Bitcoin ETF Approval Will Impact Cryptocurrency Exchanges

Bloomberg analyst Eric Balchunas predicts approval of the Bitcoin exchange-traded fund (ETF) in the United States could severely impact major cryptocurrency exchanges.

While it’s pending approval from the US Securities and Exchange Commission (SEC), Balchunas highlights the advantages of buying ETFs instead of trading Bitcoin directly.

Uncertainty Ahead For Crypto Exchanges

In a recent “Unchained Crypto” podcast episode, Balchunas predicts traditional crypto purchases could soon be replaced by buying Bitcoin ETFs on stock markets within a few years. This shift could particularly affect exchanges that fail to adapt their fees to remain competitive.

“This is why we say to the crypto exchanges this is going to be a threat to their business. Coinbase and these other exchanges charge a lot per trade,” Balchunas states. He points to ETFs having a “long history” of disrupting high fees, predicting the impact will occur in less than 5 years.

“In 3-4 years from now, you are going to be able to buy a liquid cheap Bitcoin ETFs and it is going to be powerful.”

Balchunas clarifies that purchasing an ETF will be more cost-effective for consumers. To illustrate, he compares it to the Gold ETF. He mentions the fee for this ETF is around “35 to 40 basis points,” or roughly 0.35% to 0.40%.

In contrast, crypto exchanges vary in their fee structures, with some providing attractive introductory rates or offering zero fees for the first month. However, once this initial period concludes, certain exchanges may levy transaction fees as high as 1.5%.

Balcunas further explains that the investment firm “handles all the work” for you. He notes this includes storing the digital assets and ensuring tax efficiency. “It is going to be a very high-value proposition,” he declares.

Balchunas Expects Approval with Confidence

However, numerous X (formerly Twitter) users swiftly came to the defense of the idea that ETFs would not pose a threat to exchanges:

“I disagree, there will always be a place for decentralized exchanges. Sure the bottom line could be impacted, but this just caters for a different audience, with a different level of risk,” one user stated.

Balchunas has continued to express confidence that the US SEC will approve a Bitcoin ETF.

On August 29, following the court ruling that the SEC was wrong to reject Grayscale’s Bitcoin ETF application, he stated:

“[James Seyffart] and I are upping our odds to 75% of spot Bitcoin ETFs launching this [year].”

In more recent news, the SEC has chosen to delay the verdict on seven applications aiming to introduce Bitcoin ETFs. The decision is now expected to be heard in mid-October.