- October 22, 2023
- Posted by: [email protected]
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According to a recent analysis by CryptoQuant, the endorsement of spot Bitcoin exchange-traded funds (ETFs) has the potential to propel Bitcoin’s market capitalization to increase by $900 billion while simultaneously causing the total cryptocurrency market to grow by an additional $1 trillion.
CryptoQuant anticipates that the next major wave of institutional involvement may be initiated by financial institutions offering Bitcoin investment options to their clients through spot ETFs. The report suggests that, similar to the 2020–2021 institutional adoption wave, approvals for spot Bitcoin ETFs could trigger a comparable surge.
Numerous prominent financial institutions in the United States have already sought regulatory approval to launch spot Bitcoin ETFs with the US SEC, and these approvals could materialize by March 2024, marking a pivotal moment in the cryptocurrency industry.
The anticipated influx of capital following the approval of spot ETFs is projected to surpass the capital inflow into the Grayscale Bitcoin Trust (GBTC) witnessed during the previous bull market cycle. GBTC, managed by the Digital Currency Group and the world’s largest cryptocurrency fund with $16.7 billion in assets under management, has seen its discount narrow to the lowest level in nearly two years, signifying growing optimism in the cryptocurrency market.
CryptoQuant’s report also posits that if the issuers of these Bitcoin ETFs allocate just 1% of their Assets Under Management (AUM) to these funds, it could potentially inject around $155 billion into the Bitcoin market. In this hypothetical scenario, Bitcoin’s price could conceivably surge to as high as $73,000.
Historically, during past bull markets, Bitcoin’s market capitalization has grown at a rate 3-5 times higher than its realized capitalization. This pattern suggests that for every $1 of new investment entering the Bitcoin market, the market capitalization could expand by $3 to $5.
It’s worth noting that the speculative excitement surrounding the potential approval of spot Bitcoin ETFs was evident recently when Bitcoin briefly surged to $30,000 following a false report of such an approval. This enthusiasm has led some observers to believe that the bullish momentum may persist as investors await actual regulatory approval.
Since the cryptocurrency market first exceeded the $1 trillion threshold in January 2021, it has continued to expand. Currently, the total market capitalization stands at around $1.13 trillion, with Bitcoin accounting for more than 50% of the overall market.
