The price of bitcoin has seen wild fluctuations over the years, reaching an all-time high of around $69,000 in November 2021 before pulling back. However, many analysts believe another big bull run could be on the horizon that sends bitcoin above $100,000 for the first time. One potential catalyst that could trigger such a massive price increase is the approval of the first US bitcoin exchange-traded fund (ETF).
There have been numerous applications for bitcoin ETFs in recent years, but the US Securities and Exchange Commission (SEC) has rejected them all due to concerns about potential market manipulation and lack of regulation in the crypto space. However, bitcoin has gained more mainstream acceptance, the crypto market has matured significantly, and support is building for an ETF approval. If the SEC finally greenlights the first US bitcoin ETF, it could unlock billions of dollars in new institutional investment and send the price of BTC soaring past six figures. Here are five reasons why:
massive influx of new money
The biggest reason why a US bitcoin ETF approval could send the price skyrocketing is the massive influx of new money it would unleash into the cryptocurrency market. ETFs offer investors an easy, regulated way to gain exposure to an asset without having to deal directly with that asset. A bitcoin ETF would open up the crypto market to huge pools of capital like pensions, 401ks, and other big institutional investors that are currently prohibited or hesitant to invest directly in cryptocurrencies.
Several studies have estimated billions could pour into cryptocurrencies following the launch of the first US bitcoin ETF. Research firm Fundstrat estimated $1-2 billion could flood into bitcoin in the first year alone, while Grayscale Investments CEO Michael Sonnenshein said at least $25 billion could flow in within 12-24 months. That’s a staggering amount of new capital entering a market with a total bitcoin market cap currently around $800 billion. Such a massive influx would create unprecedented buying pressure that could catapult bitcoin well past $100,000 as this fresh demand overwhelmed supply.
reduce barriers to entry
Another key factor is that a bitcoin ETF would significantly reduce barriers to entry for investing in cryptocurrencies. Right now, for many large institutional investors, the procedures and security requirements involved in directly investing and safely storing digital assets present challenges. An ETF provides the same hands-off investment vehicle they’re already accustomed to using for traditional assets like stocks and bonds. It removes complexities around security, custody and trading that have prohibited some institutions from participating so far.
By offering a regulated product individuals and financial advisors are already familiar with, a bitcoin ETF eases the onboarding process tremendously. This opens the doors for many more risk-averse and passive investors who want crypto exposure but have been waiting for an easier vehicle. Enticing this enormous untapped pool of capital into the market would apply further upward pressure on bitcoin prices. As more institutions get involved, the asset’s perceived legitimacy rises along with its potential for future growth.
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stimulates broader adoption
Approval of a bitcoin ETF would also act as a major confidence boost, stimulating even broader adoption across both institutional and retail levels. The launch of the first US cryptocurrency-linked investment product regulated by the SEC would represent a symbolic milestone. It signals mainstream recognition and acceptance of digital assets as a new established asset class worthy of investment. Institutional backing by the government’s securities regulator lends bitcoin further credibility.
This endorsement effect would galvanize interest from large financial players and ignite more innovation. It encourages the development of new crypto financial products like futures, options, trusts and crypto company stock listings. Greater participation from traditional finance strengthens surrounding cryptocurrency infrastructure as well. Wider legitimacy and accessibility invites loads of new investors, application developers and professionals into the bitcoin economy, further driving up demand and price appreciation over the long run.
reduce volatility
While huge bitcoin price gains would surely follow an ETF approval, many experts argue it could actually decrease short-term volatility over time. Currently, cryptocurrency markets are still highly fragmented and sensitive to irregular news cycles. An ETF brings bitcoin into regulated markets where trading occurs on major exchanges with tight spreads, circuit breakers and surveillance. This increases liquidity while allowing investors to treat bitcoin like any other traded asset.
More institutional money flowing in from pension funds and money managers also introduces a steadier “smart money” influence. Large institutional traders are less prone to panic selling during price dips compared to retail speculators. Their presence adds stability by absorbing supply and demand imbalances without massive volatility swings. As bitcoin matures further into a recognized investable asset with ETF access, its price action may settle into less erratic long-term growth trends seen in traditional markets. Stability breeds confidence which stabilizes valuations. This sets the stage for an orderly ascent above $100,000.
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drive adoption of other cryptos
Finally, approval of the first US bitcoin ETF would likely provide a trickle-down boost to other major cryptocurrencies as well. Not only with their prices rise along with increased bitcoin demand, altcoins stand to gain adoption following the ETF endorsement effect. Investor interest in decentralized finance and blockchain applications beyond currency would expand. This stimulates greater experimentation and competition that advances the whole ecosystem.
More institutions would feel comfortable exploring investments in large-cap altcoins like Ethereum that show real-world use. New crypto investment products tracking broader market indexes may emerge, just as equity ETFs evolved beyond single stocks. Leading altcoins aiming to be the “Amazon or Microsoft of crypto” could venture onto major exchanges. Their valuations would climb alongside growing confidence in crypto as an emerging independent asset class. A bitcoin ETF lights the torch for broader cryptocurrency acceptance that drives the whole market, including bitcoin, to new highs.
So in summary – while past bitcoin ETF applications have been rejected, the market conditions may finally be ripe for approval. If the SEC greenlights the first US cryptocurrency ETF, it could open the floodgates for billions of new capital into a still relatively small market. That unprecedented demand would catapult bitcoin to never-before-seen price heights above $100,000 as fresh money overwhelms available crypto supply. By stimulating mainstream adoption, increasing liquidity and stability, and validating cryptocurrency’s role in portfolios, a US bitcoin ETF has potential to trigger the next massive bull run.
Of course, these predictions rely on SEC approval actually occurring first. But five years of rejections shows the agency’s concerns are being addressed as the market matures. Support is building from regulators, politicians and industry leaders. If approval finally comes through, it may just provide the spark needed to ignite the next big bitcoin surge towards six-figure territory and beyond. Only time will tell how the long-awaited saga of a US crypto ETF ultimately unfolds. But there are certainly ample reasons to believe its debut could send the entire cryptocurrency market into a parabolic rally for the history books.
