According to a new report and some predictions from CryptoQuant, the approval of spot ETFs could push the price of bitcoin to $73,000 and contribute to a $1 trillion increase in cryptocurrency market capitalisation.
See all the details below.
Summary
Bitcoin price predictions linked to spot ETFs
As expected, CryptoQuant’s latest report revealed that bitcoin’s market capitalisation could see a significant increase, potentially reaching $1 trillion, as a result of the introduction of spot ETFs.
It is no coincidence that the announcement of the approval of the iShares Bitcoin Spot ETF, although later proven to be false, triggered a run-up in the cryptocurrency sector, driving the price of BTC close to $30,000.
However, when the truth of the announcement was revealed, the market promptly returned to its pre-rally levels. However, this episode underlined the market’s responsiveness to a true ETF.
Furthermore, it is important to note that there are other ETFs awaiting approval and CryptoQuant’s report examines the implications of these developments.
Specifically, the report provides an analysis of the companies awaiting approval for Bitcoin spot ETFs, including the total size of their assets under management (AUM).
While approval may not occur this year, the report suggests that the likelihood of approval by March 2024 has increased, citing recent favourable decisions in Grayscale’s (GBTC Fund) and XRP’s cases against the SEC.
Collectively, these firms have around $15.6 trillion in AUM. Even allocating just 1% of this to bitcoin would result in an inflow of $155 billion into the asset.
To put this into perspective, this figure represents almost a third of bitcoin’s current market cap.
The dynamics between capital inflows and bitcoin market cap growth
However, the impact of the aforementioned capital inflows on bitcoin’s market capitalisation is complex to determine, as market capitalisation grows more than just capital inflows.
In fact, the report uses the concept of “realised cap” to examine this dynamic.
Recall that the realised maximum is a metric that calculates the total value of bitcoin, assuming that the value of each coin is equal to the last transaction price on the blockchain.
Furthermore, the report points out that the market cap and the realised cap tend to grow at significantly different rates over time. An analysis of historical data shows that market capitalisation typically grows 3 to 6 times faster than the realised limit.
If the realised limit were to increase by $155 billion with the approval of spot ETFs and the allocation of 1% of AUM by asset managers, market capitalisation could increase by between $450 billion and $900 billion.
This suggests an increase in market capitalisation of between 82% and 165% from current levels, with the price of bitcoin likely to be between $50,000 and $73,000 as a result of these significant inflows of fresh money into the asset.
Bitcoin, volatility and the outlook for spot ETFs: Words from the CEO of Ark Invest
As mentioned above, bitcoin spiked above $30,000 following the announcement of the spot ETF approval, only to fall back to $28,000 when it became clear that these reports were unfounded.
This episode of short-term volatility resulted in significant losses for investors, with leveraged transactions exceeding $100 million.
However, attention to the implications of SEC-approved spot ETFs continues to grow. Indeed, Ark Invest CEO Cathie Wood has reiterated her optimism about such developments.
During an appearance on the Coin Stories podcast hosted by Natalie Brunell, Wood shared her views on the subject. In particular, she stated that the SEC understands bitcoin well and that the main obstacle to the approval of spot ETFs is not the agency itself, but SEC Chairman Gary Gensler.
Wood also stated that despite the broad expertise of the SEC members, Gensler’s attitude has hindered the progress of spot ETFs. Not only that, but she also expressed her belief that the SEC will soon take action on ETFs.
The CEO, who is known for her positive outlook, also stressed that she expects not just one, but several bitcoin ETFs to be approved.
She also expressed surprise that Gensler has approved risky ETFs based on bitcoin futures, but has not yet approved risk-free bitcoin ETFs.
Finally, he assumed that the ETF his firm is developing will be bitcoin equivalent and available on Coinbase, which would guarantee a high level of security.
