- The introduction of spot bitcoin exchange-traded funds (ETFs) in the U.S. could attract over $14 billion in inflows in the first year.
- Galaxy Digital’s research suggests rapid adoption due to regulatory oversight, liquidity, lower fees.
- These benefits could make spot ETFs accessible to a wider segment of institutional and retail investors.
The introduction of spot Bitcoin ETF in the U.S. could potentially attract over $14 billion in inflows in the first year, according to new research from crypto asset manager Galaxy Digital.
In a report published on October 25th, Galaxy estimates that bitcoin spot ETFs would see rapid adoption due to their regulatory oversight, liquidity, lower fees, and direct price tracking compared to existing investment vehicles like trusts and futures funds. These benefits could make spot ETFs accessible to a wider segment of institutional and retail investors.
Galaxy points to the estimated $48 trillion in assets held by U.S. wealth managers, banks, and registered investment advisors (RIAs) as representing a huge potential market for spot bitcoin ETFs. The crypto fund speculates that inflows could reach $27 billion in the second year and $39 billion by the third year following initial issuance.
Rumors and speculation fuel Bitcoin price jumps
The Galaxy Digital report comes on the heels of significant bitcoin price jumps fueled by rumors and speculation around an imminent spot ETF approval. A rumor last week led to a 10% single-day bitcoin price increase, while the discovery of BlackRock’s proposed bitcoin ETF ticker on Monday preceded a 12% gain.
Galaxy suggests these price spikes reflect sizable latent demand and pent-up investor interest in Bitcoin investment vehicles. The report estimates inflows from spot ETFs could spur a 74% bitcoin price increase in Year 1 based on increased liquidity.
Galaxy contends that existing investment products like trusts and futures funds come with limitations like high fees, low liquidity, and tracking errors. These factors make current options inaccessible or suboptimal for many investors.
Spot ETFs could offer investors simpler, cheaper direct BTC exposure without having to self-custody the cryptocurrency. With a dozen spot bitcoin ETF applications now pending before the SEC, Galaxy argues that issuer competition could also help keep fees low.
While the SEC has yet to approve a spot bitcoin ETF, Galaxy Digital believes the confluence of surging investor demand and a maturing regulatory environment could make them a reality sooner rather than later. If so, the new investment vehicle looks poised to dramatically expand access to bitcoin and crypto markets more broadly.