To gauge impact of bitcoin spot ETF, analysts look to gold

Bitcoin ETFs could see $14.4 billion of inflows in their first year trading, according to Galaxy Digital report — spurring a 74% BTC price jump

article-image

Cryptographer/Shutterstock, modified by Blockworks

share

With optimism around eventual spot bitcoin ETF approval ramping up, the exact impact such a product will have is hard to pinpoint. 

But the impact gold ETFs had on the products’ underlying asset could foreshadow the effect of yet-to-be-seen bitcoin fund launches, some industry executives say.

Bitcoin ETFs could see $14.4 billion of inflows in their first year of trading, according to a Tuesday report by Galaxy Digital research associate Charles Yu. The price of bitcoin could increase by 74% in the 12 months following approval, he added. 

Yu’s flow estimate comes from an assumption that BTC is adopted by 10% of total assets across three wealth management channels, with an average allocation of 1%. Assets managed by brokers-dealers, banks and registered investment advisers (RIAs) total roughly $48 trillion, according to the report.

The Galaxy research associate then looked to the gold market as a point of comparison to determine the impact of bitcoin ETFs on BTC’s price.

Read more: AllianceBernstein calls bitcoin a ‘safe haven asset,’ more attractive than gold

The price of gold has roughly quadrupled since State Street Global Advisors launched the SPDR Gold Trust (GLD) in November 2004. 

Loading Tweet..

Gold ETFs held $198bn in assets under management, as of Sept. 30 — representing about 1.7% of the gold supply, according to World Gold Council data. The value of bitcoin held in investment products amounted to $21.7 billion at that time, or roughly 4.3% of total issued supply.

“With gold having an estimated ~24x larger market capitalization and 36% less supply held in investment vehicles compared to bitcoin, we assume a dollar-equivalent amount of fund inflows having a ~8.8x greater impact on bitcoin markets compared to gold markets,” according to Yu.

By applying the year-one estimate of bitcoin ETF inflows into the historical relationship between gold ETF fund flows and the change in gold’s price, Galaxy Digital predicts a 6.2% price jump for BTC in the first month that a US bitcoin fund is offered, he adds.

Bitcoin’s price increase could gradually decline to 3.7% by the last month of the first year, the report states — resulting in a potential 74% rise in those 12 months.  

The year-one bitcoin price increase estimate was from its price of $26,920 at the end of September. The BTC price has risen substantially since then, hovering around $34,000 Wednesday morning.

Gabor Gurbacs, director of digital asset strategy at VanEck, noted in a September X post that bitcoin’s market capitalization of roughly $500 billion at that time is about a quarter of what gold’s market cap was in 2004. 

“In my view, upon the approval of a US spot bitcoin ETF, bitcoin’s price trajectory could follow gold’s blueprint from 2004 and the years after just much faster,” Gurbacs wrote, noting bitcoin’s “systematic scarcity” via halving schedules.  

After estimated year-one inflows of $14.4 billion, Galaxy predicts nearly $27 billion and $39 billion of inflows into bitcoin ETFs in the second and third year, respectively.

Read more: An approved spot bitcoin ETF could be ‘one of the largest launches in history’

Bitwise Chief Investment Officer Matt Hougan said during an August webinar earlier that his firm estimates US spot bitcoin ETFs could $55 billion in net flows in their first five years on the market. He noted at the time that he believes the ETF sector could ultimately reach the level of assets under management seen in gold ETFs.

“ETFs were a game-changer for gold because they brought new investors and new demand into a market with relatively fixed supply,” Hougan said in a Tuesday X post. “Sound familiar?”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

Sponsored

As part of the #Breakout2024 plans, Radix has introduced Token Trek

article-image

House members ask Gensler to keep a “consistent and equitable approach” with ether ETF proposals after the agency approved spot bitcoin ETFs in January

article-image

Using old-world instruments to address crypto user experience challenges goes against what this industry set out to do

article-image

And, weeks of a potential crypto ETF decision are no stranger to chaos

article-image

The FIT21 Act marks the second crypto-focused piece of legislation to advance in Congress this month

article-image

More than half of Solana transactions fail