In the midst of Bitcoin’s recent upswing, the notion of potentially adding $1 trillion to its market capitalization via Bitcoin spot ETFs has drawn significant attention from the market.
- Bitcoin broke past the $27,000 barrier, triggering market optimism.
- Analysts suggested that potential Bitcoin spot ETF approval could boost market cap by $1 trillion.
After a prolonged wait, Bitcoin [BTC] finally surged past the critical $27,000 price threshold, an event that sparked excitement among traders and long-term holders alike. It wasn’t just the break above this significant resistance level that fueled optimism, the much-anticipated approval of Bitcoin exchange-traded funds (ETFs) added another layer of enthusiasm to the market.
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Make it a trillion
Furthermore, an analysis from CryptoQuant suggested that the potential approval of Bitcoin spot ETFs could contribute a staggering $1 trillion to Bitcoin’s market capitalization.
This analysis anticipated that approximately $155 billion could flow into the BTC market once these ETFs are granted approval.
To put these figures into perspective, it’s important to recognize the scale of traditional finance that Bitcoin is set to tap into. The companies responsible for these ETFs have a combined total Assets Under Management (AUM) of around $15.6 trillion.
A mere allocation of 1% of their AUM into Bitcoin ETFs could inject nearly $155 billion into the market, representing nearly one-third of the king coin’s current market capitalization.
The mechanics of how new capital entering the market impacts Bitcoin’s market capitalization were evaluated. In particular, analysts looked at changes in realized capitalization.
It is a measure of the total value of all circulating BTC based on the price at which each coin was initially acquired. As new money enters the market and BTC is acquired at prices higher than the purchase price of the previous owner, realized capitalization increases.
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Still a long way to go
A historical analysis depicted the evolution of Bitcoin’s market cap and realized cap. This data provided insights into the metrics during the peak periods of 2013, 2017, and 2021.
As of the most recent data, Bitcoin’s market capitalization stood at $545 billion, a significant jump from the $396 billion of realized capitalization.
At press time, Bitcoin was trading at $29,800. Despite the surge in price, the velocity of BTC fell materially. This implied that the frequency at which BTC was being traded had fallen.
Additionally, the number of holders of BTC also declined during the same period. This could suggest that the price of BTC may hover in this range for some time.
