Potential Approval of Spot Bitcoin ETF Expected to Have Significant Effects
The US Securities and Exchange Commission (SEC) is anticipated to approve a Spot Bitcoin ETF, which could have major implications for Bitcoin and the Spot Bitcoin ETF market. Galaxy Digital, a crypto research firm, has recently provided insights into what investors can expect in the first three years following the launch of this fund.
What To Expect In The First Three Years
In a research paper published on October 24, Galaxy Digital’s research associate Charles Yu offered predictions on the market size and inflows of a US Bitcoin ETF in the first three years.
According to Yu, the addressable market size of a US Bitcoin ETF will be based on the adoption of the fund by various wealth channels. He expects Registered Investment Advisors (RIAs) to adopt the fund at a rate of 50% in the first year, increasing to 100% by the third year. Broker-dealers and bank channels are predicted to have a slower adoption rate, starting at 25% and reaching 75% by the third year. Galaxy Digital estimates that the market size could reach $14 trillion in the first year, $26 trillion in the second year, and $39 trillion in the third year.
Based on these market size estimates, Galaxy Digital anticipates inflows into the Bitcoin ETFs. They project $14 billion of inflows in the first year, $27 billion in the second year, and up to $39 billion in the third year after the fund’s launch.
However, Galaxy Digital acknowledges that factors such as potential delays or denials of the pending Spot Bitcoin ETFs could affect their analysis. Additionally, if there is poor price performance or a low adoption rate, their estimates could be impacted.
BTC price retraces to $33,900 | Source: BTCUSD on Tradingview.com
Potential Impact on Bitcoin’s Price
Galaxy Digital also provides insight into the potential effect of Spot Bitcoin ETFs on Bitcoin’s price. They predict a possible 74.1% increase in Bitcoin’s price in the first year of these funds launching. This estimate is based on the expected inflows of $14 trillion in the first year, comparing it to the impact of Gold ETFs.
Specifically, Galaxy Digital projects a 6.2% increase in Bitcoin’s price in the first month of the funds’ launch, with an estimated inflow of over $10 billion. This increase is expected to decrease gradually to a 3.7% price impact in the last month of the first year, culminating in the overall 74.1% increase.
Featured image from The Conversation, chart from Tradingview.com
