TO recent report from data analytics company CryptoQuant suggests that the approval of spot Bitcoin exchange-traded funds (ETFs) could drive Bitcoin's market capitalization to grow by $900 billion, with the total crypto market expanding by an additional $1 trillion.
CryptoQuant suggests that the next significant wave of institutional participation could come from financial institutions offering access to Bitcoin to their clients through spot ETFs.
The report argued that the previous wave of institutional adoption occurred in 2020-2021, when major institutions added Bitcoin to their balance sheets. So, this time the one-time Bitcoin ETF approvals could trigger a similar push.
Major Institutional Firms Prepare to Launch BTC Spot ETFs
Several major financial institutions in the United States have already requested Regulatory Permission to Launch Bitcoin Spot ETF with US SEC. These approvals could materialize as early as March 2024, which could mark a major milestone in the cryptocurrency industry.
The potential fund inflow resulting from ETF spot approvals is expected to exceed the capital inflow into the Grayscale Bitcoin Trust (GBTC) during the previous bull market cycle.
GBTC, the world's largest cryptocurrency fund with $16.7 billion in assets under management, is operated by Digital Currency Group.
The CryptoQuant report further suggests that if the issuers of these Bitcoin ETFs allocate just 1% of their assets under management (AUM) to these funds, they could contribute approximately $155 billion to the Bitcoin market.
This amount represents almost a third of Bitcoin's existing market capitalization. In this hypothetical scenario, the price of Bitcoin could rise to $73,000.
Historically, during previous bull markets, Bitcoin's market capitalization has expanded at a rate of 3 to 5 times its realized capitalization. This pattern suggests that for every dollar of new investment that enters the Bitcoin market, the market cap could increase by $3 to $5.
Bitcoin surged to $30K on fake Bitcoin ETF news
It's worth noting that the speculative fervor surrounding the potential approval of spot Bitcoin ETFs was evident recently when Bitcoin briefly rose to $30,000 after false report of such approval by Cointelegraph.
This exuberance has left some observers speculating that bullish momentum may persist in anticipation of actual regulatory approval.
Furthermore, the report highlights the reduction of the GBTC discount to its lowest level in almost two years, indicating the growing optimism in the cryptocurrency market.
Since the cryptocurrency market first crossed the trillion-dollar threshold in January 2021, it has continued to expand. Currently, the total market capitalization stands at approximately $1.13 trillion, with Bitcoin accounting for more than 50% of the overall market.
