How will the possible approval of a BTC ETF fundamentally change the price?
3 min read
Some financial experts believe that the price of cryptocurrencies is driven solely by investor speculation. Public pension funds, pension plans and most non-cash, equity and multi-market investment funds can only invest in certain asset classes. These limits result from the fund class regulation, the fund’s own articles of association and the risk assessment of the manager.
Not every fund can invest in the Grayscale BTC Trust
Mutual fund manager it has no absolute control over the investment decision. The fund manager is a third party that acts as an intermediary between the fund manager and the investors. This is especially true when verifying and distributing investment-related assets. The fund manager could therefore decide that a particular instrument poses a significant risk, and either limit the exposure or refuse access to it.
Global Asset Managers they will generally have a 30 to 60 percent fixed income exposure. So it is very unlikely that they would be exposed to cryptocurrencies. Amundi, a leading European investment company with assets under management of more than $ 2.1 trillion, is a good example.
According to BCG Group the global asset industry has exceeded $ 100 trillion, with North America holding nearly 50 percent of that figure. Unfortunately, these astronomical numbers cause analysts to incorrectly assign these numbers to an exchange traded fund (ETF) instrument.
#Grayscale has partnered BNY Mellon, the world’s largest custodian bank with $ 41 Trillion in assets in custody. In Feb 2021, #BNYMellon announced they were entering the #Crypto space. Big move by Grayscale in the battle for a #BTC ETF.@Grayscale @BNYMellon #etf #bitcoinetf pic.twitter.com/RfSO7UOKGS
– Thinking Crypto – YouTube Channel & Podcast (@ ThinkingCrypto1) July 13, 2021
According to the Reuters more than half of all investment grade corporate bonds in the euro area are now trading at negative yields. This includes government debt of $ 7.7 trillion, which represents 70.8% of the total. The Financial Times reported that the value of global debt with a negative yield exceeded $ 16.5 trillion.
Investors will gradually abandon fixed income strategies and move to ETFs
There is reason to believe that investors with negative returns will eventually move to riskier assets. However, a complete transition to cryptocurrencies is unlikely to occur. However, the most likely beneficiaries are non-leveraged multi-purpose assets and alternative investments. These tools usually bring lower risk such as high-yield stocks and structured assets and bonds.
As a result, possible BTC ETF approval the US Securities and Exchange Commission will open the door to a large number of funds. Although the ETF is reserved for part of the shares and classes of multiple assets, the new instrument does not even need to raise $ 500 billion to propel BTC’s market capitalization above $ 2 trillion. Less than 2.5 million coins are deposited on the exchanges, which represents $ 125 billion ready for trading.
Commodity funds are the best candidates
According to iShares, the value of global commodity products traded on the stock exchange reaches up to $ 263 billion. Given that not every mutual fund is listed, it is reasonable to assume that the actual number exceeds $ 500 billion.
This means that only a 1 percent allocation from this particular asset class equals $ 5 billion. Such an investment would certainly be enough to make the price of BTC got over a maximum of $ 65,000.
If the BTC ETF is approved, traders trigger a potential influx immediately after the announcement of approval. Regardless of whether the products receive only $ 5 billion in the first months.
As governments and central banks continue to support liquidity, buy bonds and issue stimulus packages, riskier assets will grow, thereby increasing the demand for ETFs.
