In a recent interview with Kailey Leinz on “Bloomberg Crypto,” Sergey Nazarov, a co-founder of Chainlink, shared his insights on the adoption of spot crypto ETFs as a pivotal turning point in the space.

Nazarov began by reflecting on Bitcoin’s position, noting its highest level since Autumn 2021 (BTC reached its all-time high of just over $69,000 on 10 November 2021), a period that marked the peak of the bull market, soon followed by a deep bear market. The emergence from this bear market raises questions about the sustainability of the current bullish trend. Nazarov emphasized the role of “net new buyers” in driving market cycles and adoption. He pointed out that the current cycle’s net new buyers are from the global financial system, which represents a significant group entering the cryptocurrency market.

The introduction of spot Bitcoin ETFs in the U.S., according to Nazarov, is a crucial development that provides the global financial system with investment and payment rails comfortable and familiar to them. He believes that this development opens up cryptocurrency to a vast market, potentially leading to a substantial influx of value not just into spot Bitcoin ETFs but other spot cryptocurrency ETFs as well. Nazarov sees this as just the beginning, with the next phase involving asset tokenization. Banks, noticing the inflows into such spot ETFs, might create assets to compete with these ETFs or to attract some of that capital.

Nazarov told Leinz:

Historically the way that this has evolved, is that net new buyers drive more adoption and market cycles. And I think the question to ask is ‘Who are the net new buyers in this cycle?’ The net new buyers are the global financial system, which is a very big group of net new buyers. 

I think if you look at the total net new market that’s opening up through things like ETFs and you do the basic arithmetic on that, then even within certain conservative estimates, you can see that there’s still a lot more value that can flow into not only Bitcoin ETFs but other cryptocurrency ETFs, and in my opinion, that’s really just the beginning because the next stage is then asset tokenization where banks see all these inflows into ETFs and then they make assets to compete with the ETFs or to get some of that capital.”

Nazarov unequivocally considers the existence of spot crypto ETF products in the U.S. as indicative of a turning point in the crypto adoption cycle. He says this signifies that top asset managers (including, BlackRock, which is the largest one) have reached a level of comfort with the asset class and its legal dynamics, allowing them to structure sophisticated financial products around it. Zazarov mentions that this was nearly unimaginable five years ago and marks a watershed moment in the industry.

The Chainlink co-founder further elaborated that this moment allows a significantly large market to access cryptocurrency, a market whose size may not be fully appreciated by the average consumer or even other institutions. He expects this broad market access to pave the way for the global financial market to integrate with cryptocurrency and blockchain technology in unprecedented ways.

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