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?”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

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

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume

article-image

DeFi on Bitcoin is all the rage right now and Stacks is positioned to benefit

article-image

The Boston Globe reports that lawyer John Deaton is weighing a possible bid