What are spot-bitcoin ETFs and why are they driving bitcoin prices upward? An explainer

livemint.com:

spot-bitcoin ETFs is a highly anticipated event that has kept bitcoin traders and investors on the edge for quite some time now – at least since October 2023. Although there is no fixed timeline of this event, it is likely to take place in January 2024. Spot-bitcoin ETF refers to an exchange traded fund permitted by the SEC to invest directly in bitcoins rather than in its futures.

In the past 10 years, SEC has rejected every application seeking approval for spot ETF but if speculations are to be believed, the markets regulator is likely to give a green signal to one of the proposals as early as January 2024. This would enable investors to get direct exposure to bitcoin through their brokerage accounts, and not through derivative contracts. Unlike a futures-based ETF, a spot ETF would own actual bitcoins.

This would lead to higher liquidity and greater stability of crypto prices. The move, if approved, would most likely widen this cryptocurrency’s reach and popularity among investors. According to a Reuters report, if SEC approves one of these spot ETF applications, there could be an inflow of $3 billion in just one day and as much as $55 billion in the next five years.

In a note to clients, Standard Chartered said there are expectations of anywhere between $50 and $100 billion of inflows into bitcoin ETFs in 2024, CoinDesk reported. The bitcoin prices have rallied over 60 percent since October on expectations that SEC will greenlight one or more spot ETFs in early 2024. The spot ETFs are likely to cause mass adoption, which will boost cryptocurrency's overall market valuation.