In a recent series of tweets, Vetle Lunde, Senior Analyst at K33 Research, took a deep dive into the potential implications of US Bitcoin (BTC) spot ETFs. Lunde’s analysis suggests that the broader market may be significantly underestimating the transformative power of these financial instruments.
Lunde’s claim is rooted in five cores reasons. He started with a bold statement: “The market is wrong – and dramatically underestimating the impact of US BTC ETFs (and ETH futures-based ETFs).”
Why the market is wrong about Bitcoin
First, Lunde believes the current environment is ripe for the adoption of U.S. spot ETFs, suggesting the opportunities have never been better. Such as NewsBTC reportedBloomberg experts Eric Balchunas and James Seyffart recently increased their approval odds for Bitcoin spot ETFs after the Grayscale ruling to 75% this year, and 95% by the end of 2024.
Second, Lunde pointed out that the price of BTC has returned to its pre-BlackRock announcement level. The third reason revolves around the potential competition and simultaneous launch of multiple US spot ETFs. Lunde expects that these, if approved, could lead to robust inflows, potentially exceeding the initial trading days of both BITO and Purpose.
For context, he highlighted that Purpose saw inflows of 11,141 BTC, and in the aftermath, subsequent ETF launches in Canada resulted in a whopping 58,000 BTC in inflows in just four months. Given the vastness of the US market compared to Canada, the inflow potential is significantly greater.
The fourth reason Lunde presented is based on historical data from the past four years. He highlighted a noticeable correlation between strong inflows of BTC investment vehicles and rising BTC prices. This relationship becomes even more apparent during periods of extreme inflows, which have historically contributed to significant market rebounds.
The last crucial point for Lunde is that the market got rid of excess leverage on August 17, as NewsBTC said reported.
By the numbers
In conclusion, the research firm states that US BTC spot ETFs could see inflows of at least 30,000 BTC in the first ten days. Over a four-month time frame, combined inflows into BTC investment vehicles could range from 70,000 to 100,000 BTC, driven by US spot ETFs and growing inflows into ETPs in other countries.
Based on these flow assumptions and data from the past four years, Lunde suggests a potential BTC rally of 66%, with a target price of $42,000. However, he also cautioned that this projection is based on a “naive assumption” and does not take into account other market-moving events.
At the time of writing, BTC was trading at $25,865.
Featured image from iStock, chart from TradingView.com