Exclusive Interview: Morph CEO On Spot Bitcoin ETFs As A New Frontier In Crypto Investment

With the U.S. Securities and Exchange Commission's approval of the 11 spot Bitcoin exchange-traded fund applications on Jan. 10, BTC ETFs are trading across the country via exchanges and trade markets. This allows market managers previously constrained from participating in the cryptocurrency market access to a legitimate avenue to gain exposure to the foundational digital currency.

What is spot Bitcoin ETF?

A spot Bitcoin ETF, commonly known as a Bitcoin ETF (BTC ETF), is a financial instrument designed to provide investors direct exposure to the price fluctuations of Bitcoin, the world's largest crypto asset by market capitalization.

This exposure is achieved by the ETF by holding actual Bitcoin as its underlying asset, enabling investors to acquire shares of the fund that represent a portion of the BTC held in custody by the fund.

Unlike futures-based ETFs, which derive their value from Bitcoin futures contracts, a spot Bitcoin ETF possesses and safeguards tangible Bitcoin assets.

Spot Bitcoin ETF represents a novel financial instrument to some individuals in the nascent cryptocurrency community who may not possess prior exposure to traditional financial markets. While some retail investors may possess a rudimentary understanding of this product, a comprehensive grasp of its intricacies remains elusive to many.

International Business Times spoke to Cecilia Hsueh, the co-founder and CEO of the community-driven Layer-2 solution Morph, to seek her expert insights on the recently approved spot Bitcoin ETFs in the U.S. She also delved into various aspects, including the product's potential influence on the short-term and long-term value of Bitcoin, its pivotal role in facilitating mainstream adoption of cryptocurrency and potential adverse repercussions the product may pose within the broader cryptocurrency industry.

Spot Bitcoin ETF's possible negative impact on the crypto industry

"One possible negative consequence of ETF approval is market oversaturation, resulting in investment dilution among too many funds. This, in turn, could lead to the underperformance of individual ETFs, causing confusion among investors and weakening the impact of significant capital inflows on the cryptocurrency market," said the seasoned entrepreneur, who boasts more than 10 years of experience in the field.

When asked if the spot Bitcoin ETF approvals will prove to be a "sell the news event" as many have predicted, the Morph CEO, who founded and helmed J.C.Moritz Investment Consulting and served as the CEO of Phemex trading platform between 2019 and 2021, said: "The U.S. approval of a spot Bitcoin ETF may initially trigger a 'sell the news' reaction, yet it's expected to have a positive long-term effect, bolstering investor confidence and mainstream acceptance of Bitcoin. The global crypto market cap is $1.71T at the moment, and one can only guess how much cryptocurrency investment will increase after the approval."

Impact of the crypto investment vehicle on BTC's value

Hsueh also discussed with IBT the potential impact of the spot BTC ETF on the short-term and long-term value of Bitcoin.

"I believe that it could initially cause volatility but is likely to boost Bitcoin's long-term value. As the market matures, we expect to see more institutional involvement, which could lead to greater stability and growth in the long term. In line with these developments, Morph is positioned to leverage this growth, furthering our vision of a consumer-centric blockchain ecosystem. Our outlook for 2024 remains optimistic, with expectations of a bull run driven by factors such as the halving event and anticipated interest rate cuts," she explained.

Mainstream adoption

As for the role of spot BTC ETF in the mainstream adoption of Bitcoin, the serial entrepreneur said, "An ETF will be key in welcoming more people to BTC, offering a regulated, mainstream investment vehicle. This accessibility attracts a broader investor base, including those wary of direct crypto investments. It simplifies exposure to BTC, potentially accelerating its acceptance and integration into traditional investment portfolios."

The launch of spot Bitcoin ETFs in the U.S. has the potential to bring a new wave of investors into the crypto space, and regulatory oversight while providing a more regulated and liquid investment option.

However, it also poses risks related to market oversaturation, price manipulation, short-term volatility and counterparty risk.