The Potential Impact of Bitcoin ETF Approvals on Market Cap
If the US Securities and Exchange Commission (SEC) approves Bitcoin spot exchange-traded funds (ETFs), the market capitalization (market cap) of Bitcoin (BTC) could rise to $950 billion. By investing just 1% of their $15.6 trillion in assets, ETF approvals can inject $155 billion into the market.
This would result in a significant increase in Bitcoin’s realized market cap, which is calculated by adding the purchase prices of all Bitcoin in existence. Historical data suggests that Bitcoin’s market capitalization rises faster than its realized market cap during periods of large inflows. Therefore, a $155 billion increase in the realized market cap may lead to a market cap ranging from $465 billion to $955 billion.
Bitcoin ETF Inflows Could Dwarf Grayscale
If these predictions hold true, the price of Bitcoin could rise to between $50,000 and $73,000, surpassing the realized market cap increase of $5.5 billion during Grayscale Investments’ Bitcoin Trust’s last bull market. Grayscale’s trust was previously the only regulated vehicle for institutional investors to gain exposure to Bitcoin.
A Bitcoin spot ETF would provide institutions with regulated exposure to Bitcoin, offering an alternative to the Bitcoin futures ETFs currently available. The SEC is expected to rule on ETF applications from ARK Invest, BlackRock, and others by March 2024.
SEC ETF Approval Delays Are Good
The delay in SEC approval could actually work in favor of the market. Some experts believe that the SEC’s engagement with spot Bitcoin issuers and the shift from outright rejection to a lengthy approval process indicate a positive sign. Bloomberg analyst Eric Balchunas estimates a 75% chance of approval by the end of the year.
“The fact that the SEC is actively engaging with spot bitcoin issuers on their current applications – which hasn’t ever happened before – we think a rejection is unlikely and holds a 75% chance of approval by the end of this year.”
Industry professionals, like Martin Bednall, former executive at BlackRock and CEO of Jacobi Asset Management, believe that the SEC will likely approve all applications simultaneously to avoid favoritism.
“I think the SEC will probably approve all the applications at the same time. I don’t think they’re going to want to give anybody a first-mover advantage.”
The Potential Impact on Miners and Bitcoin Halving
If most approvals occur before March, the influx of investments could drive Bitcoin prices even higher than previous halvings. This increase would benefit miners, offsetting their losses from reduced block rewards resulting from the upcoming halving scheduled for spring 2024. Additionally, smaller mining companies may be able to survive due to higher profit margins.
Hot Take: Will SEC ETF Approvals Affect Bitcoin Market Cap?
The approval of Bitcoin spot ETFs by the SEC has the potential to significantly impact Bitcoin’s market cap. By injecting $155 billion into the market, the realized market cap could increase to between $465 billion and $955 billion. This would also lead to a rise in Bitcoin’s price, potentially reaching $50,000 to $73,000.
Furthermore, the delay in SEC approvals is viewed positively by many experts, indicating a higher chance of approval for multiple ETFs. If most approvals happen before March, it could drive Bitcoin prices beyond previous halving increases and provide relief for miners.
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