Bitcoin Could Experience Positive Demand Shock from Registered Investment Advisors, Says Analyst
Bitcoin (BTC) may see a surge in demand in the coming months as registered investment advisors (RIAs) start investing in the cryptocurrency, according to CoinShares Head of Research James Butterfill. He highlighted that spot bitcoin exchange-traded funds (ETFs) have not yet been made available to the RIA market, but once they are, there could be a significant influx of investments. Butterfill noted that the RIA market represents about $50 trillion in assets, and if just 10% of RIAs choose to invest 1% of their portfolios in bitcoin, this could result in approximately $50 billion in additional inflows.
The Potential Trigger for Positive Demand Shock
Butterfill explained that fund platforms used by RIAs typically require three months of trading data before they can include newly issued ETFs. Therefore, once spot bitcoin ETFs become accessible to the RIA market, there could be a sudden surge in demand for bitcoin. Currently, only one investment advisory firm, the Carsen Group, allows trading of spot bitcoin ETFs. This dynamic could trigger a positive demand shock as RIAs start capitalizing on the new investment opportunity.
Increasing Demand and Decreasing Supply Dynamic
In a recent blog post, Butterfill pointed out the increasing demand and decreasing supply dynamic within the bitcoin market. He highlighted that since the launch of multiple spot bitcoin ETFs on January 11, there has been an average daily demand of 4,500 bitcoins, while only an average of 921 new bitcoins are minted per day. This supply-demand imbalance has led to ETF issuers sourcing bitcoin mainly from the secondary market.
Butterfill also noted that OTC desk coin holdings have fallen by 74% since their peak in 2020, which can be attributed to ETF demand in recent years. This data further supports the notion that the current supply of newly minted bitcoins cannot keep up with the growing demand.
Spot Bitcoin ETF Inflows Reach Record Highs
Last week, net inflows for U.S. spot bitcoin ETFs reached record levels. Combined net inflows for the ten spot bitcoin ETFs amounted to $2.57 billion, a 15% increase from the previous week’s $2.24 billion inflows. Notable contributors to these inflows include BlackRock’s IBIT with $2.48 billion, Fidelity’s FBTC with $717.9 million, and VanEck’s HODL with $247.8 million.
However, Grayscale’s converted GBTC fund experienced $1.25 billion in outflows, while Invesco’s BTCO contributed $29.4 million in outflows. Despite these outflows, the total net inflows since spot bitcoin ETF trading began on January 11 now stand at just over $12 billion.
As of now, Bitcoin is trading at $68,200 and has increased by 1.92% in the past 24 hours. The GM 30 Index, representing the top 30 cryptocurrencies, has also seen a 2.45% increase to reach 152.93 in the same time frame.
Hot Take: Bitcoin Demand Shock Could Drive Positive Price Momentum
The potential surge in demand from registered investment advisors for spot bitcoin ETFs could have a significant impact on Bitcoin’s price momentum. With the RIA market representing trillions of dollars in assets, even a small percentage allocation to bitcoin could result in billions of dollars flowing into the cryptocurrency.
This positive demand shock, coupled with the current supply-demand dynamics in the bitcoin market, could further drive up the price of bitcoin. The limited supply of newly minted bitcoins and the increasing demand from ETF issuers highlight a potential scarcity that could push prices higher.
Investors should keep a close eye on developments in the RIA market and the availability of spot bitcoin ETFs to capitalize on potential price movements. As the cryptocurrency market continues to evolve, new investment opportunities and increased institutional adoption could play a crucial role in shaping bitcoin’s future.
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