Analyst Warns Of Impending ‘Bloodbath’ For Crypto Exchanges With Spot Bitcoin ETF Approval

The crypto folks are­ excited for a likely gre­en light for a spot Bitcoin ETF in the U.S. But some e­xperts caution that crypto exchanges might face unexpected issues.

Some industry experts foresee the commencement of trading for a spot Bitcoin ETF as early as 2024. Coupled with the anticipated block reward halving for Bitcoin in April, Blockstream CEO Adam Back believes this event could drive BTC to $100,000.

Advocates of Bitcoin, including Jan3 CEO Samson Mow, assert that approving a spot in the Bitcoin ETFs in the U.S. could propel Bitcoin to reach as high as $1 million in the “days to weeks” immediately following.

However, the outlook could be more positive for centralized cryptocurrency exchanges, as suggested by Nate Geraci, president of ETF Store, and Eric Balchunas, an ETF analyst at Bloomberg.

If approved, a prospective spot Bitcoin ETF in the U.S. could result in a ‘bloodbath’ for cryptocurrency exchanges, as expressed by Geraci in a message on X (formerly Twitter) on Dec 17.

Geraci suggests that retail participants in a spot Bitcoin ETF will enjoy the advantages of institutional trade execution and reduced commissions. In contrast, retail users on cryptocurrency exchanges will experience ‘retail trade execution and commissions,’ emphasizing the need for improvement to compete with a spot Bitcoin ETF.

Spot Bitcoin ETF: A Game-Changer For Cost-Conscious Trader

Bloomberg ETF analyst Eric Balchunas underscored that trading a spot Bitcoin ETF would incur a cost of 0.01%, aligning with the average fee for ETF trading.

Conversely, trading expenses on platforms such as Coinbase can increase to 0.6%, contingent on the cryptocurrency, transaction size, and trading pairs.

After receiving approval, a spot Bitcoin ETF is expected to introduce increased price competition in the crypto industry, redirecting funds back to investors from exchanges that allocate substantial resources to advertise their services at events like the Super Bowl, according to Balchunas.

If ETFs are launched, it would mark the final ‘Crypto Super Bowl’ because ETFs constitute a relatively streamlined and competitive industry. Some crypto exchanges have been capitalizing on high fees while promoting populism, and this shift to ETFs could redirect the dynamics, as expressed in an interview with industry journalist Laura Shin in Sept 2023.

In the past, most of Coinbase’s revenue has come from transaction fees. In 2022, Coinbase generated $2.4 billion in transaction fees from institutional and retail investors, constituting 77% of its net revenue of $3.1 billion. Despite this, the company has been actively working to reduce its dependence on fees by diversifying its revenue streams and venturing into other income-generating services like subscriptions.

Related Reading | Coinbase Fights Back Against SEC Lack Of Crypto Guidance

The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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