Spot Bitcoin ETF capital: Could funds potentially buy up all BTC in circulation?
The long-awaited potential approval of a spot Bitcoin ( BTC ) exchange-traded fund (ETF) in the United States could mean the market sees Bitcoin supply suddenly drop as funds snap up as much as they can, some market observers have predicted . With prominent firms like Ernst Young expecting SEC approval to trigger massive demand from institutions , will the financial giants behind these ETFs leave any actual Bitcoin on the market for the rest of us?
The U.S. A spot Bitcoin ETF would bring up to $30 billion of fresh cash into Bitcoin, crypto entrepreneur and investor Lark Davis estimated in September 2023. In such a scenario, spot Bitcoin ETF issuers would buy up about 50% of all Bitcoin on crypto exchanges to back their ETFs, he projected.
Source: X (formerly Twitter)But buying as much Bitcoin as possible would likely get tricky for anyone, several industry executives and analysts agree.
“Theoretically, a company or government could attempt to buy a significant amount of Bitcoin, but acquiring all Bitcoin in circulation is highly impractical, and we still have a significant, unreleased supply of Bitcoin,” Valkyrie CEO Leah Wald told Cointelegraph. Wald said that Bitcoin’s supply is capped at 21 million coins , from which 1.4 million BTC are yet to be mined . She added:
“Bitcoin's decentralized nature and the fact that many holders might refuse to sell at any price create a natural barrier against monopoly.”
Matt Hougan, chief investment officer at Bitwise — another spot BTC ETF applicant alongside Valkyrie — also believes that no one could theoretically establish a monopoly on Bitcoin.
“The scarcity principle — a well-established economic principle — tells us that the price of a scarce good will rise to meet demand,” Hougan said. “In other words, if someone tried to ‘corner Bitcoin,’ the price would rise and rise and rise as more and more reluctant sellers were met,” the CIO added. Hougan conceded that despite that, someone could still corner a significant amount of Bitcoin.
Jan3 CEO Samson Mow echoed Hougan’s stance, expressing confidence that it would be difficult to buy all Bitcoin in circulation due to extremely high prices fueled by products like a spot Bitcoin ETF. “The price people are willing to sell increases when there are fewer coins available for sale,” he stated.
According to Mow, BTC holders will have to think hard about whether they should sell their Bitcoin, given the depreciation risks of fiat currencies like the U.S. dollar or the euro. He said:
“So as funds buy more BTC and increase their assets under management, it will become harder and harder to find willing sellers.”
Despite high competition among potential spot Bitcoin ETFs, these funds are unlikely to try to buy all the Bitcoin in circulation, according to David Gerard, author of the book and crypto blog Attack of the 50 Foot Blockchain.
Related: ‘Likely rejection’ or smooth sailing? Experts weigh in on potential spot Bitcoin ETF
“ETFs are part of using Bitcoin as a dollar derivative — the issuer doesn’t care about the cryptos at all, they care about the dollars they can get from them,” Gerard told Cointelegraph. He added:
“Lots of holders have way more Bitcoin than there are actual dollars trying to buy — the markets are thin.”
Although many industry watchers expect spot Bitcoin ETFs to fuel massive demand and thus positively affect the BTC price, some execs like BitMEX co-founder Arthur Hayes believe that successful ETFs could “completely destroy” Bitcoin . According to ARK Invest CEO Cathie Wood , some investors might “sell on the news” of spot Bitcoin ETF approval in the short term.
Meanwhile, some believe that the potential approval of a spot Bitcoin ETF in the U.S. could have little to no impact on markets, as multiple spot Bitcoin ETFs have been trading for years in other parts of the world, such as Canada.
However, the size of U.S. capital markets is so large that this comparison may be irrelevant — the crypto market hasn’t ever before seen an injection of capital of the potential magnitude so many analysts are predicting.
Magazine: Lawmakers’ fear and doubt drives proposed crypto regulations in US
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Banks Use Generative AI to Improve Internal Operations and Efficiency
APT breaks through $12
THETA breaks through $2