The application by BlackRock, the world’s largest asset manager, for approval of a Bitcoin spot ETF with the US Securities and Exchange Commission (SEC) is the biggest story in the crypto market today. Numerous experts are extremely optimistic that an approval of the first Bitcoin spot ETF in the US will be a massively bullish event, attracting huge amounts of new capital and triggering a new bull run.

But where does this theory come from? Bitcoin is often referred to as the digital gold of the 21st century, so it’s an obvious choice to look at the history of gold and the first gold based spot ETF.

Why The BlackRock Bitcoin ETF Would Be So Bullish

The first thing to note is that BlackRock applied for a spot ETF and not a Futures ETF. The SEC has already approved a number of Bitcoin Futures ETFs that hold Bitcoin futures contracts on the CME. These are currently traded on the US equity markets, but have relatively low popularity. And this has its reasons, first and foremost the so-called “drag”, as Scimitar Capital explains.

Drag refers to the underperformance of a fund that attempts to replicate the return of a particular underlying asset and is a long-term result of regular portfolio rebalancing. To track the spot price, BITO, the largest bitcoin futures ETF, holds 2/3 in the front-month future and 1/3 in the following month.

However, this “rolling” is costly because of transaction fees, slippage and because futures for the last month are usually traded at a premium over the first month in BTC (“contango”). For this reason, futures ETFs are not a good investment for retail traders in the long run and are therefore unpopular.

A Bitcoin spot ETF does not have these disadvantages. “This is the reason why physically backed ETFs like GLD and IAU for gold have a combined 90B of AUM whereas futures backed ones like BITO and USO have a paltry 1.6B,” Scimitar Capital says.

The first gold ETF, the SPDR Gold Trust ETF (GLD), was listed on the NYSE on November 15, 2004 and revolutionized gold trading. Before GLD came on the market, it was possible to invest in gold in the form of bars, coins, certificates and shares of gold mining companies.

The exchange-traded fund made investing in precious metals a no-brainer and eliminated the problems of shipping and vaults. The same revolution could be coming to Bitcoin by a Bitcoin spot ETF. Retail investors could hold Bitcoin long-term through the ETF without worrying about custody and private keys.

And the revolution in gold also made itself felt in the price. While the price of gold was still below $450 per ounce in November 2004, gold saw a meteoric rise in the years that followed.

In September 2011, less than seven years after the launch, gold was trading at $1920 per ounce. Many economic factors have influenced the price of gold, but the launch of ETFs certainly played an influential role in attracting global institutional funds to the market.

The digital gold of the 21st century, Bitcoin, may yet see this price explosion if history repeats itself.

At press time, BTC traded at $25,604, reclaiming the 200-day EMA (blue line).

Featured image from iStock, chart from TradingView.com

The Bitcoin price has risen 3.2% since yesterday’s low of $24,827. At press time, BTC was trading at $25,590 and has thus reclaimed two extremely important price levels for the moment: first, the Bitcoin price has once again risen above the 200-day Exponential Moving Average (EMA) currently at $25,299, and second, the price is now also back above the 200-week EMA at $25,304 (with the weekly close becoming of crucial importance).

As always, there are several narratives for yesterday’s rise in price. The most obvious narrative and currently the biggest topic in the market is the Bitcoin spot ETF filing by BlackRock, the world’s largest asset manager, with the US Securities and Exchange Commission (SEC). A spot ETF is seen as the holy grail that could finally open the floodgates for institutional liquidity, as Bitcoinist reported today.

Reasons For The Bitcoin Rally

BlackRock is believed to have a strong chance of getting the first spot-based Bitcoin ETF approved by the SEC due to its political influence and network. The new capital inflows made possible may have the potential to be the next bull run catalyst, according to many experts.

“BlackRock getting a BTC ETF through would be the best thing that could happen to BTC,” Galaxy Digital CEO Mike Novogratz said yesterday. Accordingly, the news is likely to have created a bullish sentiment in the market.

However, as always, several reasons play a role in the price movement on the Bitcoin market. One issue that should not be neglected is always the macro situation and the US dollar index (DXY). The latter has seen a setback in the last three days, falling from 104.70 to currently 102.21. This is likely to have favored BTC for now.

As for the macro situation, Wednesday’s interest rate decision by the US Federal Reserve (Fed) certainly still plays a role. The main story is that the market is not buying Fed Chair Jerome Powell’s hawkish stance. Analysts believe that the two more rate hikes announced in the dot plot are a feint to prevent a bullish breakout in the financial markets.

Finally, BTC’s decoupling from the S&P 500 has also been seen in recent days. Yesterday’s move could have been the start of a catch-up rally in which BTC shakes off the unnecessary losses caused by the Tether FUD and the SEC lawsuits against Coinbase and Binance US.

In addition, Bitcoin hodlers continue to show historically high conviction. As on-chain analyst Axel Adler Jr explained via Twitter, the total BTC inflow across all exchanges is currently at a low, suggesting that Bitcoin holders are in no hurry to sell their coins.

The total BTC inflow across all exchanges is currently at a low, indicating that Bitcoin owners are not in a rush to sell their coins. #Bitcoin #HODL pic.twitter.com/JTscheVcgO

— Axel 💎🙌 Adler Jr (@AxelAdlerJr) June 16, 2023

As NewsBTC reported, yesterday’s Tether FUD may also have once again marked the bottom for Bitcoin. Within the last bear market, there have already been three de-pegging events of stablecoins, all of them were marking the local bottom.

At press time, BTC changed hands for $25,590.

Featured image from iStock, chart from TradingView.com