Before Bitcoin ETFs Pass, A Clear Crypto Narrative Is Needed

Bitcoin exchange-traded funds are having a hard time clearing the bar in the U.S., where nine applications were rejected by the Securities and Exchange Commission yesterday.

In the meantime that isn't quelling speculation about how an ETF would benefit those who hold bitcoin as an investment.

In a post on Medium from June, Ironwood's Michael Strutton teases us some with his perspective on the potential of a bitcoin ETF, "If ETFs add 24 million U.S. investors, and the upward momentum adds 14 million from the rest of the world, then that adds $84 billion and $336 billion, respectively, to the market cap."

"Over the past six months, bitcoin's market cap has swung from $326 billion to $110 billion. Adding $420 billion to the market cap could put bitcoin's price range from $26,000 to $44,000," he continued.

With so much capital at risk, the SEC has been fairly clear about its stance and the regulator is right to express concern about fraud and manipulation of bitcoin markets.

It is important to spend an enormous amount of effort cataloguing the potential risks from all angles before approving a bitcoin ETF. However, crypto fans should not take the SEC's decision personally.

There is the need for a professional-grade market which has the liquidity and depth to support the hedging activities of a U.S.-based bitcoin ETF issuer.

CoinShares, chief strategy officer, Meltem Demirors, made an excellent point on CNBC in August, when she highlighted, "The narrative around bitcoin is still really hard to grasp," she said.

As SEC Commissioner Hester Peirce articulated in an argument in favor of a bitcoin ETF, saying: "Bitcoin is a new phenomenon, and its long-term viability is uncertain. It may succeed; it may fail."

Why do most bitcoin investors want a Bitcoin ETF? Today, the most obvious reason is so the prices rise and investors can ride the high again like in December.