With bitcoins (BTC) semi-annual event in less than a year, several financial giants have applied for a spot Bitcoin Exchange Traded Fund (ETF) — a scenario last seen before the 2020 to 2021 bull run.

Institutional interest in the sector dried up after major crypto giants such as FTX collapsed amid the long crypto winter of 2022. Bitcoin and many other cryptocurrencies traded largely sideways as several crypto exchanges came under regulatory scrutiny.

However, following news that major financial institutions such as BlackRock, Fidelity, Valkyrie and others were filing applications to list a spot bitcoin ETF, the price of BTC returned to over $30,000, re-invigorating investment in the crypto market.

Bitcoin price chart for one month. Source: CoinMarketCap

While several institutional giants have filed immediate applications for Bitcoin ETFs with the United States Securities and Exchange Commission (SEC) in the past, all have either withdrawn their applications or faced outright rejection by the regulator.

The SEC approved the first Bitcoin futures ETF in October 2021 – the ProShares Bitcoin Strategy ETF – which debuted on the New York Stock Exchange on October 19, 2021.

However, a spot bitcoin ETF filed by asset management giant BlackRock boosted the SEC’s chances of approving the first spot bitcoin ETF. That’s according to Eric Balchunas, senior ETF analyst at Bloomberg giving BlackRock a 50% chance approval of its spot bitcoin ETF.

The latest wave of ETF applications has begun BlackRock filed an SEC filing on June 16. WisdomTree, Invesco and Valkyrie also in the following days and weeks.

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On June 28, ARK Invest, which had previously applied for a spot bitcoin ETF in June 2021, edited his submission to make it similar to BlackRock. Asset manager Fidelity Investments also the next day applied for spot bitcoin ETF. A total of seven institutional giants have now applied for spot bitcoin ETFs.

Some industry observers believe that the years 2023 to 2024 will be crucial for the approval of a spot bitcoin ETF. Robert Quartly-Janeiro, chief strategy officer of cryptocurrency exchange Bitrue, told Cointelegraph that the timing is right because “inflation is rampant and the money supply is a mixed picture, interest rates are high and businesses are seeing decent returns, which means cryptocurrencies will have to perform in an economic an environment where rates and inflation are key factors.”

Institutional Trust in Bitcoin

Bitcoin weathered the aftermath of 2022 remarkably well, recovering from more than half of its price decline during the bear market, largely thanks to continued interest from institutional investors in the asset.

Indeed, there significantly more institutional investors in the crypto market now compared to just one year ago. Until 2022, institutions kept a safe distance from the market and even MicroStrategy stopped its routine BTC purchases.

Many large funds and companies have become interested in cryptocurrencies and are exploring their potential to invest in them.

Despite market volatility, global institutions show steady interest in cryptocurrencies. Bitfinex CTO Paolo Ardoino told Cointelegraph that bitcoin represents tremendous value in terms of its utility and unique nature as a perfectly rare asset that can never be devalued. He said: “The most traditional financial institutions recognize this,” adding: “It is not surprising that at a time of record inflation in both major industrialized economies and emerging markets, the markets are becoming more aware of the value of Bitcoin. “

“Recent new applications for ETFs in the bitcoin spot market from some of the world’s top asset managers demonstrate that there is demand for bitcoin from both investors and issuers, and this is only going to intensify. In addition to demonstrating increased institutional demand for Bitcoin, this will also attract new retail investors and encourage wider participation,” said Ardoino.

While many institutions have distanced themselves from cryptocurrencies in the past year, much of this has been due to the public relations disaster caused by FTX, with bank failures further exacerbating it. Richard Gardner, CEO of Modulus, told Cointelegraph that the institutions anticipated the demise of the crypto industry and chose to downplay and bypass the political and public backlash in the wake of FTX, thinking they would be able to reconsider their decision before the cryptocurrency surged. .

“We’re at a point where they’re starting to weigh the risk and reward of going back into the fight. Most institutions are likely to be much more cautious given the FTX disaster. They will largely be moved based on the regulatory environment. As governments put together a full regulatory regime and as bureaucrats decide how they plan to interpret the law, institutions will gauge their response and move forward accordingly,” Gardner said.

MicroStrategy – a leading Bitcoin investor and one of the driving forces behind institutional BTC adoption in 2020 – has continued the bitcoin buying spree in 2023. When the firm faced heavy losses as the price of BTC fell below $16,500, CEO Michael Saylor claimed that he had no intention of selling and would continue to add more BTC to his coffers. MicroStrategy currently holds 152,333 BTC, worth about $4.52 billion at an average price of $29,668 per Bitcoin.

Institutional inflows revive bullish optimism

While the 2017 bull run was driven by retail interest, the 2020 to 2021 bull run was driven by institutional inflows as companies like MicroStrategy and Tesla and many other publicly traded companies added bitcoin to their balance sheets.

Gracy Chen, CEO of crypto exchange Bitget, told Cointelegraph that institutions will act quickly once they see “stable and predictable retail interest.” Chen said, “The cumulative impact of institutions outweighs the impact of individual investors, and therefore they will continue to drive the growth of cryptocurrency market capitalization.”

She also highlighted that growing interest from institutions could fuel cryptocurrency adoption, helping fuel another bull run:

“Analysts expect that if BlackRock’s ETF application itself is approved, the price of Bitcoin could double. Given BlackRock’s potential institutional investor base and influence, the approval of their spot BTC ETF would have a greater impact on crypto market growth. With their BTC spot ETF application, they are likely to inspire competition among relevant financial companies. This will redirect more resources from traditional markets to Web3.”

In addition to institutional pressure, there have been major developments in the retail market, with Hong Kong opening its doors to crypto exchanges to offer services to retail customers. Ben Caselin, vice president of crypto exchange MaskEX, told Cointelegraph that during the previous bull run, “U.S. institutions were the primary drivers of the upswing, but they probably weren’t ready to get deeply involved and behaved differently than retail, basically chasing profits and acting on the hype.”

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“I expect this bull market will again be driven by Asia, perhaps with Hong Kong at the helm for the region, but based on my personal observations on the ground, I also expect significant pressure to come from the Middle East, particularly from the United Arab Emirates, Saudi Arabia and others oil-rich jurisdiction,” he added.

With the next bitcoin halving scheduled for April 2024, growing interest from institutional investors is seen as a bullish sign for the price of bitcoin and the broader crypto market. Bull runes historically began in the time before the Bitcoin halving event, where the amount of BTC per block reward is halved every four years. The scarcity factor is driving the price increase as retailers and institutional giants rush to add to their Bitcoin portfolios.