The Potential Impact of a Bitcoin Spot ETF on the Market

Introduction

A Bitcoin spot ETF, or exchange-traded fund, is currently being pursued by Blackrock, the largest investment fund in the world. This application has generated a lot of hope in the market, with expectations that it will simplify institutional investors’ access to Bitcoin. As per the New York Digital Investment Group (NYDIG), the approval of this ETF will likely have a significant impact on Bitcoin and its price.

ETF Will Lead to $30 Billion in Demand

Simply put, a Bitcoin spot ETF will make it much easier for institutional investors to gain exposure to Bitcoin. Presently, this is only possible in the US through various products such as derivatives and funds. Financial products related to Bitcoin have already attracted approximately $28 billion in investments. The introduction of a spot Bitcoin ETF is expected to result in a substantial rise in demand for BTC, despite the uncertainties regarding the fund’s potential costs.

NYDIG draws a comparison with gold to gauge the potential impact. Currently, gold ETFs are valued at $210 billion globally, which constitutes around 1.6 percent of the total market capitalization of gold. However, it is important to note that almost half of this invested amount is in North America. On the other hand, funds make up 4.9 percent of the Bitcoin market capitalization. Based on this, NYDIG predicts that the approval of a US spot Bitcoin ETF will generate a demand of $30 billion.

What Does This Mean for the Bitcoin Price?

The key question arises: how will the Bitcoin price be affected by a spot ETF? According to NYDIG’s analysis, every dollar invested in a Bitcoin ETF results in a $10 increase in BTC market capitalization. Therefore, if $30 billion flows into a spot ETF, it would signify a $300 billion growth in BTC market capitalization.

Considering that Bitcoin’s current market cap is just under $600 billion, a $300 billion increase represents a growth of 50 percent. Based on the current price, the price of BTC would reach approximately $45,000. However, it is crucial to remember that these estimates and speculations are highly subjective. While a spot Bitcoin ETF is likely to spur significant institutional interest, its approval timeline remains uncertain. It may take several months before any progress is made.