Three Years, $50 Billion: How Much Short- and Long-Term Capital Will Spot Bitcoin ETFs Bring?
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Three Years, $50 Billion: How Much Short- and Long-Term Capital Will Spot Bitcoin ETFs Bring?
How do analysts from various institutions calculate these figures?
Navigating Web3 tides with focused insightsAuthor: Nan Zhi, Odaily Planet Daily
What to Expect for Short-Term Capital Inflows?
Bloomberg ETF Analyst: $4 Billion on Day One
Eric Balchunas, senior ETF analyst at Bloomberg, stated that BlackRock could inject $2 billion into its spot Bitcoin ETF on the first day of trading, setting a record for initial capital inflows. This seed funding may give BlackRock a competitive edge among the 11 spot Bitcoin ETFs.
Balchunas believes all spot Bitcoin ETFs combined could raise up to $4 billion on their first trading day and accumulate $50 billion within two years.
On January 9, BlackRock had already allocated $10 million in seed capital to its spot Bitcoin ETF. VanEck injected $72.5 million, while Bitwise contributed an even larger seed fund of $200 million.
(Odaily Planet Daily note: Seed capital typically refers to initial or startup funding used to create and launch an ETF. When launching an ETF, certain funds are required to purchase underlying assets, establish portfolios, and cover other startup costs such as legal, administrative, and marketing expenses.)
Valkyrie Co-Founder: $5 Billion Within Weeks
Steven McClurg, co-founder of Valkyrie Investments, said Valkyrie expects $200 million to $400 million in inflows during the first week of its ETF’s launch. With around ten ETFs expected to debut simultaneously, total market inflows could reach $4–5 billion within the first few weeks of trading.
VanEck Research Head: $2.5 Billion in Q1
Matthew Sigel, head of digital asset research at VanEck, shared similar figures, citing sources indicating over $2 billion is ready to flow into BlackRock’s spot Bitcoin ETF within its first week from existing Bitcoin holders increasing their positions.
However, Sigel noted that $2 billion on day one would be exceptionally high. He forecasts $2.5 billion in trading volume for the first quarter, derived by analyzing inflows into the first gold ETF and adjusting based on U.S. money supply. Using similar analysis, he estimates a $40 billion market opportunity within two years.
Galaxy Digital Research Head: $1.44 Billion in First Year
Alex Thorn, head of research at Galaxy Digital, projected $1.44 billion in inflows during the first year for spot Bitcoin ETFs, based on wealth management industry analysis. They further predict second-year inflows could rise to $2.65 billion. Alex emphasized these inflows represent net new capital—funds that would not have entered the Bitcoin market without ETFs. He noted that ETF inflows won't happen immediately but will gradually increase. Their analysis suggests the monthly impact multiplier will decline over time as Bitcoin's share in investment instruments grows with overall market capitalization.
Cathie Wood previously told CNBC that approval of spot Bitcoin ETFs would not result in "buy the rumor, sell the news." She said: "Over our five-year investment horizon, we believe inflows into this new asset class, especially institutional capital, will be substantial. Institutions don’t need large allocations to Bitcoin to significantly push up prices of what is becoming a scarce asset." However, she did not provide specific monetary estimates.
Current Market Size Overview
According to Galaxy data, as of September 30, 2023, Bitcoin investment products (including ETPs and closed-end funds) held a total of 842,000 Bitcoins (approximately $21.7 billion).
Additionally, according to 1kx Research, the largest crypto ETP by AUM (assets under management) is ProShares Bitcoin Strategy ETF, a U.S.-based futures ETF, which held $1.68 billion in assets as of January 2, 2024.
As shown in the table below, nine out of the top 14 crypto ETPs by asset size track Bitcoin (64%), while the remaining five include three tracking Ethereum, one Solana, and one BNB.
The combined AUM of these 14 top ETPs totals approximately $9.5 billion. Spot Bitcoin ETFs are expected to significantly exceed this figure.
Long-Term Capital Inflow Potential
Earlier mentioned analysts Eric Balchunas from Bloomberg and Matthew Sigel from VanEck both provided long-term market size projections—$50 billion and $40 billion respectively within two years.
Standard Chartered Bank offered a higher forecast, suggesting that if spot Bitcoin ETFs are approved, they could attract $50–100 billion in inflows in 2024 alone, potentially pushing Bitcoin’s price to $200,000 by the end of 2025. This conclusion was drawn through comparative analysis between spot Bitcoin ETFs and gold ETFs.
Note: At the time of writing, Bitcoin's circulating market cap stands at $913.2 billion.
Galaxy Deep Dive: $39 Billion Over Three Years, Ultimate Target $450 Billion
Charles Yu, researcher at Galaxy, identified the U.S. wealth management sector as the most accessible and direct market due to its broad reach. Approved Bitcoin ETFs would benefit most from this newly accessible pool. As of October 2023, broker-dealers ($27 trillion), banks ($11 trillion), and RIAs ($9 trillion) collectively managed $48.3 trillion in assets.
Odaily Planet Daily note: RIA stands for Registered Investment Advisor
Galaxy uses $48.3 trillion as the baseline TAM (Total Addressable Market) for U.S. wealth management integrators, although the target market for Bitcoin ETFs—and the indirect effects following approval—could extend far beyond U.S. wealth management channels, attracting additional capital into spot Bitcoin markets and investment products.
As channels open up, Bitcoin ETF access across these sectors may unfold over several years. The RIA channel is expected to enter first with greater initial access. For banks and broker-dealers, each platform will determine its own timeline.
Galaxy assumes RIA adoption will start at 50% in the first year and grow to 100% by the third year. For broker-dealers and banks, growth is assumed to begin slower—at 25% in year one—and steadily increase to 75% by year three. Based on these assumptions, the estimated target market size for U.S. Bitcoin ETFs is approximately $14 trillion in the first year, $26 trillion in the second, and $39 trillion in the third.
Based on these market size estimates, assuming 10% of available assets across wealth channels adopt Bitcoin with an average allocation of 1%, Galaxy estimates $14 billion in inflows in the first year after launch, rising to $27 billion in the second year, and $39 billion in the third.
In the short term, Galaxy expects other global/international markets to follow the U.S. lead by approving and offering similar Bitcoin ETF products to broader investor bases. Beyond ETFs, various other investment vehicles may incorporate Bitcoin into their strategies.
In the long run, the target market for Bitcoin investment products could expand further to encompass all third-party managed assets (approximately $126 trillion AUM according to McKinsey) and even more broadly to global wealth (estimated at $454 trillion by UBS). Some argue that as Bitcoin becomes monetized, it will systematically reduce the monetary premium applied to other assets like real estate or precious metals, thereby greatly expanding Bitcoin’s TAM.
Using these market size estimates and maintaining the same adoption/allocation assumptions (10% of funds adopting Bitcoin, average allocation of 1%), Galaxy estimates that over the long term, potential incremental inflows into Bitcoin investment products could range between $125 billion and $450 billion.
Summary
Market expectations for short-term capital inflows vary widely, with $4 billion-level investments anticipated anywhere from a few days to a full year. However, there is consensus on long-term impact: inflows over three years are projected between $40 billion and $50 billion. Most importantly, the approval of spot Bitcoin ETFs signifies the gradual opening of global allocation channels. As countries progressively open and embrace them, the future holds vast potential.
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