Pantera Capital Founder: When Bitcoin Spot ETFs Are Finally Launched, Is It Time to Sell?
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Pantera Capital Founder: When Bitcoin Spot ETFs Are Finally Launched, Is It Time to Sell?
Buy on rumors, sell on facts.
Navigating Web3 tides with focused insightsAuthor: Dan Morhead, Founder of Pantera Capital
Translation: 0xjs, Jinse Finance
Upcoming Bitcoin ETFs: Buy the Rumor, Buy the News
There’s a lot of discussion around the potential approval of spot bitcoin ETFs happening soon.
There’s an old Wall Street adage: “Buy the rumor, sell the news.” The theory goes that if most investors expect something to happen and buy in anticipation, then when it actually happens, it naturally becomes a time for sellers to exit—while many buyers have already exhausted their positions.
The launch of a spot bitcoin ETF is perhaps the worst-kept secret in blockchain. So when the news finally arrives, will it be time to sell?
Before we share our thoughts on the future, let’s first look back at the past.
This saying played out perfectly during two recent major regulatory milestones in crypto.
CME Launches Bitcoin Futures in 2017
At one of our investor summits, former CFTC chairman Chris Giancarlo pointed out a crazy fact I had never noticed before. Throughout 2017, as the market kept rising, the rallying cry was, “When CME lists bitcoin futures, bitcoin is going to the MOON!!!”
On the very day bitcoin futures launched, bitcoin was up 2,448% compared to 12 months earlier. That was the top. That same day marked the beginning of an 84% drawdown into a massive bear market.
Coinbase Goes Public in 2021
Before Coinbase’s public listing, the market repeated the exact same cycle. The entire industry was excited about Coinbase’s upcoming direct listing. On the day of listing, bitcoin was up 848% compared to 12 months prior. Bitcoin hit its peak that day at $64,863—and the 76% drawdown bear market began.
Back in 2021, we joked: “Can someone remind me the day before a bitcoin ETF officially launches? I might want to take some chips off the table.”
ETF
I believe bitcoin ETFs will be seen as a major step forward in digital asset adoption. Before discussing this product and its impact on the industry, let’s take a moment to reflect on how far the industry has come.
A Brief History of Buying Bitcoin
Over the past decade, accessing bitcoin has changed dramatically. In the early days, people would give away bitcoin for free through so-called “bitcoin faucets.” When I first got into bitcoin, Gavin Andresen ran BitcoinFaucet—just sign up and get free bitcoin. My brother sent me some free bitcoin back then.
Soon, people needed a place to trade bitcoin. A website called Magic The Gathering Online eXchange allowed enthusiasts on the site to trade a digital currency called bitcoin, abbreviated as Mt.Gox.
Bitstamp launched in August 2011 and remains the oldest operating exchange. There was also LocalBitcoins—a marketplace that connected buyers and sellers for face-to-face trades. Those were the days.
Today we have hundreds of exchanges. Yet many are offshore, opaque platforms that resemble FTX more than the New York Stock Exchange. Many institutions are unwilling to trade or custody with these entities. IRA accounts and other financial vehicles typically cannot access cryptocurrency exchanges.
The Future from the Past
Futures didn’t make much of an impact. I’ve been trading currencies for thirty-five years and know that traditional fiat currencies rarely use futures. The foreign exchange market is almost entirely cash/spot-based.
Paradoxically, bitcoin futures are actually a step backward.
Bitcoin futures miss the entire “thesis” of bitcoin (as my friend Andrew Lawrence puts it). The elegant beauty of bitcoin is that transactions are “t-minus zero”—the trade **is** the settlement. When bitcoin settles instantly, rolling contracts (e.g., from March to June) becomes an unnecessary hassle.
There’s no T+2 settlement, no collateral, no monthly futures rollovers, or manipulation in cash-settled markets. When we go back to monthly cash-settled futures, all the magic of bitcoin disappears.
Don’t get me wrong—I think futures are good. They brought in thousands of new traders who otherwise couldn’t access bitcoin. The listing on CME and CBOE, along with CFTC regulation of bitcoin futures, was a huge positive step forward for protocol token recognition.
Bitcoin futures vs. cash/spot trading volume and relative share: As of October 2023, average daily bitcoin futures volume was approximately $38 million—representing about 13,300 theoretical contracts—versus $6.169 billion in spot trading volume, making futures just 0.4% of total activity.
Impact of ETFs
While starting a prediction with “this time it’s different…” is usually not an auspicious way to begin, I truly believe this time it is different.
The previous two bitcoin price peaks occurred:
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At $20,000 on the day CME futures launched (December 18, 2017), followed by an immediate 65% drop and ultimately an 84% drawdown.
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At $65,000 on the day Coinbase went public (April 14, 2021), followed by an immediate 54% drop and ultimately a 76% drawdown.
Neither event had any real-world impact on the actual usage of bitcoin.
It was all “buy the rumor, sell the news.”
Bitcoin futures did not open up any significant new investor base. They were only interesting to a small group of arbitrageurs. Net new buying was minimal.
Coinbase’s product was clearer. Coinbase’s platform worked well when it was privately held. The next day, after going public, it still worked the same. The change in Coinbase’s shareholders did nothing to increase access to bitcoin for ordinary people.
Bitcoin ETFs are fundamentally different. A BlackRock ETF fundamentally changes how people access bitcoin. It will have a massive (positive) impact.
We firmly believe that multiple spot bitcoin ETFs will be approved. We also believe this will happen within one or two months—not years.
I was at Goldman Sachs when they created the Goldman Sachs Commodity Index. Now everyone sees commodities as an asset class. In the 1990s, I was deeply involved in emerging markets. Now, everyone views emerging markets as an asset class. Blockchain will be the same. Spot bitcoin ETFs are a crucial step toward that classification. Once spot bitcoin ETFs exist, if you don’t have exposure, you’re effectively shorting bitcoin.
“Buy the rumor, sell the news.”
Gold ETFs: Digital Gold vs. Traditional Gold
Many market observers believe the best analogy for launching a “digital gold” ETF is the impact of launching physical gold ETFs. The first gold ETF launched outside the U.S. in 2003, and the first U.S. ETF, GLD, launched in 2004. This may be a strong analogy because, in the early 2000s, holding physical gold was difficult for many investors—just as crypto custody remains a challenge for many investors today. Moreover, the convenience, low cost, and trusted nature of the issuer would almost certainly attract new investors who previously wouldn’t participate.
We expect the same to happen with bitcoin ETFs. When investors have this option, the demand function for bitcoin could permanently shift. The launch of ETFs also has another important implication for bitcoin and crypto. Two decades ago, the introduction of ETFs helped legitimize the idea of allocating to commodities within investment portfolios. We expect the emergence of the most respected brands in consumer finance leading the first wave of bitcoin ETFs to have a similar effect.
We should also expect that a few ETFs will capture the majority of market share. The larger an ETF’s size, the more efficient its pricing, creating a virtuous cycle that makes larger ETFs even more attractive. SPDR Gold Trust (GLD) ($54.6 billion) and iShares Gold Trust (IAU) ($25.3 billion) together account for nearly 90% of the value of U.S. gold ETFs, with no other competitor exceeding $10 billion.
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