Bitcoin ETF Trading Volume Falls Short: Analysts Doubt Major Price Surge

• Bitcoin ETF trading volume fell below expectations of the first trading day.
• Analysts see a long-term potential in the price of Bitcoin through the asset class.

The trading volume of Bitcoin Exchange-Traded Funds (ETFs) launched in the US on January 11 has fallen short of expectations, casting doubt among analysts on the likelihood of a major price surge. 

Analysts Perspective on Bitcoin ETF

During an exclusive interview with CoinDesk, Moody’s analysts discussed their views on the potential impact of Bitcoin ETFs on the market. Vincent Gusdorf, Senior Vice President of DeFi and Digital Assets (DFDA) at Moody’s, highlighted that institutional investors’ entry into the crypto market, facilitated by ETFs, could be a watershed moment for the industry. 

The approval of the recent spot Bitcoin ETFs in the US was met with enthusiasm, with proponents predicting increased institutional adoption and a subsequent surge in trading activity.

However, Cristiano Ventricelli, Vice President of DFDA at Moody’s, cautioned that the approval of the ETF itself does not necessarily warrant an increased allocation to Bitcoin in investors’ portfolios. 

Bitcoin prices have steadily increased in recent months, following a spectacular market crash in 2022 caused by the demise of several major businesses in the industry, including Sam Bankman-Fried’s FTX. According to Gusdorf, whether that price trend will continue in the short term is determined by “the trajectory of other monetary policy, and whether we will not see more scandals” in the crypto industry.

In light of recent market volatility, Bitcoin’s price climbed to nearly $49,000 and subsequently fell to $46,000 within a short timeframe. Currently, Bitcoin price is down by 6.6% to $44,861.21, with a market capitalization of $899.9 billion, and a trading volume of $42.6 billion.

In the medium to long term, Moody’s analysts see the approval of Bitcoin ETFs as a positive development that will contribute to increased price discovery and stability for Bitcoin. Ventricelli suggested that this development might attract more institutional investors to the asset class over time. However, the analysts warned investors about the inherent volatility of Bitcoin and advised careful consideration of risks when allocating funds from their portfolios.

Notably, the skepticism among analysts is not necessarily a dismissal of the long-term potential of Bitcoin. Instead, it reflects a recognition that the path to widespread adoption and acceptance is likely to be more gradual and complex than initially thought.

Bitcoin ETFs Potential for Growth

Moody’s analysts see the ETF approval as beneficial not only for Bitcoin but also for other players in the crypto industry. 

Marat Faritov, Assistant Vice President of the DFDA unit at Moody’s, points out that banks may increasingly use custody solutions and other services, generating more revenue for companies within the crypto space.

Gusdorf and Ventricelli noted that developments in tokenization are another area where Traditional Finance (TradFi) and crypto intersect. The Moody’s team highlighted a convergence between the two worlds, with tokenization gaining traction and creating bridges between crypto and TradFi. 

The analysts emphasize the positive implications of ETF approval for players involved in tokenization, such as custody solution providers and tokenizers.