Analyst Spot Bitcoin ETF will be detrimental to cryptocurrency exchanges

Analyst Predicts Bitcoin ETF Will Harm Cryptocurrency Exchanges

Author: Helen LianGuairtz, Cointelegraph; Translation: Songxue, LianGuai

Although the crypto community eagerly awaits the approval of a Bitcoin exchange-traded fund (ETF) in the US, some analysts warn that this could have adverse consequences for cryptocurrency exchanges.

Some industry observers predict that a physical Bitcoin ETF may begin trading in early 2024, and if combined with the anticipated halving of Bitcoin block rewards in April, Blockstream CEO Adam Back believes this could push BTC to $100,000.

Bitcoin supporters such as Jan3 CEO Samson Mow even suggest that the approval of a physical Bitcoin ETF in the US could potentially push the price of Bitcoin to $1 million in the coming “days to weeks.”

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However, Nate Geraci, President of ETF Store, and Bloomberg ETF analyst Eric Balchunas, are not as optimistic about the predictions for centralized cryptocurrency exchanges.

Geraci wrote on X (formerly Twitter) on December 17th that once approved, a potential physical Bitcoin ETF in the US will result in a “carnage” for cryptocurrency exchanges.

Geraci states that retail buyers and sellers of a physical Bitcoin ETF would benefit from institutional-grade trade execution and commissions. On the other hand, retail users of cryptocurrency exchanges would receive “retail-grade trade execution and commissions,” emphasizing the need for improvement to compete with a physical Bitcoin ETF.

Bloomberg ETF analyst Eric Balchunas highlights that the trading fee for a physical Bitcoin ETF is 0.01%, which is the average fee for ETF trades.

In contrast, exchanges like Coinbase have trading costs of up to 0.6%, depending on the cryptocurrency, trade volume, and trading pairs.

Balchunas believes that once approved, a physical Bitcoin ETF will bring more price competition to the crypto industry, providing funding for exchanges that spend significant cash promoting their services during events like the Super Bowl.

Historically, a significant portion of Coinbase’s revenue comes from trading fees. In 2022, Coinbase earned $2.4 billion in trading fees from institutional and retail investors, accounting for 77% of its $3.1 billion in total net revenue. However, the company has been working to reduce its reliance on fees and actively diversify its revenue sources through subscription and other income-generating services.

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