How Could the First Gold ETF be Connected to the First Spot Bitcoin ETF?

• While Bitcoin is still hovering around $37,500, analysts are confident that fresh entries could lead the way for the launch of a Spot Bitcoin ETF.
• Examining the history of the first gold ETFs provides insights into the potential impact of the upcoming Spot Bitcoin ETF on relevant assets.
• The market for Spot Bitcoin ETFs could become a robust $100 billion force, according to estimates from Bloomberg Intelligence.

As Bitcoin attempts to gain strength above $37,000, analysts are exploring the connections between the first Gold ETF and the Spot Bitcoin ETF.

Spot Bitcoin ETF and the First Gold ETF

While Bitcoin is still hovering around $37,500, analysts are confident that fresh entries could lead the way for the launch of a Spot Bitcoin ETF. Analysts predict that the SEC could approve the spot Bitcoin ETF by January 2024.

However, analysts are still divided on whether the launch of a Bitcoin ETF will see potential inflows or just be a sell-the-news event. To understand this, let’s take a look at the comparison between Bitcoin, often referred to as digital gold, and the yellow metal Gold, by examining the history of the first gold ETFs.

Examining the history of the first gold ETFs provides insights into the potential impact of the upcoming Spot Bitcoin ETF on relevant assets. The introduction of the first spot gold ETFs in 2003 marked a significant milestone in finance, leading to a substantial increase in gold prices.

Over the next ten years, the value of gold reached a peak of around $1,815.50 in 2012, up from about $350 per ounce. This notable growth resulted in a total value increase of over 400%, with an annual return exceeding 15%.

This historical example provides an optimistic perspective on the potential impact of the Spot Bitcoin ETF on the Bitcoin market. If Bitcoin follows a similar trajectory to gold after the approval of the gold ETF, a significant price increase is expected.

During this period, positive macroeconomic conditions and a weakening US dollar played a role in the impressive performance of gold, and the introduction of the gold ETF significantly increased access for a broader range of investors, contributing to the rise in gold prices.

In the context of Bitcoin, expectations surrounding the introduction of the Spot BTC ETF have generated similar excitement. Despite this positive growth story, some analysts express concerns about Bitcoin ETFs, pointing out that existing products like Grayscale’s Bitcoin Trust (GBTC) or MicroStrategy’s stock capture less than 7% of the total Bitcoin supply.

However, these existing options are considered suboptimal from an institutional perspective due to high fees and a non-redeemable structure for GBTC. Similarly, according to a Glassnode report, MicroStrategy’s Bitcoin assets include underperforming variables.

The Spot BTC ETF will address these limitations, providing a more direct and regulated investment path for Bitcoin. This is expected to attract significant new capital, especially from institutional investors looking to invest in Bitcoin in a traditional and simplified manner.

Despite the optimism, critics suggest that the introduction of the ETF could only lead to reshuffling of funds, especially if GBTC is allowed to transition to an ETF format, causing outflows. Therefore, evaluating alternative indicators of demand entering the Bitcoin space after ETF approval is crucial.

Predicting Total Bitcoin Inflows

In a comprehensive analysis, potential Bitcoin ETF inflows could come from the stock and bond markets, as well as the gold market. Assuming a macroeconomic shift toward hard-value assets, it is estimated that approximately $60.6 billion, assuming about 10% of the total managed assets of key ETFs could flow into Bitcoin. Additionally, assuming a 5% shift from the gold market could contribute approximately $9.9 billion. This potential $70.5 billion influx aligns with Galaxy Digital’s initial predictions of $14 billion in the first year, indicating a significant impact on the Bitcoin market and potential price increase.

Among the potential participants are well-known organizations such as BlackRock, Fidelity, and Invesco, making the market for Spot Bitcoin ETFs a robust $100 billion force, according to estimates from Bloomberg Intelligence. The fact that leading players like BlackRock are reviewing ETF applications in response to SEC concerns suggests that the final announcement is likely imminent.