Introduction
Bitcoin (BTC) made a triumphant rally in 2023, as it concluded the year with an impressive +150% increase from an initial value of about $16,500 at the beginning of the year. As at publication BTC remains 34% below its record high of nearly $69,000 in November 2021. However there is strong sentiment in the industry that 2024 will see BTC rise to new heights.
In this blog, we explore the potential impact of the BTC ETF approval on the broader Web3 industry including the regulatory landscape and what this could mean for blockchain development.
Market Analysis and Key Points to Consider
The Securities and Exchange Commission (SEC) is set to make a crucial decision by January 10, regarding the approval or rejection of a BTC ETF. Analysts and market sentiments converge on the likelihood of approval. The outlook for approval is favourable due to the DC Circuit Court’s recent ruling that deemed the denial of the Grayscale ETF as arbitrary and capricious.
The final decision on Ark Invest’s and 21Shares’ applications are due on Jan 10th and, should these applications receive approval, there is the chance that most of the other applications will also receive a blanket approval, so that the SEC is not seen as picking favourites.
As a result the BTC ETF approval would cause a ripple effect, and the industry will be watching with anticipation over the coming days.
At Labrys, we’d like to highlight the most direct benefits of a BTC ETF approval:
- Ease of BTC Exposure – A BTC ETF would simplify access to BTC, appealing to more conservative investors who’d prefer to trust custody to traditional asset managers like BlackRock and Fidelity.
- Considerable Investment Influx – Analysts project that the BTC ETF approval could channel anywhere from $30 billion to $300 billion USD into BTC. This influx could lead to greater demand from traditional asset managers, fund managers, family offices, and retail investors, as allocating to BTC becomes a strategic imperative.
- Actual BTC Backing – Unlike current cash-settled futures ETFs, the approval of a spot ETF would require ETF issuers to purchase BTC on the open market to back their funds, potentially leading to increased demand and scarcity.
Additional Positive Catalysts Worth Considering
Bitcoin Halving: The upcoming Bitcoin halving, occurring approximately every four years and slated for April/May 2024, further contributes to the price surge we have witnessed in 2023. During the halving event, mining rewards are halved, effectively limiting the Bitcoin supply.
In April, 3.125 BTC will enter the supply for every Bitcoin block that is mined, half of what it is today (6.25 BTC).
Favourable Macroeconomic Environment: With the Federal Reserve signalling rate cuts, increased liquidity from major central banks and the forecast 2024 US election spend, 2024 is poised for macroeconomic instability. Historically this has signalled a favourable environment for BTC demand.
Other Industry Developments: Positive catalysts include increased Lightning Network development, the emergence of “DeFi on Bitcoin,” resilience in the face of industry attacks, and Central Banks’ pursuit of Central Bank Digital Currencies (CBDCs).
Cycle after cycle, it is evident that sustained demand for BTC has a domino effect of sorts, with money then spilling into Ethereum and altcoins. An example of this can be seen with the recent run of Solana (SOL) and many other altcoins ending 2023 with solid gains. Additionally we believe it is highly probable that once the BTC ETF is approved, the ETH ETF approval could follow soon after.
Conclusion
The approval of a BTC ETF will have a profound impact for the Web3 industry. Increased investment, enhanced legitimacy, institutional adoption and a broader market rally will inevitably create an even more thriving ecosystem for Web3 projects and businesses.
The increased availability of funding and a favourable market environment would likely lead to a rise in emerging, innovative projects and advancements within the space. In a market often constrained by a shortage of developers, Labrys encourages businesses to be proactive and prepare to have products ready to deploy ideally during the bull market.
If you are looking to seize such opportunities in the growing Web3 space, reach out to our team of crypto development natives to ensure your project is ready to thrive when 2024 kicks into gear. If you’re interested in building a Web3 application in 2024, reach out to us now.
