Spot ETFs tipped to accelerate Bitcoin use cases, act as tailwind for the crypto industry

The launch of spot Bitcoin exchange-traded funds (ETFs) on Wall Street’s major exchanges on Jan. 11 is expected to have a ripple effect across the crypto industry, promoting new business ventures and attracting more developers to the Bitcoin (BTC) ecosystem over time. 

Opportunities are expected to stream across different sectors, and while predicting their full scope is premature, experts particularly anticipate growing demand in fields such as decentralized finance and scaling solutions.

Bitcoin-backed loans, for example, are one of the crypto products the Ledn platform anticipates gaining traction following the ETF approvals. “The ETF will normalize the concept of borrowing against your Bitcoin, and lending your Bitcoin or ETF shares to earn extra interest,” Ledn CEO Mauricio Di Bartolomeo told Cointelegraph. “Most of the world is not able to access U.S. listed products, but will still need and want to borrow against their Bitcoin and earn interest with it.” 

In the first minutes after Wall Street’s opening bell, Bitcoin ETFs drew in $1.6 billion in volume, confirming expectations of strong demand. Bloomberg analyst James Seyffart believes there will be $10 billion in inflows to Bitcoin ETFs in the first year.

As firms look into yield opportunities tied to Bitcoin, leveraged and short ETFs are expected to emerge as well. “After spot Bitcoin ETFs, we will likely see a race for spot Ethereum ETFs and a slew of variations on Bitcoin ETFs, like 2x long ETFs, short Bitcoin ETFs and more,” forecasted Bartomeo.

Another positive development could result from more projects focusing on Bitcoin zero-knowledge (ZK) applications, said Kurt Hemecker, CEO of the Mina Foundation, which governs Mina Protocol:

“It creates new opportunities that people may not immediately identify — for example, potentially acting as a major boon for zero-knowledge-focused projects.”

Zero-knowledge technology enables the verification of transactions or data without revealing the underlying information, thus maintaining confidentiality and privacy. Hemecker believes ZK’s data sovereign attributes may boost technology adoption as businesses try to stay in compliance with regulatory requirements. “ZK offers compliant privacy on-chain, thereby preserving blockchain ethos while also allowing for institutions to more easily participate,” he commented.

Despite the enthusiasm surrounding Bitcoin-specific products, challenges persist. Experts say these challenges are similar to the ones the broader industry faces due to the ambiguous regulatory environment in the United States. “I’m very skeptical of the net benefit of this development without a regulatory framework being implemented first. It seems like a cart before horse situation,” said Tyler Adams, co-founder of Web3 software community COZ.

Another point of concern stems from the Bitcoin network. Core DAO contributor Brendon Sedo pointed out that while Ordinals have showcased the potential of integrating directly with the Bitcoin blockchain, they also exposed its limitations.

“Ordinals demonstrated the limitations of building directly within the Bitcoin blockchain, as it clogged the network and skyrocketed fees. In 2024, by embracing Bitcoin-aligned scaling solutions, Bitcoin utility can expand immensely without burdening the underlying Bitcoin blockchain.”

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