Joel Macdonald says that the newly approved Bitcoin spot ETF looks set to have far-reaching consequences for the market-leading cryptocurrency. Regulators have granted a historic green light for all 11 current issuer applications.
Past ETF launches have taken once-alternative assets or investment strategies into the mainstream. That includes buffered exposures, crude oil, and volatility futures. However, gold is by far the most relevant example in this instance.
Gold's initial U.S. ETF launched two decades ago following several years of hard work and millions of dollars in legal fees. These years of hard work and financial outlay quickly paid off, though. The result was the fundamental transformation of gold into a solid, highly lucrative, and well-respected investment.
Based purely on their respective first two months' performance, Bitcoin ETFs are outperforming gold ETFs by some margin. Trading for spot Bitcoin ETFs started on January 11th, 2024. These products amassed a record-high $14 billion in volume in just their first week. That's a feat unmatched by other commodity ETFs, including gold.
Gold prices rose for nine consecutive years following the asset's original U.S. ETF launch in 2004. That near-decade-long streak was the longest in gold's recorded history. Of course, there's no guarantee that Bitcoin will follow the same trajectory in the wake of its own ETF.
That's not least because it's currently impossible to say how much money will flow into the leading cryptocurrency's ETFs. Or how quickly. Long-term flow estimates range from $30 billion to $200 billion. What's more certain is that it won't all necessarily come at once. Instead, there's a far higher likelihood that money will flow into emerging Bitcoin ETFs over time.
Inflows for early U.S. gold ETFs ranged from $1.5 billion in 2004 and $3.3 billion in 2005 to a record high of $19.3 billion in 2009. This record high dipped to $11.8 billion in 2011 before climbing back to $17.1 billion in 2012.
Joel Macdonald explains that Bitcoin is already following a similar trajectory, closely mimicking gold's initially slow build-up before likely peaking several years from now. At the same time, and on the other hand, the market-leading cryptocurrency could also see similar outflows to gold further down the line.
That happened to gold ETFs in 2013 when investors withdrew over $40 billion from funds worldwide. This withdrawal saw a sharp pullback in prices, demonstrating how, once any market matures, flows can cut in either direction. In any case, Bitcoin's recent spot ETF looks set to transform the currency as an asset.
Gold's ETF launch turned it into a mainstream asset rather than something traded primarily over the counter by mining companies. And, while subjective, there's no reason to suspect that Bitcoin won't enjoy the same transformation. Today, gold investments are as mainstream as bonds, private equity, stocks, or venture capital.
That's after its fortune became transformed almost overnight—and forever—by its ETF a full twenty years ago. Fast-forward to 2024, and while not all investors own gold, those who don't are becoming fewer and further between.
In another two decades, similar outcomes surrounding Bitcoin will likely come to represent the most significant, long-term impact of its newly unveiled spot ETF. That's as it looks set to open it up to trillions of dollars of potential brand-new investment.
And, with that, Joel Macdonald notes that the coming weeks and months are likely to see the newly approved Bitcoin spot ETF begin to generate significant inflows. Accordingly, there's every chance that the world's biggest and most well-known cryptocurrency is finally about to go fully mainstream, and not a moment too soon.
