Spot Bitcoin ETFs Would Reduce Whale Power and Increase Stability: Nansen Analyst

The cryptocurrency landscape is poised for a major change with the recent approval of Bitcoin (BTC) spot exchange traded funds (ETFs).

Aurelie Barthere, Principal Research Analyst at Nansen, believes the approval will have a specific impact on crypto whales, which control a large share of the current token supply and wield unparalleled influence in spot markets.

“We know that ownership of crypto tokens is very unbalanced, with ‘whale’ wallets holding much of the token supply,” Barthere said in a recent interview with Cryptonews.com.

“Intuitively, any change in that structure would likely reduce long-term price volatility.”

He further said that the arrival of ETFs will bring more liquidity to the spot markets, which could lead to a more stable market.

Last week, the SEC granted approval to 11 spot Bitcoin ETFs, marking a significant departure from more than a decade of regulatory opposition.

The move comes more than a decade after the initial unveiling of a cryptocurrency-based ETF, a financial product designed to track the performance of various assets such as commodities and stocks.

The newly approved ETFs will specifically track the spot market price of Bitcoin.

Wall Street giants like BlackRock, Fidelity, and VanEck, along with several native crypto firms, are among those bringing these ETFs to the market.

The approval of these products has the potential to attract significant capital inflows into Bitcoin, with many crypto executives expressing excitement over their impact on the digital asset market.

Barthere expects a redistribution of Bitcoin supply among new buyers

When asked about the immediate effects of spot Bitcoin ETFs, Barthere expects a redistribution of token supply to new buyers, but warns that investor sentiment depends on broader economic factors.

“It will likely lead to a redistribution of token supply to new buyers. “Investor sentiment” depends primarily on other factors, such as whether inflation continues to decelerate and whether the Fed maintains the rate cuts expected by markets,” he explained.

As for the short-term performance of these ETFs, Barthere expects lower-fee ETFs to attract greater inflows.

“ETFs and futures are different instruments; We would expect futures to remain favored for trading and hedging and for ETFs to become a go-to retail instrument, as in traditional finance.”

The competitive landscape among Bitcoin spot ETF providers, according to Barthere, will be shaped by factors such as reputation, size, existing footprint and management fees.

“Existing reputation/size/footprint + management fees will likely lead to a few leaders dominating the market,” he predicts.

JPMorgan analysts they also predicted that the success of these newly created ETFs will depend on fees and liquidity.

Given the high 1.5% fees associated with GBTC, expect significant outflows from this Bitcoin trust.

Furthermore, speculative investors who have purchased GBTC shares at a discount in the secondary market over the past year, anticipating the elimination of the discount to net asset value (NAV) upon conversion, are likely to profit.

This could lead to around $3 billion exiting GBTC into the newly launched ETFs.

Analysts expect even larger outflows of $5-10 billion if GBTC fails to reduce its fees to the 0.25% level set by issuers such as BlackRock.

Spot ETH ETFs in the spotlight

Barthere expects positive effects on Ethereum and altcoins, stimulated by speculation on subsequent spot ETFs.

“There will likely be speculation on upcoming spot ETFs, which is good for ETH and altcoins,” he said

He added that other cryptocurrencies, such as Ethereum, will soon seek ETF approval.

“YES. BlackRock is said to have already started the application process for a spot ETH ETF,” he revealed.

As reported, QCP Capital, a Singapore-based cryptocurrency trading firm, predicted this Ethereum will overtake Bitcoin in the medium term, as the narrative surrounding potential ETH Spot ETF approvals will help the cryptocurrency overtake BTC.

Meanwhile, the approval of spot Bitcoin ETFs, according to Barthere, removes regulatory and custody hurdles, making it easier for traditional finance to invest in BTC.

However, he noted that the adoption of blockchain technology remains a separate process, highlighting ongoing pilot projects by major institutions.

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