The U.S. Securities and Exchange Commission has granted approval for the first Bitcoin Exchange Traded Funds, or ETFs, and the decision is seen as an extremely positive sign for the crypto industry. Not only will it result in billions of dollars of liquidity entering the space, but it will also pave the way for broader adoption of related Web3 technologies, such as non-fungible tokens (NFTs), tokenization and GameFi, industry experts say.
EFTs are a game-changer because they present an opportunity for traditional institutional investors to gain exposure to Bitcoin without the complexities of managing and safeguarding their holdings. Due to the unregulated nature of crypto, the need for self-custody of digital assets has been a major obstacle that has dissuaded some of the biggest players in traditional finance from investing in it. With that obstacle now removed, more institutional investors will look to take advantage of the opportunity to invest in one of the world’s most dynamic assets.
The most immediate benefit, for Bitcoin itself, is the expected price appreciation that should result from more money being invested into the space. It’s a prospect that has already led to a significant increase in Bitcoin’s value over the previous few months, but the longer-term impacts could be far more consequential.
Enhanced legitimacy for Web3
According to Alexander Casassovici, co-founder and chief executive of the blockchain-based livestreaming platform Azarus, the SEC’s approval marks a monumental shift as it provides a firm bridge between the rigid structures of traditional finance and the Web3 industry.
Cassovici said the development marks a turning point, “after years of regulatory uncertainties and the SEC’s cautious stance casting shadows over the crypto industry.” He added that it will have the effect of “legitimizing cryptocurrency as an asset class, aligning it with more traditional investment avenues and dispelling long-standing doubts among investors.”
As the doubts around crypto as a viable asset class are swept aside, it will accelerate growth in the wider ecosystem that has emerged around digital assets. Most importantly, the Bitcoin ETF can help to boost the legitimacy of Web3, which refers to the idea of a decentralized internet controlled by users. This will inspire more investors to explore technologies such as NFTs, tokenization and GameFi.
The ETF approval has effectively cemented Bitcoin’s status as a legitimate asset class, and this will spark more interest and demand for NFTs, which have many exciting applications, said Upland’s co-founder and co-CEO Dirk Lueth. “The expected price appreciation of Bitcoin will improve customer confidence in crypto assets in general, and lead to more interest in purchasing NFTs,” he explained.
Riding on the wave of this growing enthusiasm, Lueth believes NFTs will evolve beyond digital collectibles: “Gamified and sophisticated GameFi and DeFi assets will be part of the next big wave, drawing even more attention to the NFT industry by institutional entities,” he promised.
Casassovici predicts the lure of crypto will be too powerful to ignore for many traditional investors. He likens the excitement around the Bitcoin ETFs to the “early days of the Nasdaq” which he says was an era “characterized by high volatility and substantial returns.”
“I eagerly await the next chapter, where a broader audience moves beyond mere crypto trading to embrace the fundamentals of Web3,” Casassovici said. “It’s an opportunity for new adopters to delve into the world of decentralization and permissionless protocols, exploring the deeper implications and innovations Web3 offers.”
After Bitcoin, NFTs will be next
Investors who want to explore the promised land of Web3 could do a whole lot worse than look at the prospects of NFTs, which are one of the critical technologies powering the decentralized internet.
Lueth said NFTs have many use cases and applications that are likely to get institutional investors excited. For instance, he has a lot of hope for tokenization and fractional ownership of real-world assets that can be represented on the blockchain as NFTs. According to Lueth, this will allow for “increased accessibility into asset classes that have traditionally been reserved for small groups of buyers such as art collectors.”
Once the floodgates are opened, the growth of NFTs will likely prove to be unstoppable.
“I see this as stage one, driving more interest and involvement in NFTs,” Lueth said. “From there, more innovative models will be explored, such as utility NFTs that can gain yield.”
Pressed for an example of NFT utility, Lueth pointed to the rising GameFi industry, where digital tokens are used to represent in-game assets such as characters, weapons, accessories, powerups, digital properties and more. GameFi has already grown rapidly among crypto enthusiasts, but until now it has largely been ignored by traditional finance.
“GameFi is a space where there is currently zero institutional involvement,” Lueth pointed out. “But if you’re unsure about why GameFi NFTs will be relevant for institutions in the future, go ask your kids how they feel about digital items and the value they place in them.”