1.5 million dollars per bitcoin in 2030?! Why and why spot ETFs are attracting attention

The US Securities and Exchange Commission (SEC) approved the listing of a Bitcoin spot ETF (exchange-traded fund) for the first time in US history on the 10th. The 11 approved Bitcoin spot ETFs can now be traded on the night of the 11th Japan time. It paved the way to invest in Bitcoin spot through major US exchanges rather than crypto asset exchanges. This was a revolutionary step in the history of the Bitcoin and virtual currency markets.

If an authoritative regulatory body approves issuing a virtual currency ETF, its value will skyrocket as the market “consensus” strengthens. So what is the issuance of this virtual currency ETF? What specific impact will it have on the cryptocurrency market?

●What is a Bitcoin spot ETF?
A Bitcoin spot ETF is an exchange-traded fund with Bitcoin as the underlying asset, and it is also an index fund. Spot ETFs make it possible for conventional stock market investors to obtain ownership of bitcoins and related assets without investigating, purchasing, or storing actual cryptocurrencies (or derivative assets). In other words, after purchasing a physical ETF, investors will indirectly hold a fixed ratio of bitcoins. In fact, before Bitcoin spot ETFs were approved, multiple Bitcoin futures ETFs were already listed in the US.

●What is the difference between spot ETFs and futures ETFs?
Unlike futures ETFs where Bitcoin futures contracts are purchased and held, spot ETFs use Bitcoin itself as the underlying asset. Seen from the viewpoint of price fluctuations, spot ETFs and futures ETFs are very similar, and both aim to accurately track the price of Bitcoin and allow investors to realize exposure to price fluctuations. However, compared to futures ETFs, the operation of spot ETFs has become easier, and fees are also lower.

Simply put, futures ETFs that use “futures” as the underlying asset face long-term losses due to contract rollover (futures contracts with different periods have price differences, so futures prices do not match the value of the spot price). How big would this loss be in extreme cases? The “crude oil treasure” huge loss incident a few years ago is the most extreme case in recent years. At that time, global demand for crude oil declined due to the pandemic, crude oil futures prices plummeted, and WTI crude oil futures prices temporarily fell to a historically low level of minus 40 dollars.

Similarly, the difference between investing in Bitcoin futures ETFs and spot ETFs is that spot ETFs can track price changes more accurately. That is why the market was expecting the SEC to approve a Bitcoin spot ETF as soon as possible. The spot ETF that was finally approved this time will clearly be a safer trading tool for virtual currency investors.

Obviously, the strengthening of market consensus will have a positive impact on Bitcoin's funding growth and will greatly increase Bitcoin's transaction volume and liquidity. According to Coinglass's data as of 1/10, the Bitcoin balance in wallets at 20 major virtual currency exchanges is 1.89 million, and the total amount is about 86.9 billion dollars at the price of 46,000 dollars.

According to Galaxy Digital's calculation, based on the overall scale of the US wealth management market, Bitcoin accounts for 10% of the total assets that can be used by each asset management channel (securities company, bank, investment advisor), and assuming that the average allocation ratio is 1%, it is estimated that funds of 14 billion dollars or more will flow in the first year after the Bitcoin ETF is issued.

There is a possibility that speculation based on Bitcoin spot transactions will boost the market price and cause exchange rate fluctuations, but since it takes time for a large amount of new funds to flow in, the impact of spot ETFs on Bitcoin prices is limited in the short term. From a medium- to long-term perspective, as more funds flow into the Bitcoin market, it will be a tailwind for Bitcoin prices, which may lead to the possibility of launching other related derivatives in the future.

Cathy Wood, CEO of asset management giant Ark Investment, said on CNBC on the 11th that Bitcoin could reach 1.5 million dollars by 2030 in a bullish scenario, and the forecast increased 50% from the previous forecast of 1 million dollars.

Short-term speculative trends due to approval of Bitcoin spot ETFs will bring investment opportunities to the Bitcoin-related concept sector (excluding exchanges). In the long run, it will also have a positive impact on the following 4 types of related listed companies.

・A positive impact on companies that hold large amounts of bitcoins.
・Positive impact on mining companies that own and store computing power to conduct Bitcoin mining operations.
・Positive impact on mining machine manufacturers that develop, manufacture, and sell mining machines.
・The short-term negative impact for virtual currency exchanges that provide virtual currency trading, storage, and asset management services is positive in the long term.