As we reported back in July, the SEC has delayed its decision on whether to approve a Bitcoin ETF until September. There is an optimism in the industry, though, that the decision will be positive.
Supporters of an “optimistic” approach agree on three major reasons why a positive SEC decision could become a game changer. First assumption is that cryptocurrency price will see a significant increase; a parallel with a gold ETF launched in 2003 is given. Back then, the price of gold skyrocketed following the decision to launch an ETF. Another trigger for pulling the price up is a massive increase of institutional money flowing into the crypto market.
The second assumption is that an ETF will make cryptocurrencies more accessible. Current limitations preventing crypto’s mass adoption include confusing cryptocurrency exchanges, complex crypto wallets, lack of insurance protection, high volatility and a lack of easy-to-access information. The launch of an ETF will address these issues, especially in terms of security and protection. Again, this could become a significant incentive for institutional investors.
The third assumption is that an ETF will boost the development of a new investable asset class. Portfolio diversification is one of the most efficient strategies for long-term investors. To eliminate risks and to boost the potential of a larger ROI, assets within a portfolio should not be correlated with each other. Bitcoin has previously showed its low correlation with other assets, thus becoming a lucrative option for a diversification.