Bo-mi Lee, a Korean Researcher with the Korean Institute of Finance, has published a report citing that approving Spot Crypto ETFs could bring more harm than benefits. Notably, Bo-mi Lee has not negated the fact that there are underlying benefits of approving crypto ETFs. Harms associated with crypto ETFs pertain to a lack of understanding of the value and volatility of the token. An approval of crypto ETFs would only signal that digital assets are safe for investment purposes.
Moreover, Bo-mi Lee has said that ETFs of cryptocurrencies will lead to inefficient allocation of resources within South Korea – thereby, increasing the risk for investors.
There is a high possibility that the risk will expand, Bo-mi Lee said in the report. Integrating the traditional financial system creates a perception that virtual assets are proven assets for investment. While experienced traders and investors would care to dig deep into research, naive traders and investors may not consider doing that. They may end up relying on the profits they see on paper and the fact that they are being offered an investment product with validity.
Bo-mi Lee has sought stringent regulations and the establishment of investor protection measures. Lee believes that there are sufficient gains for individuals and businesses, but they are outweighed by the risks associated with Spot Crypto ETFs.
Bo-mi Lee, in their report, analyzed the approval of Spot Bitcoin ETF in the US and Hong Kong to derive a conclusion.
Volatility is indeed a factor that South Korean authorities may want to watch out for. Investors are likely to diversify their portfolios after the approval of ETFs in the country. A larger capital inflow to Crypto ETFs will take away that particular portion of investment, which could have been made in a safer driver.
Bitcoin has slipped past $62,000 and is listed at $60,795.32 when writing this article. This is a massive fall, considering it has plummeted by 11.55% in the last 30 days. There is certainly an uptick in the 24-hour trading volume, but the market cap and token value continue to decline. The selling pressure will likely pick some pace if Mt. Gox goes out to make settlements with the victims of the 2014 hack. While it is necessary for the now-defunct Bitcoin exchange platform to do so, those who receive their tokens will potentially be sitting on a large amount of green trade.
They acquired their tokens in 2013, and values have gone massively upward.
As for Spot Crypto ETF, similar concerns were taken into consideration by the US SEC at the time of approving applications for Bitcoin ETF. The agency is believed to be taking a more cautious approach while approving Ether ETF. A larger number of crypto ETFs are in line if the Commission gives a green light to Spot Ether ETF. That will fuel the demand for more crypto ETFs across the globe.