The tantalizing possibility of Bitcoin spot exchange-traded funds (ETFs) could potentially attract a whopping $30 billion in fresh demand for the world’s most infamous digital asset, according to a report by NYDIG. The catalyst for this surge in interest? A swell of filings from financial heavyweights like BlackRock, and Fidelity among others.
NYDIG suggests that the entrée of renowned brands could bring recognizable perks to the scene with their business models’ familiarity—easy security broker transactions and efficiency in position reporting, risk measurement, and tax reporting. The current figures give total managed Bitcoin assets a nearly $29 billion value, of which approximately $28 billion resemble spot-like products.
Not so surprisingly, the analogy between Bitcoin and digital gold surfaces. Are the dynamics the same, or is this an ill-made comparison? After all, gold ETFs barely hold 1.6% of total global gold supply, dwarfed by central banks, who hoard 17.1%, standing in contrast to Bitcoin funds, which hold around 4.9% of the total digital currency. Looking at capital vested in funds, traditional gold outclasses Bitcoin, with a towering $210 billion against Bitcoin’s modest $29 billion.
There’s an interesting nuance here—Bitcoin’s volatility outpaces gold by a factor of 3.6. In essence, this translates to a need for less Bitcoin, on a dollar basis, to achieve equivalent risk exposure. NYDIG projects that this could foster nearly $30 billion in additional demand for a Bitcoin ETF.
But let’s temper our expectations. Ecoinometrics urges a more sober view on Bitcoin ETFs, examining the success and market void filled by GLD ETF, an easily tradable product that tracked the price of physical gold. Their contention is that factors like the macro environment and a weakened dollar significantly drove the gold upsurge during the early 2000s, not just the ETF.
Arguably, a Bitcoin ETF could trigger an increased interest in Bitcoin and bring new money into the game, but don’t expect it to single-handedly rocket Bitcoin worth to $100k. The real game-changer is anticipated to be a convergence of influences: the launch of the ETF itself, a weaker US dollar value, a shift by the Federal Reserve towards Quantitative Easing, and a wealth transition towards the younger generation—who, likely, are more predisposed to crypto investment than their more mature counterparts. Again, it’s worth remembering that with every promise of a golden future, there’s often more to the story.
Source: Coindesk
