Spot Bitcoin ETF Will Be a “Bloodbath” for Crypto Exchanges, Says Analyst – Cointelegraph

As the crypto community eagerly awaits the potential approval of a spot Bitcoin (BTC) exchange traded fund (ETF) in the United States, some analysts are warning that it could potentially have unintended consequences for cryptocurrency exchanges.

Several industry observers have predicted that a spot BTC ETF could begin trading in early 2024. Combined with Bitcoin’s upcoming block reward halving, expected in April, Blockstream CEO Adam Back believes this could push BTC to $100,000.

Bitcoin proponents like Jan3 CEO Samson Mow said the approval of a spot Bitcoin ETF in the US could even push Bitcoin as high as $1 million in the following “days to weeks.”

However, according to Nate Geraci, president of ETF Store, and Eric Balchunas, ETF analyst at Bloomberg, the forecast for centralized cryptocurrency exchanges is not so optimistic.

Once approved, a potential spot Bitcoin ETF in the US would mean a “bloodbath” for cryptocurrency exchanges, Geraci wrote on X (formerly Twitter) on December 17.

According to Geraci, buyers and sellers of retail spot Bitcoin ETFs will benefit from underlying institutional trade execution and commissions. On the other hand, retail users of crypto exchanges receive “retail processing and commissions,” Geraci pointed out, emphasizing that these need to be improved to compete with a spot Bitcoin ETF.

Bloomberg ETF analyst Eric Balchunas highlighted that trading a spot Bitcoin ETF will cost 0.01%, which is the average fee for ETF trading.

In contrast, trading costs on exchanges like Coinbase are 0.6% depending on the cryptocurrency, transaction size and trading pairs.

Once approved, a spot Bitcoin ETF will bring more price competition to the crypto industry and bring money back to investors from exchanges that spend huge amounts of money to promote their services at events like the Super Bowl, Balchunas believes.

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“It would be the last ‘Crypto Super Bowl’ if they launched ETFs because ETFs are such a thin, tough industry and some of these crypto exchanges were selling a kind of populism and making a lot of money with their really high fees.” he said in an interview with industry journalist Laura Shin in September 2023.

Historically, Coinbase has generated most of its revenue from transaction fees. In 2022, Coinbase earned $2.4 billion in transaction fees from institutional and retail investors, accounting for 77% of its total net revenue of $3.1 billion. However, the company has worked to reduce its reliance on fees and actively shift revenue streams to other income-generating services such as subscriptions.

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