Spot Bitcoin ETF opens the door to $30 trillion in wealth – Eric Balchunas

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(Kitco News) – As excitement builds around the possibility of the approval of the first spot Bitcoin (BTC) exchange-traded fund (ETF), a recent survey shows that the approval of such a product will expose Bitcoin to more than $30 trillion in value over the next ten years.

The Brown Brothers Harriman (BBH) 10th annual ETF survey included responses from 325 ETF institutional investors, financial advisors, and fund managers from the U.S., Europe, the U.K., and Greater China to identify key trends and areas of innovation in the ETF market.

According to the results, despite the struggles the cryptocurrency industry faced in 2022, a quarter of respondents expect to allocate more of their portfolios to ETFs with cryptocurrency-related exposure in 2023 as compared to 33% in 2022.

Interest was even higher among the institutional investor crowd, with 74% saying they are extremely/very interested in this strategy. Overall, 48% of investors said they still plan to add cryptocurrency and digital asset-themed ETFs, representing a 6% decline from last year.

“Initiatives such as the draft regulation from the EU’s Markets in Crypto Assets proposal is expected to significantly ‘derisk’ investments in crypto assets for asset managers and provide an ‘additional layer of comfort’ for fund managers to engage with crypto exchange,” the survey said.

BBH noted that, currently, “ETFs are a $9.23 trillion market which saw global inflows of $856 billion in 2022, the second highest total ever. Given the enhanced investor education and continual product evolution within the ETF wrapper, by 2033, we believe the ETF market could be worth $30+ trillion.”

During a recent interview between Cointelegraph and Eric Balchunas, senior ETF analyst at Bloomberg, Balchunas noted that “the ETF is the format in which the boomers and the financial advisors prefer their investments delivered in. This matters because financial advisors manage about $30 trillion in assets and a lot of that is the kind of people who are a little the more wealthy side and who need help with estate planning and taxes.”

“This would open up all that money,” he said. “It still wouldn’t be a big weighting in a normal portfolio for somebody who is a casual investor, but even like 1 or 2% of $30 trillion is a lot of money. That’s why it’s a big deal, it’s what the ETF represents. It’s a bridge to all this wealth.”

When asked how much capital a spot BTC ETF would attract, Balchunas speculated that there could be “$10 billion [worth of inflows] in the first week.”

“I think this will be a slightly more measured launch,” he added. “I think because of FTX, it could take years before some of these boomer types get over that. Over time, though, I’ve no doubt that spot Bitcoin ETFs will crush the futures ETFs in assets.”

Pointing to the performance of gold ETFs since their introduction, Balchunas said, “I think there’s somewhere around $70 billion, but they’ve been around for a while, so I could see crypto ultimately getting up to about where gold is after a couple of years.”

As far as how Bitcoin’s price would respond to the passage of a spot ETF, he refrained from giving a specific price target, but noted, “Long term, if you have more of the mainstream money, if you had Bitcoin in a vehicle or platform that a lot of people prefer, you’re going to get some adopters and that’s obviously going to mean buy orders for Bitcoin. If you buy the ETF, the ETF market makers have to go buy Bitcoin.”

When it comes to the changes of approval, Balchunas said the involvement of Blackrock, the world’s largest asset manager, was enough to raise the chances of a Bitcoin spot ETF approval from 1% to 50%.