These Market Participants Could Boost Spot Bitcoin ETFs

Bitcoin has stumbled since the debut of spot ETFs earlier this month. That confirms a “buy the rumor, sell the news” element to one of the most ballyhooed events in ETF industry history.

However, that retrenchment isn’t an indictment of products such as the Invesco Galaxy Bitcoin ETF (BTCO). Arguably, it could prove to be a buying opportunity. That’s because spot bitcoin ETFs bring more investors in the cryptocurrency space in the U.S. It’s also because the digital currency’s recent pullback could encourage buying in other regions.

China could be a prime example. Burned by what’s now a more than three-year losing streak by China stocks and amid concerns about the state of the country’s real estate market, investors in the world’s second-largest economy are evaluating other asset classes, including bitcoin.

Why It Matters to BTCO

Bitcoin is often referred to as “digital gold.” The debuts of BTCO and friends were compared to the launch of the first gold-backed ETF nearly two decades ago.

The comparisons are pertinent. That’s because, particularly in the case of spot commodities and ETFs, market participants outside the U.S. affect pricing. In recent years, that scenario has played as various central banks have gobbled up physical holdings of gold. That has provided price support for the yellow metal. It’s possible China investors could have a similar effect on spot bitcoin. That potentially benefits ETFs such as BTCO along the way.

Indeed, China investors have good reasons to consider asset classes beyond the country’s stocks. So under siege are equities there that the government is increasing access to capital and considering reforms to further liberalize its financial markets in an effort to lure more international investors.

Crypto trading and mining are currently banned in China. That means interested investors must find loopholes to access bitcoin and other digital assets.

“More and more Chinese investors are using creative ways to own bitcoin and other crypto assets that they believe are safer than investing in crumbling stock and property markets at home,” reported Reuters. “They operate in a grey area. While cryptocurrency is banned in mainland China and there are strict controls on capital movement across the border, people are still able to trade tokens such as bitcoin on crypto exchanges such as OKX and Binance, or through other over-the-counter channels.”

Should China permit traditional access to bitcoin in the future, BTCO could benefit.

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