5 Long-Term Benefits of Bitcoin’s ETF Approval for NFTs
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| By Jurica Dujmovic |
I think people lie when they say, “I hate to say I told you so.”
Because there’s always some satisfaction in being right. And there’s even more satisfaction when you’re right about something good.
That satisfaction is flooding our team right now. Yesterday, my colleague Beth Canova sent out your Weiss Crypto Daily issue early to bring you the latest in the spot Bitcoin ETF approval.
After a hack, a false approval announcement and quite a lot of uncertainty, some were concerned an approval wouldn’t come.
But we weren’t, and we didn’t want you to doubt either.
As Beth said yesterday:
“We remain hopeful that an approval could come as soon as the end of today. And according to a recent Reuters article, many in the industry agree with us. But we’re not basing our outlook on sheer optimism. Nor is it based on what we want to happen. Our outlook is based solely on the facts we have.”
Our interpretation of the facts at hand was spot on. Just over an hour after yesterday’s issue hit your inbox, several spot Bitcoin ETF applications were approved.
These are a type of investment fund that trades on traditional stock exchanges, which track the actual, or “spot” price of Bitcoin.
This momentous decision, long anticipated by the crypto community, marks a significant milestone in the journey toward integrating digital assets into the mainstream financial ecosystem.
Bitcoin, the pioneer and most prominent of cryptocurrencies, has long been at the forefront of the digital asset revolution, challenging traditional notions of currency and investment.
This represents a major endorsement of Bitcoin's legitimacy and potential as an investment asset.
According to a recent poll by Zacks, 88% of financial advisers said they were waiting for an ETF approval to purchase Bitcoin. That’s likely because only 19% said they were able to buy Bitcoin in client accounts without the ETF.
Naturally, this approval opens the door to a wave of institutional and retail investment, potentially ushering in a new era of accessibility and liquidity for Bitcoin.
That’s because these ETFs are traded on traditional stock exchanges. This gives those who are either unable or unwilling to engage directly with cryptocurrency exchanges or digital wallets an opportunity to buy Bitcoin.
3 Additional Reasons Why the SEC’s Approval Is Significant
The SEC's green light for BTC Spot ETFs is a watershed moment for several reasons. I’ve covered accessibility, and that is huge.
But there are three other key benefits:
- Legitimization of Bitcoin: The SEC’s approval lends a significant degree of credibility to Bitcoin as a legitimate asset class. It signals recognition from a key financial regulator that Bitcoin has enduring value and is worthy of inclusion in the broader financial market.
In short, it’ll be much harder for naysayers like Warren Buffett to hand-wave away Bitcoin’s strength and promise. Top-performing blue-chip altcoins are also likely to benefit from that air of legitimacy.
- Institutional Involvement: With the entry of BTC spot ETFs into traditional stock exchanges, institutional investors, who might have been hesitant to invest in Bitcoin due to regulatory uncertainties or operational complexities, now have a regulated and straightforward avenue for investment.
This could lead to an influx of institutional capital into the Bitcoin market. And liquidity in crypto tends to rotate through crypto from Bitcoin, down to the leading altcoins, to mid-cap alts and finally small-cap projects. That means the benefits are likely to be felt in time by the broad market.
- Increased Liquidity and Stability: The introduction of BTC spot ETFs is expected to bring increased liquidity to the Bitcoin market. With more investors able to buy into Bitcoin through these ETFs, the market may see reduced volatility and increased price stability over time.
However, the implications of this decision are a mixed bag that extends far beyond Bitcoin itself.
The non-fungible token market, a burgeoning sector within the digital asset world, stands at an interesting crossroads in light of these developments.
To fully grasp the significance of the SEC’s approval of BTC spot ETFs and its implications for the wider digital asset space, including NFTs, it is essential to understand what these financial products are and why they matter.
Connecting BTC Spot ETFs to the NFT Market
As Marija Matić cautioned on Monday, the immediate aftermath of the ETF approvals will likely be volatile. I wouldn’t be surprised if these fluctuations in the crypto market impact NFT trading volumes and prices, as has happened before.
That’s because NFTs, being a relatively smaller and more niche market, are often more sensitive to such shifts in the crypto space. Rapid changes in Bitcoin’s value driven by the response to the ETFs could lead to a temporary slowdown in NFT sales as investors may become more cautious or even redirect their funds toward Bitcoin investments.
Still, just as liquidity rotates through the market, so does investor interest. I’ve said before that narratives are a key driver of price action in a bull market like this one. And NFTs have a distinct narrative within the crypto space.
So, in time, a thriving Bitcoin market can create a positive sentiment across crypto, potentially increasing investor confidence in NFTs.
Also, a portion of investors — institutional and retail alike — entering the crypto market through these ETFs are more inclined to explore other digital assets, including NFTs, than before.
That’s because the NFT market, as well as other sectors of crypto, will benefit from Bitcoin’s new legitimacy. While NFTs may not receive Bitcoin-level acceptance just yet, this could be the first step in combating the skepticism that many in TradFi have.
But these are nearer-term outcomes. The real benefits the Bitcoin spot ETF approvals bring to the NFT sector are long-term effects.
For me, there are five that stand out:
Benefit 1: Wealth Effect on NFT Purchases
High-value NFTs — the ones that make headlines due to their outrageous auction prices or celebrity endorsements — can be considered luxury items. As Bitcoin increases in value due to the influx of new buyers, the “wealth effect” may kick in. Especially for holders who bought ahead of time, sitting on even bigger gains.
This wealth effect could result in a surge in demand from high-net-worth individuals, especially for those high-ticket, high-visibility NFTs.
Benefit 2: Professionalization and Legitimization
The entry of institutional players could lead to a more professionalized NFT market, with improved standards, greater transparency and enhanced credibility, as investor attention eventually shifts away from BTC and into new opportunities.
Benefit 3: Innovation in NFT Space
The influx of new investors and capital into the crypto market could spur technological advancements in the NFT space, including improved platforms, enhanced security and innovative use cases.
Benefit 4: Integration with Traditional Finance
The acceptance of Bitcoin by traditional financial systems could pave the way for NFTs to follow suit. By that I mean as crypto becomes less of a boogeyman and more of an opportunity to TradFi investors, we could see NFT integration with conventional financial products and services. This could look like NFT-backed loans, investment funds and other opportunities that have yet to be considered.
Since NFTs are the best technology available to prove ownership of digital assets, NFT integration with financial products and services could be a huge new avenue for the sector.
Benefit 5: Potential Regulatory Attention
No one likes the government telling them what they can or can’t do. But regulations are necessary to provide clarity and chase away the fear, uncertainty and doubt of a new market.
That’s exactly why the Bitcoin spot ETF is so important — it gives investors too uncertain about the Wild West that is crypto a clearer and more familiar way to invest.
The growing interest in NFTs, fueled by the Bitcoin ETF approval, might draw more regulatory scrutiny to the NFT market. That could lead to the development of new regulations and standards specific to NFTs.
While rolling out common sense regulations is never easy, it is a game-changer for adoption. If the NFT market follows Bitcoin’s lead, it could open the space up to new investors previously too wary to test the waters.
Navigating the regulatory landscape will be crucial for the NFT market. The challenge will be to foster innovation while ensuring compliance with evolving regulations.
Personally, I eagerly anticipate being part of this journey during what could be a historic era for digital ownership and blockchain technology.
The innovator in me wants to build utility and solve real-world problems with NFTs, transcending speculative hype. The realist in me knows that bubbles deflate, and that only the platforms and communities with real connectivity to human needs will stand the test of time.
So, onward and upward we march into the emerging metaverse, with the spot Bitcoin ETF leading our way. For now.
The boundaries between finance, technology and community will likely blur as digital assets become further enmeshed into our collective fabric. Transactions will bear both financial and social value.
In this fusion, I believe NFTs have immense disruptive and creative potential, one that I’m excited to harness.
The stage is set. Let the innovation begin!
Best,
Jurica Dujmovic
