The Importance and Future of Physical Bitcoin ETFs: Insights from Analyst Michaël van de Poppe

Dive into the world of cryptocurrencies with Michaël van de Poppe's expert analysis on physical Bitcoin ETFs.

Understand their significance, how they're changing investment dynamics, and what future trends we can expect in this detailed, enlightening read.

Michaël van de Poppe Elaborates on Physical ETFs

Michaël van de Poppe, a well-known analyst and trader renowned for his cryptocurrency price predictions, explained the importance and future of the much-discussed "Physical Bitcoin ETF" in a detailed post on January 12, 2024, following its listing approval by the U.S. Securities and Exchange Commission (SEC).

Michaël van de Poppe, with over 680,000 followers on platform X, is a prominent analyst and the founder & CEO of "MN Trading," a firm involved in cryptocurrency-related consulting and education.

The U.S. Securities and Exchange Commission (SEC) announced on January 11, 2024, Japan time, the approval of a total of 11 Physical Bitcoin ETF listings. While trading of these ETFs has begun, Michaël van de Poppe's extensive post discusses the significance and future of the Bitcoin ETF.

※ The following is a summary of the explanation given by Michaël van de Poppe.

Understanding Bitcoin and ETFs

Fundamentally, Bitcoin does not require an ETF. As a decentralized currency and asset, it can function independently of governments. However, in modern society, when utilizing Bitcoin, regulatory measures like ETFs become necessary.

The "decentralized" nature of the technology supporting Bitcoin remains unchanged. Computers are still required to mine new Bitcoins, and the maximum supply of Bitcoin remains at 21 million BTC.

The change brought about by ETF approval mainly concerns "institutional investors." But first, let's define an ETF and understand what it is.

What is an ETF (Exchange-Traded Fund)?

An ETF (Exchange-Traded Fund) is a tracker or derivative product of an underlying commodity, index, bond, or stock. A Bitcoin ETF tracks Bitcoin, with physical Bitcoin serving as collateral.

Approval of an ETF means the product can be traded on conventional stock exchanges. In the crypto industry, Bitcoin is traded on crypto exchanges like "BINANCE" and "Bybit," but ETFs are fully regulated products traded on exchanges like "Nasdaq" or "AEX."

The Difference Between ETF Prices and BTC Prices

The price of an ETF significantly differs from the Bitcoin price. This is because an ETF is a derivative product, essentially following the Bitcoin price, hence termed a "tracker."

The U.S. SEC approved the ETF applications of all 11 groups that applied for a physical Bitcoin ETF. These ETFs became tradable through exchanges, showing prices distinctly different from the Bitcoin price.

For instance, while the current Bitcoin price is "1BTC = $47,000," the ETF price could be as low as $22. Why such a price difference?

An ETF is essentially a type of fund. Initially, the scale of the ETF is presented, followed by the number of shares to be issued.

For example, in a $100 million ETF issuing 10 million shares, the price of the Bitcoin ETF would be $10. This differs from the actual Bitcoin price, as they are entirely different products.

The Importance of Physical Bitcoin ETFs

Bitcoin is still a relatively unregulated product, and large institutional investors cannot incorporate Bitcoin itself into their portfolios. This is due to issues like "money laundering and terrorism financing," but also because BTC is not classified as a financial product.

As ETFs are investment products within a regulatory framework, institutional investors can now participate in the Bitcoin market by incorporating ETFs into their portfolios.

This method is also used when wanting to invest in commodity markets or baskets of stocks.

One reason why physical Bitcoin ETFs are considered important is that they enable large institutional investors to enter the Bitcoin market.

What Rising Prices in Physical ETFs Indicate

Assuming a starting price of $10 for an ETF with a $100 million start, this start is often determined by the interest of the entity's clients. What does it mean when such an ETF's price begins to rise?

A rise in the price of a Bitcoin ETF indicates high positive market interest in the product, generally seen as a "good sign."

In the case of a physical Bitcoin ETF, issuers must ensure that they have Bitcoin as collateral to guarantee that "the ETF can be exchanged for Bitcoin."

In simple terms, "if an ETF is worth $100 million and is tradable, it must be backed by an equivalent amount in Bitcoin."

If we recognize substantial interest from large institutional investors, it becomes apparent that the value of the ETF would start rising.

It is expected that institutional investors could show interest worth $200 billion in the market. This could significantly impact Bitcoin prices.

If the price of an ETF rises from $10 to $15, assuming 10 million shares are issued, the value of the ETF becomes $150 million. This means "the issuer of the ETF must purchase additional Bitcoin to ensure sufficient collateral for the offered product."

The Implication of Physical Bitcoin ETF Approval

The approval of a physical Bitcoin ETF signifies that "a mature economic zone fully accepts Bitcoin as a complete asset."

It implies that "more focus will be placed on Bitcoin in terms of education, regulation, finance, and politics, promoting network growth."

The current situation suggests that Bitcoin has finally matured and taken its first step. The fact that Bitcoin's likelihood of disappearing is virtually zero increases the interest of more people and stakeholders in including "digital gold" in their portfolios.

In conclusion, the approval of a physical Bitcoin ETF positively impacts the entire cryptocurrency market. It is believed to have a positive effect not only on developers and miners but also on investors.

Anticipated Future Developments

Going forward, there is a very high possibility of creating "basket-type cryptocurrency ETFs composed of multiple brands," and the likelihood of a "physical Ethereum ETF" being approved for listing is also very high.

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