Eleven approved Bitcoin ETFs have painted the pioneering cryptocurrency with a fresh coat of legitimacy. By receiving an official blessing from the Securities and Exchange Commission (SEC), an institutional investing barrier has been lifted.

With this barrier gone, financial advisors, mutual funds, pension funds, insurance companies and retail investors can now receive Bitcoin exposure without hassling with direct custodianship. More importantly, a taint has been scrubbed off from Bitcoin, previously likened to “tulip mania”, “rat poison”, or “index of money laundering”.

Following the unprecedented domino of crypto bankruptcies throughout 2022, Bitcoin price reverted to November 2020 level of $15.7k by the end of that year. After that great FUD reservoir was drained, Bitcoin slowly recovered during 2023 and entered 2024 at $45k level, first visited in February 2021.

With the 4th Bitcoin halving ahead in April, and with ETFs setting new market dynamics, what should Bitcoin investors expect next? To determine that, one must understand how Bitcoin ETFs elevated BTC trading volume, effectively stabilizing Bitcoin’s price volatility.

Understanding Bitcoin ETFs and Market Dynamics

Bitcoin itself represents the democratization of money. Not beholden to central authority like the Federal Reserve, Bitcoin’s decentralized network of miners and algorithmically determined monetary policy ensures that its limited 21 million coin supply can’t be tampered with.

For BTC investors, this means they can be exposed to an asset that is not on an inherent trajectory of devaluation, which is in stark contrast to all existing fiat currencies in the world. This is the foundation for Bitcoin’s perception of value.

Exchange-traded funds (ETFs) present another democratization pathway. The purpose of ETFs is to track an asset’s price, represented by shares, and enable trading throughout the day unlike actively managed mutual funds. The ETFs’ passive price tracking ensures lower fees, making it an accessible investment vehicle.

Of course, it would be up to Bitcoin custodians like Coinbase to enact sufficient cloud security to instill investor confidence.

In the ETF universe, Bitcoin ETFs have demonstrated high demand for a decentralized asset that is resistant to centralized dilution. Altogether in the last 15 days, they have resulted in $29.3 billion trading volume against $14.9 billion pressure from Grayscale Bitcoin Trust BTC (GBTC).

Image credit: Bloomberg Intelligence via James Seyffart

This is not surprising. As Bitcoin price moved up due to Bitcoin ETF hype, 88% of all Bitcoin holders entered the profit zone in December 2023, eventually reaching 90% in February. In turn, GBTC investors were cashing out, placing a downward pressure worth $5.6 billion on Bitcoin price.

Moreover, GBTC investors took advantage of lower fees from the newly…

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