Bernstein: Spot Bitcoin ETF Approval Would Spark Fresh Liquidity and New Cycle

Wealth management firm Bernstein suggests a fresh growth phase for the market if a spot Bitcoin (BTC) ETF application gets approved by the Securities and Exchange Commission (SEC). 

In a new report, the firm noted that a spot BTC ETF would add value to the entire digital asset ecosystem by creating demand in the spot market including the stablecoin market.

The firm argues that fresh capital would trickle into the market, sparking renewed liquidity around several assets and creating a resurgence in DeFi volumes.

Aside from liquidity for DeFi, the stablecoin ecosystem stands to gain as most investors would use these assets as an entrant to wider cryptocurrencies. 

Other points highlighted by the report include the boom of investments around crypto infrastructure and the tokenization of traditional assets across several chains. 

“With the interest of leading global asset managers in bitcoin (BTC) spot ETFs and potential mechanisms to address the U.S. Securities and Exchange Commission (SEC) objections, the probability of approval has risen.” 

Analysts led by Gautam Chhugani stated that a potential approval would become a “flywheel” for both retail and larger institutions in the wake of recent regulatory turmoil in the United States as it would create a wide notion of legitimacy. 

This month, Bernstein released a study that projects the stablecoin market cap to grow by 2,145% to nearly $3 trillion in the next five years as PayPal’s stablecoin and other developments await the sector. 

The firm also projects a spot BTC ETF to grow exponentially, tapping 10% of Bitcoin’s market cap in a couple of years.

Spot BTC ETF is backed by all 

Since the filing of a spot BTC ETF application by BlackRock in June, several Bitcoin bulls have backed an approval by the SEC anticipating a major price uptick amid surging adoption.

Following the ETF application by major firms, the price of Bitcoin skyrocketed above $31,000 with bulls expressing delight at the market turnaround after the bearish outlook of 2022.

📊 Renewed Institutional Interest: Crypto Inflows Surge After BlackRock's Bitcoin ETF Filing

Investment funds backed by digital assets saw their largest weekly inflows in a year last week, with $199 million being added to the sector.#CryptoNews https://t.co/9WFosFprto

— Cryptonews.com (@cryptonews) June 27, 2023

Although the SEC has delayed the approval of applications filed by Ark21 Shares, industry executives still express optimism of an imminent approval which would open the floodgates for more institutional investment in digital assets.

Bernstein further stated that the present reality though a slight increase from last year still moves sideways.

“On-chain assets have been stuck in a $40b range this year, and stablecoins in circulation at around $120b,” the report reads.

The launch of PayPal’s stablecoin, PYUSD has Aldo’s been likened to the start of a new traditional payment drive in digital assets as it opens its customer base to new utilities.