- The approval of Bitcoin ETFs in the US is a major milestone for crypto, but the impact on broader portfolio allocations may be limited initially according to Moody’s analysts.
- While the ETF approvals are a “watershed moment”, Bitcoin remains a very small part of most investment portfolios currently.
- Over the medium to long term, the ETF development is expected to gradually increase institutional investment in Bitcoin as a new asset class and have a positive effect on Bitcoin price discovery and stability.
The long-awaited approval of Bitcoin exchange-traded funds (ETFs) in the US is a major milestone for the crypto industry. However, the impact on broader portfolio allocations may be limited, according to analysts from Moody’s Investor Services.
Institutional Interest in Bitcoin Set to Increase
Moody’s analysts do not downplay the significance of the first Bitcoin ETFs being approved after 10 years. They describe it as a “watershed moment” that will likely attract more institutional investors to the crypto market. However, Bitcoin remains a very small part of most investment portfolios. The ETF approvals alone won’t necessarily entice investors to increase their Bitcoin allocation.
Recent Bitcoin Price Trends and Drivers
In the last year, Bitcoin’s price has more than doubled after the dramatic crypto market downturn in 2022. Moody’s notes that whether this positive trend continues depends on factors like monetary policy and potential new industry scandals. The analysts cite the FTX collapse as an example of crypto failures that have impacted Bitcoin’s price.
Longer-Term Outlook More Positive for Bitcoin
According to Moody’s, the ETF development will likely have a positive effect on Bitcoin price discovery and stability over the medium to long term. It is expected to gradually increase institutional investment in Bitcoin as a new asset class.
New Investor Protections with Bitcoin ETFs
Moody’s points out that buying Bitcoin through regulated ETFs offered by traditional financial players reduces risks compared to dealing with less regulated crypto intermediaries. However, they caution that Bitcoin itself remains highly volatile.
Beyond Bitcoin: The Rise of Tokenization
In addition to Bitcoin ETFs, Moody’s is tracking the growing trend of tokenizing real-world assets like bonds or commodities on blockchains. They see this as another area where traditional finance is embracing crypto technology. The approval of Bitcoin ETFs validates crypto solutions and is also positive for tokenization.
While the first Bitcoin ETFs are a milestone, their impact may be limited initially unless institutional investors significantly increase their crypto asset allocations. However, Moody’s analysts see the approvals as validation of crypto’s steady integration with mainstream finance over the long run.