Bitcoin ETF Launch: Initial Ripples, Long-Term Tsunami

Bitcoin investors may face initial disappointment with the launch of spot Bitcoin exchange-traded funds (ETFs), according to Gabor Gurbacs, an adviser at VanEck. Gurbacs highlights regulatory hurdles and market dynamics as potential factors shaping the trajectory of these innovative financial instruments. Gurbacs contends that the initial influence of a Bitcoin ETF is being overestimated, projecting modest net inflows of around $100 million, primarily sourced from large institutional investors recycling existing funds.

In my view, people tend to overestimate the initial impact of U.S. Bitcoin ETFs. I think maybe a few $100mm flows (mostly recycled) money.

Long term, people tend to underestimate the impact of spot Bitcoin ETFs. If history is any guide, gold is worth studying as a parallel. https://t.co/6vvkA9aC09

— Gabor Gurbacs (@gaborgurbacs) December 31, 2023

Yet, Gurbacs paints a bullish picture of the long-term effects of Bitcoin ETFs, drawing parallels with the trajectory of gold prices following the introduction of gold ETFs in 2004. Gurbacs notes that gold prices soared from $400 to $1,800 in the eight years post-launch. The surge catapulted the gold market cap from $2 trillion to an impressive $10 trillion in the same timeframe.

Moreover, currently holding a market cap of $834 billion, BTC comprised about 41% of gold’s market capitalization in 2004. Gurbacs envisions that, upon the expected approval of a spot Bitcoin ETF in the United States, Bitcoin’s price could mirror gold’s trajectory, albeit faster due to Bitcoin’s capped supply and scarcity-inducing events like halving.

Bitcoin ETF’s Long-Term Impact

Gurbacs emphasizes that approving a spot in Bitcoin ETF has more than just financial implications. It holds the potential to legitimize and destigmatize BTC in the eyes of institutional investors and nation-states, marking a significant step in Bitcoin’s mainstream acceptance.

Furthermore, Bloomberg ETF analysts Eric Balchunas and James Seyffart endorse Gurbacs’ perspective. They stress the necessity of adopting a broader, more prolonged view to appreciate the full impact of such financial products. Seyffart urges observers to look beyond short-term data points, emphasizing the transformative potential of Bitcoin ETFs over the long haul.

Mostly in agreement with Gabor on this. Consensus seems to be (anecdotally) that People are focused on a massive short term impact that I think could be a bit of a let down while at same time not fully appreciating the potential longer term impacts. https://t.co/z69Wbffcu9

— James Seyffart (@JSeyff) December 31, 2023

Bitcoin’s price today is $42,493.68 USD, with a 24-hour trading volume of $16,110,906,630 USD, according to Coinmarketcap data. Opinions within the market vary regarding the anticipated approval of the ETF. Some anticipate a substantial and enduring price surge, while others speculate it might trigger a ‘sell the news’ event. Experts recommend emphasizing the lasting impact of spot Bitcoin ETFs over fixating on immediate results.

Related Reading | Coinbase Custody Prepares for Bitcoin ETFs with Leadership Changes