Bitcoin will become a $900 billion asset and the entire crypto market will grow by $1 trillion if Bitcoin spot exchange-traded funds (ETFs) are approved, data analytics firm CryptoQuant wrote in a recent report .
The first wave of institutional adoption in 2020-2021 came from institutions adding Bitcoin to their balance sheets, while the next wave could be financial institutions giving their customers access to Bitcoin through spot ETFs, CryptoQuant argued in the report.
The potential inflow to spot ETFs would be significantly larger than the money that flowed into the Grayscale Bitcoin Trust (GBTC) during the last bull market cycle. GBTC is the largest cryptocurrency fund in the world and currently has $16.7 billion in assets under management. Digital Currency Group is the parent company of Grayscale and CoinDesk.
According to CryptoQuant, about $155 billion could flow into the Bitcoin market if issuers that have applied to list Bitcoin ETFs invested 1% of their assets under management (AUM) in these ETFs. This represents almost a third of Bitcoin’s current market capitalization. If this scenario were to occur, it would hypothetically push the Bitcoin price to between $50,000 and $73,000.
Historically, Bitcoin’s market cap has grown three to five times more than its actual capitalization during previous bull markets. This suggests that for every dollar of fresh money entering the Bitcoin market, the market cap could increase by $3 to $5, CryptoQuant added.
Bitcoin recently briefly rose to $30,000 after Cointelegraph published a false report about the approval of a spot Bitcoin ETF. According to some observers, the frantic upward move in prices would keep the bears at bay for some time.
“No one will dare short BTC in the foreseeable future. Even if this Cointelegraph news were false, BTC could still rise further in anticipation of approval,” said Markus Thielen, head of research and strategy at Matrixport, in a Telegram broadcast.
The optimistic sentiment is also evident as the GBTC discount continues to decline to its lowest level in almost two years.
Cryptocurrency market capitalization exceeded $1 trillion for the first time in January 2021. At press time, the total market capitalization was $1.13 trillion, with Bitcoin accounting for over 50% of that.