Cryptoverse – Spot Bitcoin ETFs May Stir Up U.S. Demand. Can it Overtake Gold?

Due to the growing interest in virtual currencies, spot Bitcoin exchange-traded funds (ETFs) are attracting investors' interest, especially in the U.S. market.

Investors and enthusiasts are closely watching as these ETFs aim to replicate the value of Bitcoin, potentially impacting the broader crypto market.

Spot Bitcoin May Be the Next Big Thing. Comparison with Gold

October has witnessed a remarkable 28% surge in the world's most prominent cryptocurrency, BTC. This surge is largely attributed to the growing optimism that U.S. regulators will approve a spot Bitcoin ETF, potentially sparking a fresh wave of demand.

This has raised the interest of market experts and analysts offering a wide range of estimates for the influx of capital that spot Bitcoin ETFs could attract.These estimates span from a modest $3 billion on the initial trading day to a substantial $55 billion over five years.

Drawing comparisons to the influence of ETFs in the gold market, industry leaders anticipate a similar wave of buying once the first spot BTC ETFs debut.

This reminiscence extends to the launch of the first gold ETF in the U.S. back in 2006 and the introduction of Bitcoin futures ETFs in 2021.

Meanwhile, prominent players in the investment sector, including Fidelity, BlackRock, and crypto-focused entities like Grayscale, have already submitted applications for spot BTC ETFs.

Also, the U.S. Securities and Exchange Commission (SEC) is currently reviewing between eight and ten filings for these new financial products, although the precise timeline for their approval remains undisclosed.

While the outlook for spot Bitcoin ETFs is generally optimistic, some traditional investors remain cautious about the cryptocurrency space, often citing a lack of essential value.

They express their reservations and assert that their client's funds will not be directed toward such investments. But amid these reservations, the anticipation of an ETF offering direct exposure to Bitcoin has positively impacted the BTC's price. It recently reached $35,198, marking its highest level since May 2022.

Addressing The Challenges with Bitcoin ETFs

Despite these positives, the precise level of demand for a spot BTC ETF poses a challenge, given the varying metrics and factors used for estimation. Besides this, the opacity of Bitcoin markets, with price fluctuations predominantly driven by investor sentiment, adds an extra layer of complexity to these predictions.

Notably, one estimation by U.S. crypto firm NYDIG placed the demand for a spot Bitcoin ETF at around $30 billion.This calculation compares the sizes and volatility of the gold and Bitcoin ETF markets, with values of $210 billion and $28.8 billion, respectively.

Furthermore, an ETF strategist, Todd Sohn, noted that it's rare to witness a brand-new asset class entering the ETF market, making it difficult to predict the exact demand that will materialize.

Meanwhile, current Bitcoin ETFs, linked to futures prices, are limited in tracking Bitcoin's price movements accurately.The costs associated with rolling over futures contracts can eat into returns. This has led many investors to perceive them as less attractive.

Nevertheless, the overall outlook could be positive, given the rising interest in the Bitcoin ETF approval. For now, only the market moves following the launch will determine whether the demand could surpass the estimation or fail to reach it.

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