Experts Warn of Financial System Risks as Bitcoin ETFs Bridge Gap

Описание: Ruholamin Haqshanas

Last updated:

January 31, 2024 02:38 EST
| 3 min read






































Source: AdobeStock / Gajus

The recent launch of exchange-traded funds (ETFs) tracking Bitcoin (BTC) has sparked concerns among experts about the potential risks that could emerge as cryptocurrencies become further intertwined with the traditional financial system.

The Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs earlier this month, marking a significant moment for the crypto industry, which has faced challenges such as bankruptcies and criminal activities.

Previously, the SEC had rejected these products, citing concerns about investor protection.

However, a court challenge brought by Grayscale Investments prompted the SEC to reconsider its position.

Spot Bitcoin ETFs Could Attract $100 Billion in Investments.


The combined assets of these ETFs amount to around $21 billion, and analysts predict that they could attract as much as $100 billion in investments this year from both retail and institutional investors.







Some experts have expressed concern that if these products gain widespread adoption, they could introduce risks to other parts of the financial system, particularly during times of market stress, as per a Reuters report. 

They argue that the ETFs could exacerbate Bitcoin price volatility or create disconnections between the ETF price and the actual value of the cryptocurrency.

These concerns are based on evidence from previous volatility events involving ETFs.

Furthermore, experts point to the interplay between financial and crypto markets, highlighting the risks they can transmit to one another.

They cite examples such as the liquidation of crypto lender Silvergate Bank due to the collapse of the FTX crypto exchange, which subsequently contributed to the failure of Signature Bank.

The collapse of Silicon Valley Bank also triggered a run on the stablecoin USD Coin.

“As investors pour money into these products, you substantially increase the risk of much greater interconnection between the core of the financial system and the crypto ecosystem,” said Dennis Kelleher, CEO of Better Markets, an advocacy group that had urged the SEC to reject bitcoin ETFs, citing risks to investors and the financial system.

Spot ETFs Could Amplify Volatility.


Bitcoin’s daily average volatility is approximately three and a half times that of equities.

However, some experts have warned that spot Bitcoin...

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