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With the arrival of the Bitcoin Spots ETF, Galaxy Digital predicts Bitcoin at $70,000. In this Pooyan Music post, we examine the possibility of such an increase.
Galaxy Digital, which registered for the Bitcoin ETF, estimates that the approval of the ETF will release $14 billion in inflows in the first year, $26.5 billion in the second year and $38.6 billion in the third year.
This difference is based on the gradual supply of Bitcoin by independent advisors, market dealers and banks.
“We see the wealth management channel, particularly banks, broker-dealer platforms and independent RIAs, as the largest market with new access to Bitcoin,” said Alex Thorne, Head of Wealth Management. In the United States, these two sectors manage $47 trillion.”
The asset manager estimates that independent advisors will be the fastest to adapt to the new Bitcoin product. He further states:
We assume that the RIA channel starts at 50% in year 1 and increases to 100% in year 3. Based on these assumptions, we estimate the size of the US Bitcoin ETF addressable market to be $14 trillion in the first year after launch, $26 trillion in year 2, and $39 trillion in year 3.
These flows increase the price of Bitcoin by 6.2% in the first month of trading and gradually decrease to 3.7% by the twelfth month, for an overall increase of 74% in the first year.
This implies a Bitcoin price of around $70,000 by Christmas 2024, which overall seems about right based on past performance.
In a broader analysis, if we consider the entire wealth market, rather than a specific segment that did not have access to Bitcoin before the ETF, the gains could be even greater. Galaxy says:
“In the long term, the addressable market for Bitcoin investment products could be across all third-party managed assets (~$126 trillion in AUM according to McKinsey) and even more broadly across global wealth ($454 trillion according to UBS) to expand. Some believe. As Bitcoin makes money, it systematically lowers premiums applied to other assets such as real estate or precious metals.
Based on this market size and stability of our acceptance/allocation assumptions (BTC is accepted by 10% of funds with an average allocation of 1%). We estimate potential new incremental inflows into bitcoin investment products over a long period of $125 billion to $450 billion.”
10% of 1%, that is 0.1% of the world’s wealth in Bitcoin, translates into inputs almost equal to the entire market cap of Bitcoin.
However, almost all academic studies show that at least 1% of your investment portfolio should be in Bitcoin for optimal risk-adjusted returns. This makes its market value 4.5 trillion dollars or 10 times the current situation.
More recent studies suggest that 10% should remain in Bitcoin. But if we stick to a conservative 1%, BlackRock alone would have $8.9 trillion in assets under management.
Obviously, BlackRock offers BlackRock Ishares Bitcoin ETF (IBTC) to its clients and probably recommends at least 1%. That translates to $89 billion worth of Bitcoins from BlackRock alone.
On the other hand, Gary Scales, a favorite of institutional investors during the recent period, has $21 billion in his Bitcoin Trust, worth 620,000 Bitcoins.
Another comparison is the sharp rise in the price of Bitcoin in the winter of 2020, based on about $2 billion bought by institutional investors, half a billion of which was bought through Grayscale in just one week.
So, in conclusion, $14 billion inflow is a significant amount. Let alone the nearly $100 billion that might come from BlackRock alone, plus JP Morgan estimated in December 2020 that family offices held just 0.18% of their assets in bitcoin, compared to 3.3. They keep a percentage for gold.
The price of Bitcoin at that time was not far from the current price, so although this percentage may have increased. But it probably did not grow significantly.
Given these price conditions, we have always assessed Bitcoin at $40,000 for the end of this year. But looking at the price this week, it may reach $50,000 and even more.
However, there is now evidence that FTX actually sold bitcoins that did not belong to it. This makes non-artificial ATH estimates much more complicated. So that some calculations estimate it to be $140,000. Then, if a big rally occurs, it will increase to $300,000. It means ten times now.
The market value of a $300,000 bitcoin is $6 trillion, which seems like a huge number. But cryptos reached a market value of 3 trillion dollars in the last climb. So $10 trillion may be available for a great bull run.
This puts it at the same level as the market value of gold. Although some of them have $20 trillion in gold, potentially leaving room for another bull market after that.
All in all, it now looks very likely that there will be more positives than a price cut. This time, institutional investors may enter the story soon. In this case, the equations will be completely upside down.
