Predicted Impact of Bitcoin ETFs on Crypto Market: According to CryptoQuant, a data analytics firm, the crypto market cap could increase by $1 trillion if bitcoin spot exchange-traded funds (ETFs) are approved. This approval could potentially make bitcoin a $900 billion asset.
Rise of Institutional Adoption: Institutional adoption of bitcoin has been increasing, with financial institutions integrating bitcoin into their balance sheets. The next wave of adoption could involve financial institutions offering bitcoin access through spot ETFs. Several prominent financial entities have already applied to launch spot bitcoin ETFs in the U.S., with potential approvals expected by March 2024.
Influx from ETFs Compared to Grayscale Bitcoin Trust: The potential influx from spot ETFs is predicted to be larger than the investments that have gone into the Grayscale Bitcoin Trust (GBTC), which currently has $16.7 billion in assets under management. If the current ETF applicants allocate just 1% of their assets under management to bitcoin ETFs, it could bring approximately $155 billion into the bitcoin market. This influx could account for one-third of bitcoin’s existing market cap, potentially pushing its price to a range of $50,000 to $73,000.
Historical Perspective of Bitcoin Market Cap Expansion: In past bull markets, bitcoin’s market capitalization typically expanded 3-5 times its realized capitalization. This suggests that for every dollar of new investment in the bitcoin market, the market cap could increase by $3-$5.
Market Reactions and Current Market Status: A recent surge in bitcoin’s price to $30,000 was triggered by a false report about the approval of a spot bitcoin ETF. Despite the inaccuracy, the bullish momentum appears to continue, discouraging potential short-sellers. The current total crypto market cap is $1.13 trillion, with bitcoin dominating over half of this figure.