A new research report from the New York Digital Investment Group (NYDIG) suggests that Bitcoin-linked exchange-traded funds (ETFs) could attract $30 billion in new demand for the world’s largest digital currency. The cryptocurrency market is witnessing a frenzy in the launch of ETFs tied to digital assets, thanks to submissions from companies like BlackRock, Fidelity, and others.
The introduction of a Bitcoin ETF benefits from the popularity of brands like BlackRock and franchise iShares, which facilitate buying and selling through financial intermediaries and provide a straightforward environment for reporting positions, measuring risks, and tax reporting compared to current alternatives.
The total assets under management for similar Bitcoin-related products amount to $27.6 billion out of a total of $28.8 billion. Bitcoin is often referred to as “digital gold,” and despite its high volatility, ETFs linked to it represent only 4.9% of the total Bitcoin supply, while central banks own 17.1% of the total gold supply.
These figures reveal a significant gap in demand between the digital and analog versions of assets in ETFs, with gold ETFs holding over $210 billion while Bitcoin ETFs have only $28.8 billion. This difference is partially attributed to the volatility of Bitcoin, meaning investors need smaller quantities to take on the same level of risk compared to gold. However, this discrepancy is expected to lead to an increase in demand for Bitcoin ETFs amounting to approximately $30 billion.
Supporting factors for Bitcoin ETFs in the future include expectations of ETF launches, the decline in the value of the US dollar, the Federal Reserve’s push for increased cash liquidity, and intergenerational wealth transfer to younger individuals showing growing interest in cryptocurrency investments.