The introduction of Bitcoin ETFs (Exchange-Traded Funds) in the United States could significantly transform the cryptocurrency landscape, resulting in increased demand and an estimated $14.4 billion investment influx within their first year of trading. A recent study conducted by crypto analysis firm Galaxy examines the potential impact of cash-settled Bitcoin ETFs on the market, drawing insights from existing gold ETFs to predict their future performance.
A Gold-Mining Approach
Based on data compiled as of September 30th, 2023, Galaxy’s analysis reveals that gold-based ETFs collectively held around 3,300 tonnes of the precious metal, approximately 1.7% of the global gold supply. In contrast, various cryptocurrency investment vehicles offering Bitcoin accounted for 842,000 BTC or about $21.7 billion, equivalent to 4.3% of Bitcoin’s total supply issued.
Galaxy extrapolates these figures to understand how successful Bitcoin ETFs could be if they follow a similar trajectory as gold ETFs. The conclusion drawn is that, considering the differences in market capitalization between gold and Bitcoin, cash-settled Bitcoin ETFs should raise roughly $14.4 billion in their first year of trading – that amounts to around $1.2 billion per month.
Estimated Impact on Bitcoin Prices
With the analogy to gold ETFs as a reference point, the expected success of cash-settled Bitcoin ETFs leads to an estimated 6.2% price increase for Bitcoin in the month immediately following the deployment of one or more initial cash-settled BTC ETFs in the United States. According to Galaxy’s model, based on past observations in gold ETF monthly returns, this percentage is expected to gradually decline, eventually reaching 3.7% by the end of twelve months. Consequently, Galaxy’s study suggests that over a one-year period, Bitcoin prices could experience an impressive 74% growth after the introduction of cash-settled ETFs in the US market.
Advantages of Bitcoin ETFs
Beyond their potential impact on Bitcoin prices, cash-settled Bitcoin ETFs also offer several benefits for investors:
- Lower fees: Compared to costs typically associated with hedge funds and closed-end funds, ETFs tend to have lower fees, making them more attractive to cost-conscious investors.
- Competitive landscape: The likelihood of multiple cash-settled Bitcoin ETFs receiving approval simultaneously means increased competition, allowing investors to choose from a variety of options while also encouraging providers to differentiate themselves from competitors.
- Accessibility: Unlike existing investment options available for those looking to gain exposure to Bitcoin, ETFs are significantly more accessible – making them an ideal choice for both wealthy individuals and average retail investors alike.
A Bright Future Ahead
As recent trends suggest, investor interest in cash-settled BTC ETFs continues to grow. Recognizing its potential to fuel considerable growth in the price of Bitcoin while simultaneously providing advantages such as lower fees, increased competition, and improved accessibility, the prospect of a future where Bitcoin ETFs become commonplace becomes increasingly attractive.
Investors seeking to capitalize on the opportunities presented by this pivotal moment in Bitcoin history should keep a close eye on regulatory developments surrounding Bitcoin ETFs approval in the United States. With a promising forecast for market performance and widespread interest in these investment vehicles, the eventual arrival of cash-settled Bitcoin ETFs may signal an era of momentous growth in the cryptocurrency sphere.
