- October 27, 2023
- Posted by: [email protected]
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Galaxy Digital, a prominent player in the cryptocurrency space, believes that the approval of a spot Bitcoin (BTC) Exchange-Traded Fund (ETF) stands as one of the most influential catalysts in the ongoing expansion and acceptance of the leading digital asset. Charles Yu, a research associate at Galaxy, explores the potential consequences of a spot BTC ETF in the United States in a market analysis report dated October 24 and emphasizes its crucial role amid evolving market dynamics.
Galaxy Digital’s research projects a substantial 74% growth in Bitcoin’s value within the first year of ETF approval, potentially propelling the asset’s price to a striking $59,000. This forecast anticipates a noteworthy 6.1% upswing in the very first month. Yu further elucidates, “If we apply our year-one estimate of $14.4 billion in inflows (~$1.2 billion per month or ~$10.5 billion on an adjusted basis using our 8.8x multiplier) into the historical relationship between gold ETF fund flows and change in gold price, we estimate a +6.2% price impact for BTC in the first month.”
Yu’s predictions appear grounded in reality, considering that the lead-up to ETF approvals has already witnessed Bitcoin’s price surging in anticipation. The digital asset skyrocketed past the $31,000 mark following BlackRock’s application to the U.S. Securities and Exchange Commission (SEC), alongside similar initiatives by major players like Fidelity, Valkyrie, and other institutions. More recently, Bitcoin reached heights above $35,000, a level not seen in over 16 months, primarily due to expectations of SEC approval.
Galaxy’s analysis highlights the numerous advantages that an approved spot BTC ETF would offer to the market and institutional investors. The report characterizes this ETF as the most direct and easily accessible route for institutional players. Given that the U.S. wealth management industry boasts a staggering $48 trillion across banks, registered investment advisors (RIAs), and brokers, Galaxy envisions substantial growth potential as an ETF that would streamline the flow of institutional capital into the crypto market.
Galaxy forecasts a 50% expansion in the RIA channel within the first year and a subsequent 100% growth in the next three years, with banks and brokers also expected to witness a 25% increase within the first year and a 75% surge over the following three years. Consequently, the U.S. market for a BTC ETF could balloon to $14 trillion within the first year, ultimately reaching a monumental $39 trillion by the third year.
Galaxy’s projections suggest that investments would stretch beyond these figures if international clients, alternative investment products, and retail services tapped into the potential of a Bitcoin spot ETF. Such an ETF would democratize access to the market, allowing both institutional and retail participants from various wealth groups to partake.
Additionally, the involvement of established traditional finance giants in applying for a spot ETF infuses the market with a renewed sense of credibility and reinforces the necessity for sound regulatory measures. The crypto market in the United States has encountered regulatory turbulence, particularly following the upheaval in the Terra ecosystem and the notorious FTX debacle.
Galaxy Digital’s insights shed light on the transformative potential of a spot BTC ETF, not only as a catalyst for Bitcoin’s price ascent but as a pivotal milestone in the continued maturation and expansion of the cryptocurrency market, catering to a diverse range of investors and players in the financial industry.
