a huge pool of potential new demand.
- Institutional investment – Institutions like hedge funds and banks require SEC-regulated products. An ETF would give them the green light to invest.
- Short squeezes – Billions worth of bitcoin is currently shorted. The buying pressure from an ETF could trigger short squeezes as short sellers rush to cover their positions.
- Media hype – Approval would dominate financial media and could create a fear of missing out among retail investors.
Potential Market Impact
Here are some potential scenarios if a spot bitcoin ETF is approved:
- Bitcoin immediately spikes 15-25% as short term traders pile in.
- Over the following weeks, bitcoin climbs 50-100% as new demand enters from institutional investors and 401k/IRA allocations.
- Increased institutional demand leads to a smoother bull run over the coming year instead of boom/bust cycles.
- Bitcoin reaches new all-time highs over $100k within 12 months after approval as credibility and accessibility drive mainstream adoption.
Of course, past performance does not guarantee future results. But an ETF approval would remove significant barriers, possibly unleashing a wave of bitcoin buying.
Conclusion
While nothing is guaranteed, approval of a spot bitcoin ETF could be the catalyst that finally brings mainstream capital into bitcoin. The resulting influx of new demand from both institutional and retail investors may propel bitcoin to new heights.
