Industry analysts Nate Geraci, President of The ETF Store, and Eric Balchunas, a prominent Bloomberg Exchange Traded Fund (ETF) analyst, have recently spotlighted a potential game-changer in the crypto world: introducing a spot Bitcoin ETF in the United States.
According to their analysis, this development could bring benefits and notable challenges, particularly for established crypto exchanges such as Coinbase.
The duo’s insights, shared on X, paint a picture of a changing market dynamics. Geraci’s post highlighted the potential impact of a spot Bitcoin ETF, which he describes as a “bloodbath” for crypto exchanges.
Their argument hinges on transaction fees – a critical revenue stream for platforms like Coinbase.
Gonna be a bloodbath for crypto exchanges…
— Nate Geraci (@NateGeraci) December 18, 2023
The Fee Conundrum: Spot Bitcoin ETF Vs. Crypto Exchanges
According to Geraci’s analysis, a spot Bitcoin ETF would offer retail buyers and sellers “the advantage of institutional-grade trade execution” and commission rates.
This efficiency level is contrasted with the current model employed by most crypto exchanges, where retail users are subjected to relatively higher trade execution and commission fees. Geraci emphasizes the need for crypto exchanges to evolve their fee structures to remain competitive in this forthcoming landscape.
Balchunas further reinforces this viewpoint by pointing out the stark difference in trading costs between a spot Bitcoin ETF and crypto exchanges. He cites that trading a spot Bitcoin ETF could cost as little as 0.01%, a standard fee in the ETF industry.
This figure is substantially lower than the trading fees on exchanges like Coinbase, which can reach up to 0.6% depending on various factors such as the type of crypto, transaction size, and trading pairs.
Introducing a spot Bitcoin ETF would intensify price competition within the crypto industry. Balchunas argues that this competition will return monetary benefits to investors, potentially reducing exchanges’ marketing expenditures on high-profile events like the “Super Bowl.”
SEC’s Decision On Bitcoin ETF: A Critical Turning Point?
Amid these predictions, Nate Geraci has also recently voiced concerns about possible outcomes if the US Securities and Exchange Commission (SEC) decides against approving a Spot Bitcoin ETF.
Geraci warns that a denial could result in one of the most significant downturns in crypto history, referring to it as one of the “bigger rug pulls” in the crypto market. Geraci’s concerns stem from the high anticipation and speculation surrounding the SEC’s decision on spot ETF, which is expected to occur in the upcoming month.
The SEC’s approval or disapproval of a Spot Bitcoin ETF is more than just a regulatory decision; it represents a pivotal moment in integrating crypto into mainstream finance.
The anticipation has already had a noticeable impact on the market, and the final decision could set the tone for future interactions between traditional financial structures and the evolving world of digital assets.
If spot bitcoin ETF not approved in January, might be one of bigger rug pulls in crypto history…
Not my base case, but can’t entirely rule out given history here (which is why I said *close* to 100%).
That said, sticking w/ my original pre-Grayscale court victory prediction. https://t.co/zhlLDgMlzw
— Nate Geraci (@NateGeraci) December 18, 2023
Geraci mentioned a near 100% probability of SEC approval for a spot Bitcoin ETF in his post. While he clarifies that this isn’t his base case scenario, he acknowledges the importance of considering the historical context in which the SEC has operated, which adds complexity to predicting the outcome.
Featured image from Unsplash, Chart from TradingView