- As estimated by the cryptocurrency investment firm Galaxy Digital, Bitcoin is predicted to experience a price increase of 74.1% in the first year after the introduction of spot Bitcoin ETFs in the United States.
- Recent market reactions highlight the high demand for such investment tools. Just last week, a mere rumor caused Bitcoin prices to surge by 10%.
- Spot ETFs could offer investors the opportunity to be exposed directly to Bitcoin without the need to store and manage the asset themselves.
Charles Yu, a research associate at Galaxy Digital, examined what price impact spot Bitcoin ETFs could have if approved.
How Will Spot Bitcoin ETFs Affect the Price?
As predicted by crypto investment firm Galaxy Digital, Bitcoin is predicted to see a 74.1% price increase in the first year after the launch of spot Bitcoin ETFs in the US. Charles Yu, a research analyst at Galaxy Digital, examined the potential impact of Bitcoin ETF fund inflows by comparing it to the impact of gold ETFs, estimating that the total market size for Bitcoin ETFs could reach $14.4 trillion within the first year.
Galaxy Digital argues that ETFs can provide a more efficient investment vehicle compared to asset types like existing securities and futures. The company foresees fund inflows increasing to $27 billion in the second year and $39 billion in the third year.
The introduction of Bitcoin ETFs could greatly benefit the wealth management industry in the United States, according to Galaxy Digital, which identifies it as the primary direct market that would be most impacted.
Recent market reactions underscore the high demand for such investment tools. Just last week, a mere rumor caused Bitcoin prices to surge by 10%. Similarly, the announcement of BlackRock’s proposed Bitcoin ETF led to a 12% increase.
However, Galaxy Digital also emphasized the limitations of existing investment products, such as high fees, low liquidity, and tracking errors, making them less attractive to a broader investor base.
Spot ETFs could offer investors the opportunity to be exposed directly to Bitcoin without the need to store and manage the asset themselves. Yu stated, “Fees have not yet been listed by Bitcoin ETF applicants, but ETFs generally offer lower fees than hedge funds or closed-end funds, and it is expected that the numerous ETF applicants will aim to keep fees low to remain competitive.”
SEC Is Reviewing 12 Applications
The U.S. Securities and Exchange Commission (SEC) is currently reviewing 12 spot Bitcoin ETF applications submitted by Grayscale, 21Shares & Ark, BlackRock, Bitwise, VanEck, WisdomTree, Invesco, Galaxy, Fidelity, Valkyrie, Global X, Hashdex, and Franklin.
Nevertheless, Yu remains optimistic, believing his predictions are conservative and do not account for potential “secondary effects” that could follow the approval of a Bitcoin ETF. He thinks Bitcoin’s attractiveness could further increase as other global markets begin offering similar products.
Looking ahead, Yu suggests that 2024 could be a critical year for Bitcoin and that ETF inflows, the upcoming Bitcoin halving in April 2024, and potential changes in interest rates could be significant factors affecting its price.
