Bitcoin spot exchange-traded funds (ETFs) could attract $30 billion in fresh demand for the flagship cryptocurrency, a new prediction says.
In a recent research report, the Global Head of Research at Crypto investment firm NYDIG, Greg Cipolaro, delivered a bold vision of how the arrival of a spot Bitcoin ETF would be a game changer for the world’s oldest and largest crypto.
A Spot Bitcoin ETF Will Open Door To $30 Billion Inflows
$10 billion in new demand could suddenly unlock for the Bitcoin market if a spot ETF is approved by the U.S. Securities and Exchange Commission, according to NYDIG.
BlackRock’s filing for a spot crypto ETF last month sparked a new wave of optimism in the crypto space, which prompted other large Wall Street institutions, including ARK Invest, Valkyrie, and Fidelity to file their applications for a physically settled Bitcoin ETF.
The SEC has capsized all previous applicants looking to offer spot investment vehicles with direct exposure to BTC but started greenlighting ETFs linked to BTC futures in 2021. In June, the SEC gave its regulatory blessing to a leveraged Bitcoin futures ETF, one of the first of its kind in the U.S.
While a spot ETF has not yet hit the market in the U.S., NYDIG estimates that a total of $28.8 billion in Bitcoin assets under management already exists across the globe. Of these, $27.6 billion has been allocated to spot-like investment products.
NYDIG’s Greg Cipolaro notes that a spot Bitcoin ETF with the SEC’s approval would be a safer bet for investors and act as a reliable choice of investment especially because of BlackRock and iShares brand recognition.
Cipolaro then went on to present an interesting analogy between Bitcoin and gold — two assets that are oftentimes compared to each other. Gold ETFs around the world reportedly hold roughly $210 billion in AUM, NYIG notes. Remarkably, a bigger portion of Bitcoin’s supply (4.9%) is held in various fund formats compared to gold (1.6%). When considering private investments, the ratio is more favorable for Bitcoin compared to the yellow metal, which entails coins and bars.
NYDIG further uses a volatility equivalent basis to estimate potential demand for a spot Bitcoin ETF.
“Bitcoin is about 3.6x more volatile than gold, meaning that on a volatility equivalent basis, investors would require 3.6x less bitcoin than gold on a dollar basis to get as much risk exposure. Still, that would result in nearly $30B of incremental demand for a bitcoin ETF,” Cipolaro writes.
So, as the trend goes, Bitcoin is looking optimistic in both value and regulation as institutional trust returns to the crypto industry.
While NYDIG thinks having spot Bitcoin ETFs in the market could herald a new stage of institutional investors getting involved with the cryptocurrency, not everyone is convinced such a product would be of great benefit to the nascent industry. JPMorgan said earlier this month that Bitcoin spot ETFs have not seen any substantial success in overseas markets like Canada and Europe, where they have existed for years. As such, there is no reason for them to gain much traction in the U.S. if they do receive the SEC’s seal of approval.