The green light for spot Bitcoin exchange-traded funds (ETFs) in the United States has introduced a much-needed avenue for capital flow from traditional finance (TradFi).
According to David Prinçay, the president of Binance France, the U.S. spot Bitcoin ETFs are the first investment vehicles that allow institutions to easily get involved in Bitcoin (BTC). In an exclusive interview with Cointelegraph, Prinçay stated that prior to the approval of ETFs, large financial institutions in Europe were unable to invest in Bitcoin. However, that has changed now.
During the first quarter of 2024, BNP Paribas, the second-largest bank in Europe, invested in BlackRock’s spot Bitcoin ETF. While the initial investment was only $41,684, which is less than the value of one Bitcoin, Prinçay described it as primarily “symbolic.”
Furthermore, the introduction of spot Bitcoin ETFs has led to Bitcoin being increasingly seen as a financial asset for retirement, even among mainstream investors. Prinçay explained that some major financial institutions, like Fidelity, allow investors to directly expose themselves to Bitcoin ETFs through their 401(k) retirement plans. Fidelity is also the largest 401(k) plan provider in the U.S. Prinçay added that these types of investments bring in long-term capital that could help reduce volatility.
While the majority of Bitcoin ETF holders are still retail investors, holding over 85% of the underlying BTC, with only 10% held by hedge funds, this is in line with the natural progression of newly-launched trading products. Retail investors possess most of the world’s cash. Additionally, Prinçay clarified that the retail investors in this case include not only crypto retail investors who previously held BTC in a cold wallet but also TradFi retail investors.
Since their launch, the U.S. spot Bitcoin ETFs have absorbed 4.29% of Bitcoin’s supply, as reported by Dune.
Overall, the approval of spot Bitcoin ETFs has opened up new opportunities for institutional participation in Bitcoin, allowing for increased investment and potential reduction in volatility.