Spot ETFs are coming

After a decade of effort, the introduction of spot Bitcoin ETFs into the US financial market has taken its final step. The anticipated approval is expected to have a significant impact on the digital asset market in the coming years. There is a widespread belief that the SEC, to avoid favoring any particular entity, will approve multiple issuers simultaneously, similar to the scenario last autumn when Ethereum futures ETF was launched. Currently, 11 major spot ETF application entities are poised to receive approval in the coming week. The release of spot ETFs involves various aspects such as estimated inflow scale, competition dynamics among issuers, and the matured market structure of Bitcoin. Some issuers have initiated marketing campaigns, while others aim to gain a competitive edge in minimum fees. The development of this intense competition remains uncertain.

Consideration of the dynamic of Bitcoin's on-chain supply is also crucial and may evolve in the medium term. The proportion of long-term Bitcoin holders is steadily increasing, and these dormant BTCs may not be accounted for in Bitcoin's "free float" supply. In 2023, only 30% of BTC is in an active on-chain state, with the majority yet to be accessed. However, it is essential not to oversimplify the determining factors of BTC prices, as they are influenced by numerous unknown variables. This growing illiquidity, coupled with a significant influx into ETFs, may squeeze the market and encourage more supply to enter the liquidity market.

This transformative development may signify a shift in digital assets from niche to emerging asset classes, becoming a significant trend for the year.