How Much BTC Inflow Can We Expect When the Spot Bitcoin ETF Gets Approved?

• Lunde’s analysis suggests that the market might be significantly underestimating the transformative power of these financial instruments.
• Lunde predicts that if approved, these ETFs could lead to strong inflows that potentially surpass the first trading days of both BITO and Purpose ETFs based on these flow assumptions and data from the past four years.
• Based on these flow assumptions and data from the last four years, Lunde suggests a potential 66% BTC upside and targets a price of $42,000.

Assuming approval of Spot Bitcoin ETFs in the U.S., how substantial could the capital inflow be, and could it reach massive proportions compared to Canada?

Consequences of Spot Bitcoin ETF Approvals

Vetle Lunde, Senior Analyst at K33 Research, delved deep into the potential consequences of U.S. Spot Bitcoin (BTC) ETFs in his recent posts. Lunde’s analysis suggests that the market might be significantly underestimating the transformative power of these financial instruments.

Lunde’s claim is based on five fundamental reasons. He began with a bold statement: “The market is mistaken and dramatically underestimates the impact of U.S. spot BTC ETFs (and ETH futures-based ETFs).”

Firstly, Lunde believes that the current environment is highly favorable for the approval of U.S. spot ETFs and suggests that the odds have never been more in their favor. Bloomberg experts Eric Balchunas and James Seyffart raised the probability of Bitcoin spot ETF approval to 75% for this year and up to 95% by the end of 2024 following the Grayscale decision.

Secondly, Lunde noted that the BTC price retraced before the BlackRock announcement. The third reason involves potential competition and the launch of multiple U.S. spot ETFs simultaneously. Lunde anticipates that if approved, these ETFs could lead to strong inflows that potentially surpass the first trading days of both BITO and Purpose ETFs.

For context, Purpose saw inflows of 11,141 BTC, and subsequent ETF launches in Canada led to 58,000 BTC of inflow in just four months. Considering how much larger the U.S. market is compared to Canada, the inflow potential is quite high.

Lunde’s fourth reason is based on historical data from the past four years. He emphasized a clear correlation between strong BTC investment product inflows and rising BTC prices. This relationship becomes even more pronounced during periods of excessive inflow that contributed to significant market upswings in the past. The final critical point for Lunde was that the market survived without excessive leverage on August 17th.

Analyzing the Numbers

In conclusion, the research firm claims that U.S. BTC spot ETFs could see inflows of at least 30,000 BTC in their first 10 days. Over four months, total inflows into BTC investment products could range from 70,000 to 100,000 BTC due to the impact of U.S. spot ETFs and increased inflows into ETPs in other countries.

Based on these flow assumptions and data from the past four years, Lunde suggests a potential 66% BTC price increase, targeting a price of $42,000. However, he cautioned that this projection is based on a “pure assumption” and does not account for other market movements.