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If we were to judge the immediate effects of SEC approval 11 Bitcoin ETFs in Spot in January, as an indicator of its long-term price response, HODLers would likely have been disappointed with just a 6% price increase in just over a month. While the approvals brought a new wave of positive attention and robust institutional activity in the crypto market, the instant price jump everyone predicted failed to materialize.

Of course, now we are witnessing Bitcoin rises to record prices and the beginning of a full-scale bull market unfolding right before our eyes. With major asset managers like BlackRock and Fidelity bringing crypto to their clients, the attention was worth it, even if it stalled momentarily early on.

But are ETFs the only reason for BTC’s significant price jump? Yes, the convenience of ETFs has unlocked new demand, but it is delaying the real adoption of BTC as a sovereign store of value.

What the ETF approvals brought to the industry was a revitalized sense of confidence in the crypto market after a harrowing crypto winter. We can attribute this renewal to the safer membership of trusted financial institutions and them guiding the way to wider adoption.

The more professional image is truly welcome and lays out a clear roadmap for how large institutions and the general public can incorporate cryptography and other facets of blockchain technology without completely reorienting their financial reality.

While this risks creating a situation where the majority of BTC is held in spot ETFs, thus consolidating a decentralized financial instrument within the confines of traditional, centralized control – the odds of this happening are greatly reduced as of now. .

It is also inaccurate to say that ETFs are the only contributors to the bullish momentum the crypto market finds itself in today. Although they probably play an important role thanks to all their contributions, both monetary and in terms of image, it is reductive to say that other factors are not at play here.

Bitcoin ETFs play a dual role, bringing attention and funds to BTC itself and also sharing the spotlight with other industry sectors.

The bear market helped facilitate a critical push for crypto projects to step away from the spotlight and focus on rebuilding and developing products that could withstand any type of regulatory, technological, or institutional scrutiny. Ignoring the advances that creative projects have made in infrastructure and that are now contributing to this renaissance would be harmful.

In fact, many of these developments would not be possible if they were not explicitly due to the immense advances made in the blockchain ecosystem. While many blockchain builders were aware of the need to build a framework that would enable sustainable growth, it took a while to see this come to fruition.

Now, blockchain infrastructure is the cornerstone of the ecosystem’s growth. Only since the beginning of 2024, infrastructure projects created about $800 million in equity financing, and last year recorded more than $1.1 billion in the same quarter. While this year’s numbers represent a decline, they show how proactive financing in these infrastructure projects is now bearing fruit through institutional interest.

Likewise, the rapid development of layer 2 projects for Bitcoin has also planted the seeds of scalability. And that’s before even diving into the weight pulled by the Ethereum ecosystem and several other altcoins that are also witnessing a surge in activity and development. Think about where industry and development would be without something as instrumental as, say, zero-knowledge rollups (zk-rollups) or other scaling technologies.

In such a short period, it is difficult to say whether ETFs are responsible for the market turnaround we have witnessed. Did they draw attention to developments that would have happened regardless, even if the ETFs were rejected? Or did they trigger advancement beyond what the industry could have imagined of its own volition?

Bitcoin ETFs will add value to the broader crypto ecosystem and promote adoption by giving the industry a more professional image – which will compel retail investors to learn and understand the asset class over time. Even with the recent negative net inflows of BTC ETF activity, the outlook remains extremely positive on the effect these advancements and more will bring to the space.

Yes, we can probably expect more price swings, and it would be wrong for HODLers to assume they will make quick gains just because of ETFs. But what they achieve is creating a new foundational pillar for institutional attention and investment that will ultimately bolster Bitcoin and all cryptocurrencies in the long term.

James Wo

James Woan experienced entrepreneur and investor in the crypto space, established DFG in 2015. Currently manages a portfolio of over one billion dollars in assets. With a background as an early investor, James has backed companies such as LedgerX, Ledger, Coinlist, Circle, and ChainSafe. Additionally, he was an early investor and supporter of protocols such as Bitcoin, Ethereum, and Polkadot.

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