Why Bitcoin ETFs will change the game for crypto

Like many in the crypto community, I am excited about the potential for Bitcoin ETFs and the game-changing possibilities they hold for the market. Following are a couple of ways they stand to make a significant impact:

A boom in Bitcoin’s value

To better understand how the launch of a Bitcoin ETF could affect the digital currency’s price, it’s fair to make the comparison to gold-linked ETFs. In 2003, the price of gold dramatically increased following the introduction of the first exchange traded fund.

One reason for this was that investment access to the precious metal became much easier, and retail investors were thus able to gain exposure and diversify their portfolios without having to purchase and store physical gold. Today the SDPR GoldShares ETF is one of the biggest ETFs in the market with over $35 billion under management.

Considering the massive growth trajectory following the launch of gold ETFs, many crypto enthusiasts, including myself, believe that a similar positive correlation could exist between Bitcoin prices and the launch of Bitcoin ETFs. In fact, in a note to its clients, JPMorgan referred to a Bitcoin-based ETF as the "holy grail for owners and investors."

Furthermore, an ETF launch could precipitate a massive influx of institutional money into the crypto market. Between Goldman Sachs announcing the launch of its Bitcoin trading platform, to JPMorgan launching a patent for blockchain-powered payments, we have already seen increased institutional adoption in the crypto space this year. However, I believe that a launch of a Bitcoin ETF would be precisely what the market needs to catapult Bitcoin’s price — and the cryptocurrency space as a whole — to the next level.

Addressing the security issue

Most will agree that the dynamic world of cryptocurrency is complicated, even for those of us who spend every day in the trenches. For newcomers, it can be flat-out daunting. In its current state, anyone who wants to buy or trade cryptocurrency has to be able to navigate a multitude of crypto-specific exchanges and deal with crypto wallets.

Not only are these tasks complicated and confusing, but they also have the potential to expose investors to significant security risks. Add to this concerns around a lack of insurance protection and custodianship, and you cut out a significant number of potential investors.

"By some estimates, there is $10 billion of institutional money waiting on the sidelines to invest in digital currency today," Co-Founder and CEO at Coinbase Brian Armstrong said in a blog post last year. The primary item that he claimed was preventing institutional investors from getting involved was "the existence of a digital asset custodian that they can trust to store client funds securely."

I believe a Bitcoin ETF is a natural next step in the digital currency’s maturation as an asset.

While the SEC’s Hester Peirce is seemingly in the pro-ETF corner, it is clear that the Commission is looking for rigorous transaction monitoring by an ETF that is based on a regulated market of significant size.

While it will be a challenge to satisfy all of the SEC demands, my optimism for an ETF approval in the not too distant future is high.

About the author: Chris Kline is the co-founder of Bitcoin IRA.