Will investor behavior change once an ETF is approved?

An ETF offers tax advantages and investment opportunities like Roth IRAs, Santos says

article-image

TimeImage Production/Shutterstock modified by Blockworks

share

Hope springs eternal. Or at least a few years. Maybe a decade or two?

It’s been a decade since the first ever spot bitcoin ETF application. After yet another series of spot bitcoin ETF decision delays by the US Securities and Exchange Commission, the question persists: where should a crypto-focused investor allocate funds in the event that an ETF does — some glorious day — actually earn approval?

In lieu of an SEC-blessed spot bitcoin ETF, the industry offers numerous avenues for crypto exposure right now: mining companies, venture funds, traditional stocks in companies like Coinbase and MicroStrategy, Grayscale Bitcoin Trust shares (GBTC), and of course, actual “physical” crypto held in storage — hopefully, cold. 

Read more: Delays mount: SEC defers ruling on BlackRock, Fidelity bitcoin ETFs

So would the approval of a vaunted ETF really change the space all that much? Or is it nothing more than crypto’s MacGuffin, artificially pushing the plot forward with bitcoin’s orange glow emanating from a regulatory briefcase?

For institutions with billions of dollars to move around, things would definitely change for the better, says Jason Yanowitz on the Empire podcast (Spotify/Apple). “Let’s say you’re trying to deploy $2 billion into bitcoin,” he says, “it’s very tough to do that.”

“You have to get a crypto native OTC desk and implement it like that. The ETF is going to bring enhanced liquidity. It’s going to reduce the need for physical holdings,” he says.

In the same way that people don’t want to physically hold gold, slipping precious metal bars under their beds, people don’t want the responsibility of holding their own bitcoin, Yanowitz says. “They don’t want to deal with that.” 

On top of the secure custody advantages, an ETF offers increased price transparency and discovery, “which institutions want,” he says.

For individual investors, an ETF provides a wider array of investment strategies. However, this might come at the cost of forgoing certain offerings that have previously acted as proxies.

“Historically,” long-time crypto investor Santiago R. Santos says, “investors have allocated to the industry by investing in venture funds, hedge funds and Grayscale products.” 

Santos says a spot bitcoin ETF will likely have a negative impact on large scale funds and entities like Grayscale, if it fails to convert to an ETF. With Grayscale’s current GBTC trust, “the fees are very, very high,” Santos says. “It’s charging a one percent fee or so, whereas an ETF charges basis points,” which are “an order of magnitude less.”

“Crypto natives historically have allocated to Grayscale products through a tax advantage account, like a Roth IRA,” Santos says. With an ETF, he says, “that also becomes a possibility, which is fairly advantageous.”

An ETF offers investors enhanced access and exposure to bitcoin. It introduces a number of strategies with options markets, and facilitates the ability to borrow “in a cost-efficient manner,” he says.

This time isn’t different

Santos then asks Yanowitz, “if you had a hundred dollars to invest from scratch,” with all the options available today and ETFs to boot, “how would you allocate that hundred dollars?”

“I’m buying bitcoin and Coinbase, probably. Those are my two,” he replies, choosing to invest in something he can buy and “forget about” for ten years. “Why buy the ETF when you could buy the underlying [asset]?” he asks.

Santos answers the rhetorical question, reminding Yanowitz that an ETF offers Roth IRA possibilities, which is impossible with physical bitcoin. But such a strategy might require an investor to “max out their allocation” to achieve similar results, Yanowitz replies.

“The most dangerous thing in crypto from an allocating perspective,” Yanowitz says, “is thinking that this time will be different. And if you look at all the last cycles, bitcoin leads.”

“Bitcoin leads, that capital flows into ETH, that excess capital in ETH flows into —  in 2017 it was ICOs, in 2020 it was DeFi, in 2021 it was NFTs — that keeps pushing out on the risk spectrum until the cycle is over.”

With a potential spot bitcoin ETF next year alongside the halving, a presidential election and continued pressures to “turn the money printer back on,” Yanowitz concludes, it’s “tough to be bearish Bitcoin right now.” 

Despite the years of delays, the crypto faithful remain hopeful — and the convoluted plot continues.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

article-image

Interchain Labs will focus on sovereign L1s and institutional demand, abandoning plans for smart contracts on the Cosmos Hub

article-image

Also, only three tokens have outperformed bitcoin so far this year: XMR, HYPE and SKY

article-image

The fund group has submitted proposals in recent months for other funds that would hold litecoin, solana, XRP, HBAR, Sui and others

article-image

Momentum’s back — BTC leads, risk assets follow

article-image

Ondo Finance’s acquisition of blockchain development company Strangelove follows its buy of Oasis Pro

article-image

Cryptocurrency and stock traders alike had a lot to unpack Wednesday