The cryptocurrency market is continuing to evolve.
Incredibly enough, Bitcoin (BTC-USD) is now 15 years old; the original digital currency kicked off back in 2009. And as the industry matures, change inevitably comes for the industry.
The big cryptocurrency investment strategy for this year is the rise of institutional capital. With the advent of exchange-traded funds (ETFs), large financial firms can now safely deploy capital into Bitcoin with the click of a button. ETFs also allow individual investors to readily access the Bitcoin market from their tax-sheltered retirement accounts. This change opens up a new frontier for digital assets.
Crypto to Buy: Bitcoin (BTC-USD)
Earlier this month, the SEC dramatically changed the cryptocurrency game. On January 11th, the SEC approved the trading of 11 different ETFs devoted to Bitcoin. Those included funds such as iShares Bitcoin Trust (NASDAQ:IBIT) and Invesco Galaxy Bitcoin ETF (NYSE:BTCO), which have attracted substantial amounts of investor capital since launching a few weeks ago.
Up until January 2024, investors had much more limited access to Bitcoin on American stock exchanges. Grayscale Bitcoin Trust (NYSEARCA:GBTC) was operating as a trust but could only trade on the Pink Sheets. Previously, the SEC blocked Grayscale’s petition to convert itself into an ETF.
Now, though, Grayscale has been able to become an ETF, and that fund conversion has ushered in the approval of all other sorts of digital asset ETFs as well. With Bitcoin being the oldest and most well-known crypto, it stands to gain the lion’s share of new capital flowing into the industry.
Crypto to Buy: Ethereum (ETH-USD)
Ethereum (ETH-USD) should be the next cryptocurrency in line to benefit from this trend. The SEC is expected to rule on whether or not it will approve Ethereum ETFs later this spring. Some analysts are hopeful this could lead to a major rally in the price of ETH.
Bears might contend that cryptocurrency prices initially sold off in the wake of the Bitcoin ETF approvals, which is true. However, in that case, the Grayscale Bitcoin fund already had a large sum of capital in it, and once the ETFs were approved, a large chunk of money was transferred out of that GBTC product into other funds with lower expense ratios.
With that shift largely taken care of, future inflows into the Bitcoin ETFs should be a net positive for the ecosystem and support higher prices. In any case, there is not much money in Ethereum trusts; an Ethereum ETF would tap a more unclaimed market, potentially leading to significant upside later this year.
Crypto to Sell: Floki Inu (FLOKI-USD)
There is a flip side to the cryptocurrency investment strategy centered around capturing these institutional capital flows.
The arrival of all these big-name asset managers like BlackRock (NYSE:BLK) in the ETF space is that cryptocurrency is a more serious endeavor now. And in attracting this more professional class of investors, the overall digital asset landscape changes.
We’ve already seen more speculative parts of the crypto landscape, like non-fungible tokens (NFTs), lose popularity. Meme coins are likely to be another loser during this shift.
Take Floki Inu (FLOKI-USD) for example. The coin is one of the various meme tokens to emerge riding off the popularity of Dogecoin (DOGE-USD). However, given Floki Inu’s high transaction tax, limited visibility and minimal utility, it seems Floki Inu will not have a promising future.
In the wild west days of crypto, meme coins with little more than social media support could enjoy significant popularity. With the rise of ETFs and institutional money in crypto, however, unproven oddities such as Floki Inu are likely to fall by the wayside as the smart money concentrates in the most promising tokens and projects.
On the date of publication, Ian Bezek did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
