The Potential Impact: According to CryptoQuant, a well-known data analytics firm, the cryptocurrency market cap could increase by $1 trillion if bitcoin spot exchange-traded funds (ETFs) receive approval. This approval could potentially raise Bitcoin’s value to a staggering $900 billion.
Institutional Adoption: The crypto industry experienced its initial wave of institutional adoption between 2020 and 2021 when institutions started adding bitcoin to their balance sheets. CryptoQuant’s report suggests that the next wave of adoption may involve financial institutions offering bitcoin access through spot ETFs. Several prominent financial entities have already applied to launch spot Bitcoin ETFs in the U.S., with potential approvals expected by March 2024.
Comparative Analysis: The potential influx from spot ETFs is projected to surpass the investments that previously went into the Grayscale Bitcoin Trust (GBTC), the world’s largest cryptocurrency fund with $16.7 billion in assets under management. CryptoQuant’s analysis indicates that if the current ETF applicants allocate just 1% of their Assets Under Management (AUM) to these ETFs, the bitcoin market could see an influx of around $155 billion. This influx would account for nearly one-third of bitcoin’s existing market cap and potentially drive its price to a range of $50,000 to $73,000.
Historical Perspective: Based on past bull markets, Bitcoin’s market capitalization has typically expanded to 3-5 times its realized capitalization. This pattern suggests that for every dollar of new investment in the bitcoin market, the market cap could increase by $3-$5.
Market Reactions: The recent surge in Bitcoin’s price to $30,000 was triggered by an erroneous report about the approval of a spot bitcoin ETF. Despite the inaccuracy, the bullish momentum continues, discouraging potential short-sellers. Markus Thielen, Matrixport’s head of research and strategy, commented on the prevailing optimism and highlighted the reluctance to short BTC in the foreseeable future.
Current Market Status: The crypto market surpassed the $1 trillion threshold in January 2021. As of the latest data, the total market cap stands at $1.13 trillion, with bitcoin accounting for over half of this figure.