Why Bitcoin Spot ETFs Are So Important

Author: Dan Held, Head of Business Development at Kraken; Translation: Golden Finance xiaozou

The Bitcoin spot ETF was approved today and can be traded tomorrow. So, why are Bitcoin ETFs so important?

1, Friction

ETF greatly reduces transaction friction to almost zero. You don’t need a bank to send money to Kraken, no KYC/AML processes, no understanding of how orders work, and no knowledge of key management or security.

2, Retirement Accounts

While you could previously purchase Bitcoin using a self-directed IRA, the process was difficult and expensive Also very high. Now, trillions of dollars can flow into Bitcoin with just a few clicks.

3, Institutional Investors

ETFs legitimize Bitcoin and allow institutions to hold Bitcoin through their existing services. Financial advisors can now easily include Bitcoin in their investment portfolios. Since Bitcoin has little correlation to many traditional assets and is highly volatile, adding an ETF to your portfolio (say, 1%) will provide you with a better performing Sharpe Ratio. It doesn't take much thinking, adding ETFs to your long-term asset management strategy is a smart move.

4 , Derivatives and Hedging

After the ETF is released, options trading will be available, and anyone can use call/put options to hedge their existing Bitcoin positions, or you can also bet on Price trend.

5, solving the unit bias problem

As we have seen with Doge, Shiba and other meme coins, when people’s holdings are XXXX instead of 0.XXX, a large supply would make them feel richer. Humans tend to think in terms of whole numbers, not decimals.

The share price of a Bitcoin ETF can be any value. For example, 1 dollar. Retail investors will flock to the idea that they can own hundreds or thousands of “Bitcoin stocks.” What most people don’t know right now is that they can buy only fractions of Bitcoin. They considered the price of $45,000 "too expensive" compared to the market value.

6 , Conclusion

When the influx of massive purchases encounters a fixed supply, the price trend will only move in one direction.

This may not happen right away, or it may not happen in 1-2 months, but I believe the next 6-18 months will be crazy.