A recent report from data analytics firm CryptoQuant suggests that the approval of spot Bitcoin exchange-traded funds (ETFs) could push 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 Bitcoin access to their clients through spot ETFs.
The report argued that the previous institutional adoption wave came in 2020-2021 when major institutions added Bitcoin to their balance sheets. So, this time around spot Bitcoin ETF approvals could trigger a similar push.
Major Institutional Firms Gear Up to Launch Spot BTC ETFs
Several major financial institutions in the United States have already applied for regulatory permission to launch spot Bitcoin ETFs with the US SEC. These approvals could materialize by March 2024 at the latest, potentially marking a significant milestone in the cryptocurrency industry.
The potential inflow of funds resulting from spot ETF approvals is anticipated to surpass 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 the Digital Currency Group..
CryptoQuant’s report further suggests that if the issuers of these Bitcoin ETFs allocate just 1% of their Assets Under Management (AUM) to these funds, it could bring approximately $155 billion into the Bitcoin market.
This amount represents nearly a third of Bitcoin’s existing market capitalization. Under this hypothetical scenario, Bitcoin’s price could potentially surge to as much as $73,000.
Historically, during previous bull markets, Bitcoin’s market capitalization has expanded at a rate 3-5 times greater than its realized capitalization. This pattern suggests that for every $1 of new investment entering the Bitcoin market, the market capitalization 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 surged to $30,000 following a false report of such an approval by Cointelegraph.
This exuberance has left some observers speculating that the bullish momentum may persist in anticipation of actual regulatory approval.
In addition, the report highlights the narrowing of the GBTC discount to its lowest level in nearly two years, indicating the growing optimism in the cryptocurrency market.
Since the cryptocurrency market first crossed the $1 trillion threshold in January 2021, it has continued to expand. At present, the total market capitalization stands at approximately $1.13 trillion, with Bitcoin comprising over 50% of the overall market.