Galaxy Digital, a cryptocurrency firm, believes that the approval of a spot Bitcoin (BTC) ETF would be one of the most impactful catalysts for the growth and adoption of the leading digital asset. In an analysis on October 24, Galaxy’s research associate Charles Yu discussed the potential effects of a spot BTC ETF in the United States and its significance given the current market conditions.
The firm projects a 74% growth in Bitcoin in the first year following an ETF approval, which could lead to a price increase up to $59,000 and a 6.1% increase in the first month.
“If we apply our year-one estimate of $14.4bn in inflows (~$1.2bn per month or ~$10.5bn on an adjusted-basis using our 8.8x multiplier) into the historical relationship between gold ETF fund flows & change in gold price, we estimate a +6.2% price impact for BTC in the first month.”
These predictions are based on the previous price surges that occurred in anticipation of an ETF approval. The price of Bitcoin surpassed $31,000 after BlackRock and other firms applied for approval from the Securities and Exchange Commission (SEC). Recently, Bitcoin reached a 16-month high above $35,000 in anticipation of an imminent SEC approval.
Broader Impacts on Adoption
The reports emphasize the benefits of a spot BTC ETF approval on the market, particularly for institutional investors who would have a more accessible and direct method of investing. Galaxy predicts significant growth in the wealth management industry in the US, estimated at $48 trillion across banks, registered investment advisors, and brokers. An ETF would make it easier for institutional funds to enter the market.
According to Galaxy, the RIA channel could grow by 50% in the first year and 100% in the next three years, while banks and brokers may see a 25% increase in the first year and a 75% increase in the next three years. The United States market size for a BTC ETF could reach $14 trillion in the first year and $39 trillion by the third year. These estimates could be even higher if international clients, other investment products, and retail services are taken into account.
Effective Adoption and Regulation
A Bitcoin spot ETF would open up the market, providing accessibility for both institutional and retail players across different wealth groups. This shift would extend beyond wealth managers to include RIAs, brokers, and other fiduciaries. The fact that major corporations in traditional finance are applying for a spot ETF adds credibility to the market and drives the need for proper regulation.
The crypto market has faced regulatory challenges in the United States following incidents such as the fall of the Terra ecosystem and the implosion of FTX.