Have Bitcoin Spot ETFs Triggered a New Bear Market?

The recent approval by the US Securities and Exchange Commission (SEC) of Bitcoin spot ETFs (exchange-traded funds) has sparked intense debate.

This fundamental move, clouded by concerns about centralization and market volatility, raises an important question. Could this be the catalyst for another stock market winter? cryptocurrencies?

Spot ETFs Challenge Bitcoin’s Principles

SEC Chairman Gary Gensler is ironic about the approval of spot Bitcoin ETFs. He believes these financial products challenge Bitcoin’s principles by centralizing the digital asset. Gensler warned that the measure could cause further speculation and volatility in an already volatile market.

He emphasized that Bitcoin remains a highly speculative asset, often associated with illegal activities such as money laundering and ransomware:

“Satoshi Nakamoto said that it will be a decentralized system. Consider the irony of those who say this week is historic. It was about centralization and traditional methods of financing. “Investors were already able to express themselves in Bitcoin… But now they can also buy it through a centralized exchange product.”

Read more: What is a Bitcoin (BTC) ETF? Beginner’s Guide

Likewise, prominent investor Kevin O’Leary has expressed skepticism about spot Bitcoin ETFs. He questioned the value they bring to long-term investors like him who view Bitcoin as digital gold. O’Leary’s position

highlights these ETFs’ high fees and lack of direct ownership.

These features may not appeal to purists who prefer to own Bitcoin directly. Mr. Vanderful predicted that few of the newly approved ETFs would survive, with major players such as BlackRock and Fidelity probably dominant due to its vast resources. O’Leary stated:

“If you are a purist like me and only hold Bitcoin for the long term as digital gold, I would never buy an ETF. Why should I pay these fees? It’s completely unnecessary and doesn’t bring me any added value.”

These statements lay the groundwork for a critical analysis of the potential implications of these ETFs for the flagship cryptocurrency.

Spot ETF: Bitcoin as a Medium of Exchange

Bitcoin’s original purpose as a medium for small online transactions has been marred by its inefficiencies: high costs and cumbersome payment processes. Its use for larger transactions remains limited. Meanwhile, its use for clandestine and illegal activities raises questions about its viability as a currency.

Read more: Bitcoin (BTC) Price Forecast: 2023, 2024 and 2035.

Even BlackRock CEO Larry Fink was skeptical about Bitcoin being replaced by traditional currencies: “I don’t think it will ever become a currency. I think it’s an asset class.”he explained.

In turn, the Managing Director of the International Monetary Fund Kristalina Georgievastated that cryptocurrencies such as Bitcoin should not be considered “money” in the conventional sense:

“We believe we should differentiate between money and assets. When we talk about cryptocurrency, we are actually talking about an asset class. They may be secured and therefore safer and less risky, or they may be unsecured and therefore riskier investments. But it’s not really money. “It’s more like a wealth management fund,” Georgieva said.

The introduction of a Bitcoin ETF further distances the cryptocurrency from its supposed decentralized ideal, reconnecting it to traditional financial systems. Bitcoin has a high correlation coefficient with highly speculative sectors rather than traditional stores of value such as gold.

During times of financial crisis, such as the March 2023 bank run and the March 2020 pandemic panic, Bitcoin was anything but stable. It has experienced significant volatility and price declines, belying its intended role as a digital haven.

Bitcoin Spot ETF: History Points to Market High

The launch of spot Bitcoin ETFs, as highlighted by a technical analyst under the pseudonym Crypto Con, could mark the beginning of a new bear market. This pattern reflects the analyst’s assertion, linking major cryptocurrency events and critical market changes.

“To say there is no correlation between Bitcoin and news events would be a denial,” Crypto Con noted.

He drew parallels with past events such as the launch of the CME Bitcoin futures contract in December 2017 and Coinbase IPO in April 2021, which coincided with market highs. Likewise, the FTX crash in November 2022 Silicon Valley bank collapse Significant market lows followed in March 2023.

Read more: Bitcoin halving 2024: what is it and what to expect?

Recent Bitcoin spot ETFs like these events could potentially mark a turning point in the market.

Historically, the cryptocurrency market has shown great sensitivity to such significant events. This sensitivity often leads to sharp market movements. Thus, the introduction of spot Bitcoin ETFs could be a signal for investment strategies. trade

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