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- A report from Coinbase Institutional suggests that the market has already partially priced in this approval, making it uncertain how much more Bitcoin can outperform in the event of a favorable decision by the SEC.
- The crypto community is eagerly awaiting the potential approval of spot-based Bitcoin ETFs, but Coinbase’s analysis suggests that it would take more time for institutional inflows to follow.
The world’s largest cryptocurrency Bitcoin (BTC) has delivered a strong performance in 2023 and the community has further expectations with the approval of the first spot Bitcoin ETF in the US. While the hopes for a Bitcoin price rally are high, a report from Coinbase Institutional states that the approval has been already priced in partially.
In its monthly report, David Duong, head of institutional research at Coinbase Institutional, noted:
We think the divergence in the performance of bitcoin and other tokens shows that the potential approval of one or more spot bitcoin ETPs has already been partially priced in. That makes it less clear how much more bitcoin could outperform if a favorable U.S. Securities and Exchange Commission (SEC) decision occurs.
Since BlackRock (BLK) and other established giants in traditional finance applied for BTC ETFs based on the spot market in mid-June, Bitcoin has seen an 8 percent increase in its value. In contrast, ether, the second-largest cryptocurrency by market capitalization and a leader among alternative cryptocurrencies has experienced a 7.5 percent decline.
Bitcoin Sails Through Unfavorable Macros
Bitcoin, categorized as a macro asset, has outperformed the broader cryptocurrency market, even in the face of certain unfavorable developments in the U.S. Treasury yield curve’s term structure since mid-June. This suggests that factors beyond the curve’s behavior, such as expectations surrounding ETFs, have influenced the BTC market.
Remarkably, Bitcoin’s value has risen despite the widening spread between yields on the 10-year and three-month notes (3m10y slope), which has increased by almost 70 basis points to -0.8 percent since mid-June. This stands in contrast to ether, which, adhering to its established pattern, declined while maintaining an inverse relationship with the Treasury yield curve’s term structure.
“Crypto prices have had an inverse relationship with changes in the term structure of the U.S. Treasury yield curve since mid-1Q23. But the strength of that relationship is very different for BTC (vs. the U.S. 3m10y slope) compared to ETH (vs the U.S. 3m10y slope),” Duong said.
Will the Bitcoin Outperformance Continue?
The cryptocurrency market has long anticipated the introduction of a spot-based Bitcoin ETF, with hopes that it would pave the way for mainstream capital to flow in. According to NYDIG, the approval of spot-based Bitcoin ETFs has the potential to generate $30 billion in new demand for the world’s largest digital asset.
According to Coinbase’s analysis, once the spot-based ETF is approved, Bitcoin might lose its current advantage over the broader market, as we observed following the launch of futures-based ETFs in October 2021.
Coinbase’s statement highlighted the uncertainty around how much more Bitcoin could outperform the market in the event of a favorable decision by the U.S. Securities and Exchange Commission (SEC). While one or more approvals could result in substantial net inflows, these inflows might take time to materialize, as markets often exhibit impatience.
This scenario draws a parallel to the SPDR Gold Shares ETF (GLD), the first spot gold ETF in the United States, which made its debut 19 years ago and now holds over $50 billion in assets. Many Bitcoin proponents regard the cryptocurrency as digital gold.
In the latest development, the U.S. SEC has decided not to contest the court ruling for converting the Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF.
