What Is “The Great Bitcoin Accumulation”?

Lately, the crypto sphere has been under the attack of an American regulator, the Securities and Exchange Commission (SEC), which has been suing several major crypto companies, including Binance and Coinbase and bringing uncertainty into their future. However, new optimistic views on the industry’s prospects appeared recently when spot Bitcoin exchange-traded funds (ETFs) entered the spotlight. 

In this article, we are going to look into the present state and potential of Bitcoin ETFs, and how they might influence the BTC price and decentralized finance (DeFi) at large.

What happened?

In June 2023, one of the world’s major investment companies, BlackRock, filed for SEC approval of a spot Bitcoin ETF. Its innovation is the fact that if approved, this ETF would track the cryptocurrency’s current value on the market. The Commission has been notorious for only accepting funds that deal with futures or indirect exposure to crypto because of the fear of uncontrolled speculation. 

BlackRock’s application is proposing a fund that has a mechanism for ensuring that customer assets cannot be diverted by the exchange to a third party, which is exactly what happened to FTX in late 2022.

Even though there is no information at the moment that the SEC has any intentions to treat this application any differently, four other investment firms have applied for the Bitcoin ETFs. What is more, the experts started talking about “The Great Accumulation”, and the BTC price increased. 

It has now been firmly above the $30,000 mark since June 23, 2023, with the “greed” level being over 60. At the same time, views on whether this means a positive development for the crypto market or not, are far from being homogenous. 

What is “The Great Accumulation”?

“The Great Accumulation” is the idea of investors acquiring or accumulating a significant amount of Bitcoin over a relatively short time without the intention to sell the asset in the short term. 

BTC is limited to just 21 million, so the introduction of Bitcoin ETFs could cause competition between large institutions and retail investors. In this situation, the cryptoasset’s price would significantly grow because of several reasons:  

1. Accessibility. ETFs make it easier for investors to trade assets. They typically use traditional stock exchanges, which are more familiar and accessible to many investors compared to cryptocurrency exchanges. Introducing a Bitcoin ETF would mean a wider range of investors who were not prepared to go through the technical challenges of acquiring a cryptocurrency.
2. Institutional investment. ETFs are often favored by institutional investors, such as hedge funds, pension funds, and asset managers. They typically have larger amounts of capital to invest and may have regulatory restrictions that limit their direct investment in cryptocurrencies. However, through an ETF, they can invest in the cryptocurrency without directly purchasing it (we talked more about such investment options in this article). The entry of institutional investors into the Bitcoin market through ETFs could lead to increased demand and price appreciation.
3. Market validation. The approval and launch of a Bitcoin ETF would provide a level of regulatory validation and oversight. It signifies that a recognized financial authority has deemed Bitcoin to be a legitimate investment asset. This validation could boost investor confidence, attract more mainstream investors, and generate greater interest in Bitcoin, potentially resulting in an increase in its price.

The higher appreciation of the asset, as well as the wider acceptance and recognition by the anti-crypto SEC, might well be advantageous to the sphere. However, we should also remember that this might mean that retail investors could lose the opportunity to directly participate in the institutions-flooded market at all.

This sentiment has been expressed by several experts, some of whom expect major changes in the crypto sphere, including Cameron Winklevoss, the co-founder of crypto company Gemini.

Conclusion

While it is not at all clear at the moment how exactly Bitcoin ETFs might affect the asset’s price (after all, the SEC has not even approved it yet), the phenomenon on its own might potentially have a large significance for the crypto sphere in general. On the one hand, institutional investors can make BTC more accessible to the general public, which also means wider acceptance and more capital brought to the industry. On the other hand, institutional investors might in a way bring too much influence of traditional market players to DeFi essentially decreasing its autonomy.