Bitcoin spot-based exchange-traded funds (ETFs) could bring a massive influx of demand for the world’s largest digital asset, according to crypto trading firm NYDIG’s recent research report. The report states that a spot ETF could bring some noted benefits compared to existing alternatives, and that there are $28.8 billion in bitcoin assets under management with $27.6 billion in spot-like products.
Comparing Bitcoin to gold ETFs, NYDIG points out that gold ETFs hold only 1.6% of the total global gold supply, while bitcoin funds hold 4.9% of the total bitcoin supply. Additionally, there is over $210 billion invested in gold funds while only $28.8 billion in bitcoin funds. NYDIG estimates that on a volatility equivalent basis, investors would require 3.6x less bitcoin than gold on a dollar basis to get as much risk exposure. Still, that would result in nearly $30B of incremental demand for a bitcoin ETF.
Ecoinometrics has a more cautious take on a bitcoin ETF, noting that the significant rise of gold during the early 2000s was largely due to a favorable macro environment and a weakening dollar. They write that a spot Bitcoin ETF can help with drumming up more interest into Bitcoin and will undoubtedly attract some fresh money into the space. But that won’t make one Bitcoin worth $100k single-handedly.
The real potential for a Bitcoin ETF lies in a convergence of factors, including the launch of the ETF, a weaker US dollar, a Federal Reserve move towards Quantitative Easing, and a generational wealth transfer to younger individuals more likely to invest in crypto. Now, we just need to wait for approval.