The cryptocurrency market is currently abuzz with optimism after ProShares Bitcoin Strategy ETF (NYSE:BITO) launched. These investment products could offer additional exposure to cryptocurrencies, increasing the number of investors.
For now, hope for the launch of more ETFs appears to be the main driving force behind the market's current rally. Bitcoin crossed the $60,000 mark for the first time since May last week after reports surfaced that the Securities and Exchange Commission (SEC) could approve another Bitcoin ETF this week.
Considering the amount of excitement currently trailing the ETF space, it's worth understanding how these investment products could be a massive catalyst for additional growth in the market.
Exchange Traded Funds Definition
An ETF is a financial instrument that tracks the value of an underlying asset. It trades on traditional stock exchanges like regular stocks, offering even more legitimacy to the asset in question.
Bitcoin ETFs will track the value of Bitcoin and will trade on these exchanges, as opposed to crypto-focused exchanges like Binance and Coinbase (NASDAQ:COIN).
With a Bitcoin ETF, investors will be able to invest in Bitcoin outside of these crypto exchanges. A Bitcoin ETF's value is directly proportional to Bitcoin's price.
Bitcoin ETFs are huge because they allow traditional investors to participate. We already saw institutions enter the crypto space in the past year, with companies like MicroStrategy Incorporated (NASDAQ:MSTR) and Tesla (NASDAQ:TSLA) allocating billions into the asset. Now, ETFs offer accessibility to Bitcoin for all of Wall Street.
Currently, most investors tend to move into fixed-income funds, mutual funds, non-leveraged equity funds, and much more. Data from the Boston Consulting Group (BCG) estimates that the global equity market has a value peg of $100 trillion. At the same time, Reuters reported recently that most corporate bonds in Europe now offer negative yields.
Investors themselves remain pessimistic about global currency and equity markets, with the Financial Times claiming that negative-yield debt has now soared to almost $17 trillion worldwide.
With most assets still offering negative yields, this appears to be the best time for investors to consider alternative assets. They might not necessarily shift to cryptocurrencies right away, but they can access alternative investment funds and non-leveraged funds backed by a basket of assets.
Eventually, a Bitcoin ETF will make it more accessible for these investors to get cryptocurrency exposure. A massive market ready to move will open enormous opportunities for cryptocurrencies.
Then, there is the push for commodities funds as well. Data from iShares shows that exchange-traded products worldwide have a collective value of about $265 billion. Considering that not all of these products are listed, we could give a conservative value between $450 billion and $500 billion.
If ETFs can get approval, corporate funds could allocate between 0.5% and 1% of their assets under management to Bitcoin as a means of diversifying. This influx of purchases should be enough to push Bitcoin's price to a new high and break its $54000 record.
Interestingly, it's worth pointing out that many investors will try to get ahead of the curve as soon as an ETF is approved. Their demand action alone could push Bitcoin above $65,000, with further demand getting it above the $70,000 mark and beyond.
Bitcoin Technical Outlook
Bitcoin's price action over the past two weeks has brought it above its short-term and long-term moving average (MA) metrics - ranging from the 10-day MA of $59,437 to the 200-day MA of $45,346.
Bitcoin's relative strength index (RSI) stands at 73.79, slightly underbought for an asset of its magnitude. With a positive moving average convergence divergence (MACD), the asset shows a strong buy signal.
Source: TradingView
Some analysts believe that an ETF approval doesn't necessarily mean we're heading for milestone price movement despite the hype.
Conclusion
Bitcoin's outlook, for now, remains highly positive. Institutional investment has consistently increased the Bitcoin price, and there's no reason why this period should bring anything different. It is worth noting that many in the market have also applied for ETFs for years, but the SEC has shut them down.
We already see good news. ProShares, America's leading provider of exchange-traded products, listed its Bitcoin futures-backed ETF on the New York Stock Exchange on Oct. 19. Valkyrie Bitcoin Strategy ETF (NASDAQ:BTF), Bitcoin futures-backed ETT, could list on the NYSE as well after it was listed on the NASDAQ last week.