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Bitcoin (BTC) continues to trade above $37,000, and analysts are still confident that the launch of a spot Bitcoin ETF will lead to new inflows of capital. The current expectation is that the U.S. Securities and Exchange Commission (SEC) will approve at least one ETF by January 2024. Analysts are divided on whether the launch of a Bitcoin ETF will trigger potential inflows or if it will be just a sell-off event, comparing it to digital gold, Bitcoin, and the valuable metal, gold.
Spot Gold ETFs vs Spot Bitcoin ETFs
Examining the historical introduction of spot gold ETFs provides insight into the potential impact of the forthcoming spot Bitcoin ETF on the underlying assets. The launch of the first spot gold ETFs in 2003 was a significant milestone in the financial sector and triggered a substantial increase in gold prices. Over the next decade, the value of gold rose from around $350 per ounce to approximately $1,815 in 2012. This significant growth indicates an annual return of over 15% and a total appreciation of over 400%.
This historical precedent presents an optimistic view on the potential impact of the first spot Bitcoin ETF on the Bitcoin market. If Bitcoin follows a similar trajectory to gold after the approval of the first spot gold ETF, a significant increase in price could be observed.
During this period, positive macroeconomic conditions and a weakening U.S. dollar played a role in gold’s impressive performance, while the introduction of the gold ETF significantly increased accessibility for a broader investor base, contributing to the rise in gold prices.
In the context of Bitcoin, the expectation surrounding the launch of a spot Bitcoin ETF has also generated similar excitement. Despite this positive growth narrative, some analysts express concerns about the real market size of Bitcoin ETFs and highlight that existing products like Grayscale’s Bitcoin Trust (GBTC) or MicroStrategy’s stock capture less than 7% of the total Bitcoin supply.
However, all the current alternative options are not considered optimal from an institutional perspective due to issues such as high fees and an unredeemable structure of GBTC. Similarly, according to a Glassnode report, MicroStrategy’s Bitcoin holdings include variables beyond Bitcoin’s performance, while providing exposure to the largest cryptocurrency.
The introduction of a spot Bitcoin ETF will provide a more direct and regulated investment vehicle for Bitcoin, addressing all these limitations and issues. It is expected to attract a significant amount of new capital, particularly from institutional investors seeking a traditional and streamlined method to invest in Bitcoin.
Despite the excessive optimism, critics argue that the launch of an ETF, especially if GBTC transitions into an ETF format and allows for redemptions, could only lead to the reshuffling of funds. Therefore, evaluating alternative demand indicators entering the Bitcoin market after ETF approval remains crucial.
Forecasting Total Inflows into Bitcoin
A comprehensive analysis suggests that a spot Bitcoin ETF could attract potential inflows from both the stock and bond markets, as well as the gold market. With the shift of capital towards tangible assets in macroeconomics, the shift of capital from stocks and bonds to Bitcoin becomes even more likely.
Assuming that 10% of the combined assets under management (AUM) of significant ETFs could flow into Bitcoin, an estimated entry of approximately $60.6 billion is projected. Additionally, a presumed 5% shift from the gold market corresponds to an entry of around $9.9 billion. This potential inflow of $70.5 billion reflects the most optimistic scenario and aligns with Galaxy Digital’s forecast of $14 billion in inflows in the first year, indicating a significant impact on the Bitcoin market and potential price appreciation.
According to Bloomberg Intelligence, with the possible participation of renowned asset management companies such as BlackRock, Fidelity, and Invesco, spot Bitcoin ETFs have the potential to become a market worth $100 billion. Currently, leading players like BlackRock are attempting to address the concerns of the U.S. SEC through various revisions to their ETF applications, and these efforts are interpreted as a sign that the final approval announcement could be imminent.
