Galaxy Digital, a crypto investment firm founded by billionaire Mike Novogratz, has published a blog post predicting that the price of Bitcoin (BTC) will increase 74.1% in the first year after spot Bitcoin exchange-traded funds (ETFs) are launched in the United States. The firm estimated the total addressable market size for Bitcoin ETFs to be $14.4 trillion in the first year, based on the assumption that 10% of global investable assets would allocate to Bitcoin.
The firm used gold ETFs as a baseline to assess the potential price impact of fund inflows to Bitcoin ETF products. According to its estimates, Bitcoin’s price would increase 6.2% in the first month after an ETF launch, before steadily trending downward to a 3.7% monthly increase by month 12.
Spot vs futures ETFs
The prediction comes amid the anticipation of the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC). Spot ETFs are different from futures ETFs, which track the price of Bitcoin futures contracts rather than the actual Bitcoin. Futures ETFs have higher fees and lower tracking accuracy than spot ETFs, making them less appealing to investors.
The SEC has already approved four futures-based Bitcoin ETFs this month, which have attracted over $1.5 billion in assets under management in their first week of trading. However, many crypto enthusiasts are still waiting for the green light for spot-based Bitcoin ETFs, which are seen as more beneficial for the Bitcoin ecosystem and price.
Second-order effects and future outlook
Galaxy Digital acknowledged that its prediction could be affected by a delay or denial of spot Bitcoin ETFs by the SEC. However, it also said that its estimates were conservative and did not factor in “second-order effects” from a spot Bitcoin ETF approval. These effects could include increased adoption, innovation, and regulation in the crypto space, as well as more institutional and retail demand for Bitcoin.
The firm also said that 2024 could be a big year for Bitcoin, citing ETF inflows, the April 2024 Bitcoin halving, and “the possibility that rates have peaked or will peak in the near term.” The halving is an event that reduces the supply of new Bitcoins by half every four years, creating a scarcity effect that tends to boost the price.
At the time of writing, Bitcoin is trading at $34,000, up 5% in the past 24 hours and 23% in the past month.