What Will the Inflows Look Like in the First Year of Spot Bitcoin ETFs After Approval?

• Galaxy Research recently published a report predicting the Bitcoin ETF to attract $14 billion in inflows in its launch year.
• In their analysis, they used this $48.3 trillion as the Total Addressable Market (TAM) baseline for US wealth management consolidators.
• Galaxy Research notes that this broader impact could attract much larger inflows into Bitcoin spot markets and investment products.

As expectations increase that the SEC will approve spot Bitcoin ETF applications, Galaxy Research evaluates how these ETFs may see money inflows.

How Will Spot Bitcoin ETFs Fare in Their First Year?

Excitement surrounding the Spot Bitcoin ETF is catching up with market players as they quickly make predictions. Galaxy Research recently published a report projecting a $14 billion inflow in the launch year of the Bitcoin ETF.

In their report, Galaxy Research indicates that the most accessible and direct market for a potentially approved Bitcoin ETF is the U.S. wealth management industry. As of October 2023, the total assets managed by broker-dealers ($27 trillion), banks ($11 trillion), and registered investment advisors (RIAs) ($9 trillion) sum up to $48.3 trillion.

In their analysis, they used this $48.3 trillion as the Total Addressable Market (TAM) baseline for U.S. wealth management aggregators. It’s important to note that the indirect effects of these addressable markets and the approval of a Bitcoin ETF will likely extend beyond the U.S. wealth management sector, influencing international markets, retail investors, other investment products, and various channels. Galaxy Research suggests that this broad impact could attract much larger inflows to Bitcoin spot markets and investment products.

Key Assumptions for Determining Inflows

Galaxy Research’s assumptions predict the RIA channel starting to adopt at 50% and reaching 100% in the first year, with a lighter adoption forecast for banking transactions and broker-dealers, starting at 25% and steadily increasing to 75% in the third year. Based on these assumptions, they estimate that the addressable market size for a U.S. Bitcoin ETF will be approximately $14 trillion in the first year after launch, about $26 trillion in the second year, and around $39 trillion in the third year.

To estimate inflows into Bitcoin ETFs, they assume that 10% of total existing assets in each wealth channel is adopted by Bitcoin, with an average allocation of 1%. Based on these market size predictions, they estimate that inflows in the first year after launch would be approximately $14 billion, about $27 billion in the second year, and $39 billion in the third year for a Bitcoin ETF.

Among recent developments, BlackRock has moved its iShares Bitcoin ETF application to the DTCC platform. Simultaneously, a U.S. court instructed the SEC to reconsider Grayscale’s spot Bitcoin ETF application.