• Analysts from credit-rating agency Moody’s claim that the approval of Bitcoin ETFs will be a “watershed moment” for the crypto industry and is likely to attract institutional interest.
  • Bitcoin is a relatively small asset class, so the impact on broader investing may be minimal.

In an exclusive interview with CoinDesk on Thursday, analysts from credit-rating agency Moody’s Investor Services said that Bitcoin ETFs will provide U.S. investors with better and more regulated crypto assets, but won’t likely have a significant impact on the wider investment landscape.

It’s not that the crypto sector’s joyous response is unfounded. The U.S. Securities and Exchange Commission approved the first batch spot bitcoin ETFs on Wednesday. This was 10 years after the initial proposal.

Vincent Gusdorf is senior vice president of DeFi and Digital Assets at Moody’s. It is a significant event and the entry of institutional investors into this market could be a turning point for the crypto industry.

“Bitcoin represents a small portion of an investor’s portfolio and approval of the ETF does not necessarily constitute a reason for increasing this allocation,” said Cristiano Ventricelli. Vice president of DFDA, Moody’s.

Bitcoin prices have steadily increased in recent months following the dramatic collapse of the market in 2022, which was caused by the failures of several major players, including Sam Bankman Fried’s FTX. Gusdorf stated that whether this price trend will persist in the near future depends on the “trajectory of other monetary policies” and if there are no more scandals from the crypto world.

Bitcoin’s price fluctuated on Thursday. It rose to nearly $49,000 before falling back down to $46,000 in the course of 90 minutes. According to , CoinGecko, the price of the asset has doubled in the last year.

“In the mid-to-long term, we view it as a positive change that will increase price discovery and stability of bitcoin. Ventricelli added that it would probably lead to an increase in the allocation of institutional investors towards this asset class.

Moody’s does not rate bitcoin, and cannot comment on its creditworthiness. However, Gusdorf says that ETFs like BlackRock’s IShares Bitcoin Trust were among those trading today. Buyers can “remove the risks associated with a third party that was probably less regulated prior to the SEC’s decision.”

He cautioned, however, investors that bitcoin is still a volatile investment, and they should consider this when allocating money from their portfolios.

Crypto x TradeFi

Crypto and traditional finance (TradFi) are not only interacting through ETFs. Gusdorf Ventricelli stated that their team closely monitored developments in the tokenization field, where blockchain technologies and distributed ledgers, which power crypto, are used to digitize real assets, be they bonds or funds.

The central banks and large TradFi players are experimenting with the tokenization of assets, and a few have already offered tokenized green bond and other funds.

Marat Faritov is the assistant vice president at Moody’s in charge of the DFDA Unit. He says that the approval of Bitcoin ETFs will also be positive for the other participants of the crypto industry – from tokenizers to custody solution providers.

Faritov stated that “for example, banks will now start using these services to enable solutions and so will probably be generating more revenues for all of these companies in the crypto space.”

Gusdorf says that although crypto has become “increasingly lesser mentioned” in conferences on tokenization there is a convergence of the TradFi space and crypto. Gusdorf’s team has rated the tokenized fund that will be issued on Ethereum and Stellar Blockchains.

Gusdorf stated, “We are now seeing bridges being built here between the crypto and TradFi worlds.”

Nikhilesh De.