Crypto analyst predicts $220B net inflows in Bitcoin ETFs within three years
Bitcoin’s recent surge in price following the approval of a spot Bitcoin ETF has led to inflows for financial firms. Coinbase, a popular crypto exchange platform, has seen a roughly 50% increase since the start of the year. Despite the surge, JMP Securities’ Director of Financial Technology Research, Deon Ryan, believes there is still a compelling upside case to cryptocurrencies.
In a report released last night, Ryan notes that there has been $10 billion in net inflows into the ETFs over the past two months. Ryan predicts an additional $220 billion of net inflows into the ETFs over the next three years. According to Ryan, the ETFs are transformational for the crypto space and open the door to the $25 trillion financial advisor-driven money that hasn’t yet been allocated.
Ryan believes that the demand driving up prices is excellent for companies like Coinbase, which directly benefits from ETFs’ trading. Coinbase has already seen a 100% increase in trading volumes in the first quarter compared to the fourth quarter. Ryan argues that Coinbase is a play on the asset class’s evolution, and that is why there is still plenty of upside.
GrayScale Bitcoin ETF struggles but still has potential
Ryan cautions that there have been problems with the GrayScales Bitcoin ETF. The ETF struggled with $5 billion in Exodus during the first 30 trading days. However, Ryan notes that the Exodus was more indicative of the idiosyncratic nature of the problem. Some of the Exodus is related to bankruptcy estate sales that have already played out, while others are traders in the trade around the premium that GBTC traded to Bitcoin several years ago.
Ryan advises people not to worry about GrayScales, as they will be back in the game. The company has announced another ETF structure that could bring in inflows. Ryan advises people to focus on the net flow story, which has been $1 billion every two months.
Coinbase’s evolving business model drives growth
According to Ryan, Coinbase’s on-ramp for new investors into cryptocurrencies is becoming increasingly commoditized. Ryan predicts that the primary on-ramp stage will see huge growth in the exchange platform. However, Ryan stresses that Coinbase is not just an exchange platform. Instead, the company is involved in virtually every aspect of how this industry grows, including payments, remittance, tokenization of real-world assets, and web 3.
Ryan points out that Coinbase’s revenue sources are diversifying. Subscription and service revenues that were zero in 2020 have already grown to $1.5 billion. Ryan predicts that these revenues will grow even faster than the exchange part of the company’s model. He believes that these other areas will be the primary drivers of revenue growth over the next decade.
In conclusion, Ryan believes the end game is to acquire as much Bitcoin as possible as it’s “the highest form of property, the apex property in the world, and it’s the best investment asset.” He highlights that whoever acquires the most Bitcoin wins.
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