How Bitcoin ETFs can promote crypto adoption and regulation

Bitcoin ETFs are a way for investors to buy into the idea of cryptocurrency trading without actually trading Bitcoin itself. While it’s not actually Bitcoin or crypto trading, it opens to door to conservative investors not ready to make the move into Bitcoin just yet. And the ramifications will very likely have a strong impact on the price of Bitcoin and cryptocurrency adoption overall.

Some analysts consider speculation and investor sentiment as the key driving factors of Bitcoin price. Currently, without asset investment opportunities such as approved Bitcoin ETFs, it is difficult to draw a relation to other investments like pension funds, retirement plans and fixed income investments to cryptocurrency or digital asset classes.

Limited exposure to Bitcoin from asset managers

When it comes to asset management, it’s worthwhile noting that mutual fund managers don’t have full control of all investment decisions of the investor they’re looking after. Fund administrators will liaise between the fund manager and the investor to verify and allocate assets according to certain investors.

Why this is important is because a fund administrator might rule out an asset class that poses a risk or shows too great volatility for the investor. As a result, assets like Bitcoin and other digital currencies might be denied if the administrator sees them as a threat to the portfolio.

According to Amundi, a massive European investment firm, cryptocurrency exposure is extremely unlikely. As per a recently released report by the firm, 44% of Amundi’s assets under management (AuM) are in fixed income with 21% locked in multi-assets. Furthermore, global asset managers will have up to 60% fixed income exposure, which won’t include Bitcoin and other cryptocurrencies.

Source: Amundi

This being said, the global asset industry is growing as the global economic crisis recedes and as the world looks back to investment following the initial uncertainty following the pandemic.

The global asset industry is increasing, with North America leading the charge. According to the Boston Consulting Group, the industry has grown past $100 trillion USD. However,  these figures don’t address how Bitcoin and cryptocurrency investment will fit into the statistics accurately. Despite this, the firm is still bullish about the use and adoption of cryptocurrencies. As reported at the end of 2020, BCG offered that cryptocurrencies are a “vehicle with great prospects“. According to the firm:

They have the potential to outperform conventional banking products while offering greater efficiency, less bureaucracy, and more transparency.”

Investors are looking for higher rewards from riskier assets

According to Financial Times reports, the global debt has surpassed $16,5 trillion – a number increased as investors are becoming less optimistic about central bank and bond purchases. As a result, there’s a predicted shift on the horizon towards riskier assets like Bitcoin. While it’s not expected that cryptocurrencies will overtake the investment market, the digital currency industry will likely see larger-scale investors (both retail and institutional) enter the market.

As this happens, a regulation approval from the United States Securities and Exchange Commission (SEC) towards Bitcoin ETFs will encourage administrators and asset managers to consider the funds without ruling out the asset class because of the risk.

A Bitcoin ETF will capture fresh attention

The approval of a Bitcoin ETF will introduce new traders to Bitcoin trading. Although the initial investment in an ETF will not be trading the actual token, the introduction of Bitcoin to investors will likely lead them to invest in the market. Moreover, governments and authorities will likely concentrate on regulating the space with more investors, which will possibly add a layer of protection that will attract investors sitting on the fence.

With more security for investors, the more investment the market will see, and the higher the price of Bitcoin will rise.

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