As the possibility of spot Bitcoin exchange-traded fund (ETF) approval looms on the horizon in the United States, analysts are warning that this may not be entirely positive news for centralized cryptocurrency exchanges (CEX) such as Coinbase.
Spot Bitcoin ETF Approval Could Affect Crypto Exchanges
ETF Store president Nate Geraci and Bloomberg ETF analyst Eric Balchunas expressed concerns about the potential negative impact on crypto exchanges if a spot Bitcoin ETF is approved.
Geraci went so far as to describe this as a “bloodbath” for the stock markets in a tweet.
The primary concern lies in the difference in transaction fees. Geraci emphasized that individual spot Bitcoin ETF buyers and sellers will benefit from institutional trading execution and lower commissions.
In contrast, users on centralized exchanges will face individual transaction processing and relatively higher fees.
Geraci emphasized that crypto exchanges need to improve their retail trading practices and reduce commissions to compete with the spot Bitcoin ETF.
Eric Balchunas added to this sentiment by stating that a spot Bitcoin ETF is expected to have a transaction cost of around 0.01%, which is the average fee for ETF trading.
In contrast, exchanges like Coinbase currently charge fees that can be as high as 0.6% depending on the cryptocurrency, transaction size, and trading pairs.
Potential approval of a spot Bitcoin ETF could bring more price competition to the cryptocurrency sector and direct funds back to investors from exchanges that traditionally charge higher fees.
Balchunas suggested that this competition could affect exchanges that spend significant amounts on advertising, such as during high-profile events such as the Super Bowl.
*This is not investment advice.
