A spot-based bitcoin exchange-traded fund (ETF) would attract significant capital and boost the price of BTC by 74% in the first year after launch, according to Galaxy Digital. The estimate comes amid rising anticipation that the U.S. securities regulator will approve one or more of the proposals that are currently under review.
Galaxy Digital Sees $39 Billion of Inflows by Third Year After Bitcoin ETF Launch
A spot bitcoin ETF will provide investors with direct exposure to bitcoin without the need to own the digital asset and an approval of the investment product, which comes with certain benefits over current options, will catalyze adoption, according to Galaxy Digital.
The investment company, one of the applicants to issue America’s first spot bitcoin ETF with a regulatory nod from the U.S. Securities and Exchange Commission (SEC), published an analysis sizing the market for an exchange-traded fund tracking the price of the leading cryptocurrency.
Galaxy believes that a spot bitcoin ETF will strongly impact adoption mainly due to two main factors – expanded accessibility across wealth segments and greater acceptance through formal recognition by regulatory bodies and trusted financial service providers.
Based on the results from its research, Galaxy Digital has estimated that $14 billion will flow into a bitcoin ETF in the first year following a launch. The total is projected to increase to $27 billion by the second year and $39 billion by the third year after that.
The author of the article, Galaxy’s research associate Charles Yu, also expects the price of bitcoin (BTC) to increase by 74% in the first year after an ETF approval. The estimate is based on the price of $26,920 per coin registered on Sept. 30, 2023. Bitcoin is trading at over $34,600 at the time of writing.
The SEC approved ETFs holding bitcoin futures in 2021 but the Commission has yet to greenlight a spot bitcoin ETF in the U.S. It has previously rejected proposals citing risks of fraud and market manipulation as well as concerns over custody and investor protection.
Earlier this year, the regulator accepted to review a number of applications, including that of Galaxy Digital which partnered with Invesco to compete with major financial firms such as Blackrock to launch one, but has since delayed its decisions on many of them.
“Anticipation that ETFs will be approved soon is rising, and our analysis suggests these products could see significant inflows, primarily driven by the wealth management channels that cannot currently access safe and efficient bitcoin exposure at scale,” Galaxy said in its blog post.
“Inflows from ETFs, market narratives about the forthcoming Bitcoin halving (April 2024), and the possibility that rates have peaked or will peak in the near term, all suggest that 2024 could be a big year for Bitcoin,” the crypto investment firm concluded.
Do you agree with Galaxy’s estimates about the impact of a spot bitcoin ETF on the crypto market? Tell us in the comments section below.
