Bitcoin spot-based exchange-traded funds (ETFs) are predicted to ignite a $30 billion surge in demand for the world’s leading digital asset, as per NYDIG’s recent research report. This comes amidst the ongoing spot-ETF fever in the crypto market, triggered by filings from prominent players like BlackRock (BLK) and Fidelity, media reports said.
NYDIG highlights the advantages of spot ETFs, citing the brand recognition and simplicity of position reporting, risk measurement, and tax reporting. Their research reveals that $28.8 billion is currently held in bitcoin assets, with $27.6 billion in spot-like products.
While Bitcoin is often referred to as digital gold, the comparison to gold ETFs listed in the early 2000s reveals a significant disparity in demand. Gold ETFs hold only 1.6% of the global gold supply, while central banks account for 17.1%. In contrast, bitcoin funds hold 4.9% of the total bitcoin supply.
Evidently, there is a massive gap in demand between the digital and analog versions of the asset in funds, with over $210 billion invested in gold funds and only $28.8 billion in bitcoin funds.
NYDIG further illustrates that, despite Bitcoin’s 3.6 times higher volatility than gold, investors would need 3.6 times less bitcoin than gold on a dollar basis to attain similar risk exposure. Consequently, a bitcoin ETF could generate nearly $30 billion of incremental demand.
However, Ecoinometrics expresses a more cautious stance on a bitcoin ETF, warning that comparisons with gold ETFs might be misleading. The significant rise in gold’s value during that period was primarily due to a favorable macro environment and a weakening dollar, influenced by geopolitical events like the war on terror, China’s rise, and ballooning U.S. deficits.
While a spot Bitcoin ETF may garner more interest and attract fresh capital into the space, it alone may not drive Bitcoin’s value to $100k. Evidently, macroeconomic factors will continue to play a pivotal role in determining the cryptocurrency’s trajectory.
NYDIG’s research emphasizes the potential boost in demand that a bitcoin ETF could bring to the market. While comparisons to gold ETFs should be taken with caution, a well-structured ETF has the potential to attract significant investments to the digital asset space. As the market evolves, investors and analysts will keep a close eye on how such products influence the crypto landscape.
