In a recent research report, NYDIG, a prominent crypto trading firm, has suggested that the introduction of Bitcoin spot-based exchange-traded funds (ETFs) could potentially generate $30 billion in new demand for Bitcoin, the world’s largest digital asset. CoinDesk reported this information earlier today.
NYDIG, a branch of Stone Ridge, is a pioneering holding company with a track record of establishing innovative firms in the technology and finance sectors, including a thriving alternatives asset manager with over $13 billion in assets. Leveraging this robust base, NYDIG offers a range of Bitcoin solutions to various sectors, including banking, insurance, fintech, and nonprofits. By combining rigorous regulatory compliance with robust technology, NYDIG aims to make Bitcoin accessible to all.
The crypto market has been anticipating the potential introduction of spot ETFs, especially following filings by major financial institutions such as BlackRock and Fidelity. NYDIG’s report highlights the potential benefits of a spot ETF, including the brand recognition of BlackRock and the iShares franchise, the familiarity of purchase and sale methods through securities brokers, and the simplicity of position reporting, risk measurement, and tax reporting.
According to NYDIG’s calculations, there are currently $28.8 billion in Bitcoin assets under management, with $27.6 billion in spot-like products. The firm also points out that while gold ETFs currently hold only 1.6% of the total global gold supply, Bitcoin funds hold 4.9% of the total Bitcoin supply.
The report also notes a significant difference in demand for the digital and analog versions of the asset in funds. There is over $210 billion invested in gold funds, compared to only $28.8 billion in Bitcoin funds. Despite Bitcoin being about 3.6 times more volatile than gold, NYDIG suggests that this could result in nearly $30 billion of incremental demand for a Bitcoin ETF.
However, as CoinDesk’s article points out, the newsletter Ecoinometrics offers a more cautious perspective on a Bitcoin ETF. It argues that while the GLD ETF filled a significant void in the market by providing an easily tradable product that tracked the price of physical gold, the significant rise of gold during that time was largely due to a favorable macro environment and a weakening dollar. Therefore, comparisons between gold ETFs and Bitcoin ETFs may be misleading.
Ecoinometrics suggests that the real potential for a Bitcoin ETF lies in a convergence of factors: the launch of the ETF, a weaker US dollar, a Federal Reserve move towards Quantitative Easing, and a generational wealth transfer to younger individuals more likely to invest in crypto.