Galaxy Digital, a cryptocurrency company, believes that the green light for a spot Bitcoin (BTC) ETF could be a major game-changer, significantly boosting the adoption and growth of the leading cryptocurrency.
In a market analysis dated October 24, Charles Yu, a research associate at Galaxy, delved into the potential implications of a U.S.-based spot BTC ETF, emphasizing its importance given the evolving market dynamics.
The company anticipates Bitcoin’s value could surge by 74% within the first year following an ETF endorsement, potentially driving its price up to $59,000. This also translates to a projected 6.1% hike in just the initial month.
“By using our year-one forecast of $14.4 billion in inflows (roughly $1.2 billion monthly or about $10.5 billion when adjusted using our 8.8x multiplier) and comparing it to the historical correlation between gold ETF inflows and gold price changes, we project a 6.2% rise in BTC’s price within the first month,” explains Yu.
The projections made by Yu seem grounded, especially considering recent market reactions. As the buzz around an ETF approval builds, the asset’s price has experienced notable surges. After BlackRock submitted its application to the Securities and Exchange Commission (SEC), followed by similar submissions by firms like Fidelity and Valkyrie, the price of Bitcoin surged past $31,000.
Furthermore, Bitcoin’s price recently climbed above $35,000, marking its highest in 16 months, largely driven by looming approval anticipation from the SEC.
Wider impacts on adoption
The studies emphasize the positive impacts of greenlighting a spot BTC ETF both on the broader market and for institutional players, identifying it as the most straightforward and readily available avenue of the ETF.
Given the U.S. wealth management landscape, spanning $48 trillion across banks, registered investment advisors (RIAs), and brokerage firms, Galaxy foresees significant expansion. This is attributed to the simplicity an ETF would offer, facilitating the flow of institutional capital into the market.
Galaxy estimates that the RIA sector will witness growth by 50% in its inaugural year, doubling in the subsequent three years. Concurrently, they anticipate banks and brokers to grow by 25% in the first year and escalate by 75% over the next trio of years.
Summing it up, the market potential for a BTC ETF in the U.S. is projected to skyrocket to $14 trillion in its first year, reaching an astonishing $39 trillion by year three.
Wu opines that these investment horizons could expand even further if they encapsulate international clientele, diverse investment tools, and retail services in their projections.
Effective adoption and regulation
The introduction of a Bitcoin spot ETF can be a game-changer, offering broader access to both institutional and retail investors across various wealth brackets. This shift not only diversifies the playing field from traditional wealth managers but also extends opportunities to Registered Investment Advisors (RIAs), brokers, and other fiduciaries.
Moreover, the involvement of major players in the conventional finance sector applying for a spot ETF instills a fresh sense of legitimacy in the market. This can pave the way for more structured and beneficial regulations.
However, the U.S. cryptocurrency market hasn’t been without its challenges, especially in the regulatory domain. These challenges were exemplified by the collapse of the Terra ecosystem and the widely publicized meltdown of FTX.