Bitcoin might not have fallen, but its price is certainly on the slide. For that reason, many have been left wondering what developments might actually wake it from its slumber. Three letters in the form of ETF have been thrown around. ETF stands Exchange Traded Fund and is a marketable security that tracks an index, bonds, a commodity, or a collection of assets like an index fund. If you’re an active trader or investor, odds are you will have encountered ETFs at one point or another. What makes ETFs so attractive is the sheer versatility and simplicity of them. Transferring this simple way of investing to cryptocurrency through Bitcoin ETFs has the potential to be truly game-changing.
The Appetite for Investing
Looking at ETFs from a Bitcoin perspective, it’s “easy” potential is actually somewhat obvious. Once the SEC allows Bitcoin ETFs, it’s mean that anyone with a broker-linked investment account, IRA, or 401K could invest in Bitcoin with ease. Potentially it could even be done in just a single click. No messy wire transfers or credit cards transactions, nor would someone be required to navigate Coinbase and other crypto exchanges, which can often come with major security hurdles.
The top five brokers – ranked by the amount of money managed – showcase the true the power that Bitcoin ETFs could wield. Fidelity ($5.4 trillion), Charles Schwab ($2.7 trillion), Edward Jones ($800 billion), Ameriprise Financial ($800 billion), and TD Ameritrade ($600 billion) could deliver a huge cash injection into the crypto market through its clients.
Here’s where things get interesting, in the US there are around 251 million adults over the age of 18. Yet, during Bitcoin’s December 2017 boom, just 12.6 million – around 5% of the American adult popular actually invested in Bitcoin. Now, 54% of Americans own stocks, which shows that the appetite for investment is there. This also means that Bitcoin ETFs have a potential market of over 120 million, without factoring in natural market growth over time. These are huge numbers, which shows that Bitcoin ETFs could open the door to wave after wave of increased investment.
Tapping into an Untapped Resource
Around the world, there are approximately 22 million Bitcoin wallets. But, only around 11 million actually hold more than $6.50 worth of BTC, as for many it appears that investing in Bitcoin has yet to be any more than a passing decision. There will obviously be overlap in this number, so the wallets per person figure is probably much lower, potentially around 20 million wallets. This shows that, from an interest perspective, Bitcoin could be considered an “untapped” resource.
As you are likely well aware, Bitcoin is a finite commodity capped at 21 million coins. 17 million of those coins have been mined already, while if you are to believe some reports 4 million Bitcoins have actually been lost. The large-scale investors, that carry a total figure of around 3.2 million across the top 100 most valuable wallets, aren’t exactly moving BTC around at a consistent rate. This means that there is probably a circulation of just under 10 million Bitcoin.
Even if the introduction of Bitcoin ETFs draws in just 20% of the current equities trading market, it would still result in 24 million additional investors. This is just for the US, and as we all know, where America goes the rest of the world tends to follow. The introduction of Bitcoin ETFs could be a global trigger that supercharges Bitcoin’s performance.
What will it mean for Bitcoin’s price?
Bitcoin needs a shot in the arm, that much is obvious – ETFs could be the rocket fuel that’s required. During January 2018, Bitcoin had a market cap of $222 billion. US investors currently represent 63% of the 20 million worldwide investors. On average, a US investor acquired around $3,500 worth of BTC. As such, US investors equated to $44.1 billion – 20% of total ownership – of January 2018’s market cap. This leaves $178 billion or $24,000 per investor for the rest of the world.
If the introduction of ETFs contributes an extra 24 million investors within the US, plus an estimated 14 million from the rest of the world. This could potentially add $84 billion and $336 billion respectively to the market cap. Boosting the market cap by such amount could push BTC’s value to between $26,000 and $44,000.
Yes, in recent months this market cap has tumbled, but that doesn’t alter the impact that Bitcoin ETFs could have.
Decisions, Decisions, Decisions
For any of these predictions to become a reality, the SEC needs to make a clear and decisive decision on ETFs – something that it has had a hard time doing as of late. In January, the SEC shut down any idea of Bitcoin ETFs, but in March it said it would consider them again. Since then, the subject has been broached multiplied times, with new ETFs being presented to the SEC in hopes of approval. What ETFs could mean for Bitcoin is potentially huge, but the real question is will it ever become a reality? With the SEC still pondering approval that still remains up in the air.