Key Points
- Bitcoin could see a positive demand shock due to potential inflows from registered investment advisors (RIAs).
- Spot Bitcoin ETFs are witnessing record high inflows, with net inflows surpassing $12 billion since January 11.
Bitcoin’s demand could potentially increase in the coming months due to new inflows from registered investment advisors (RIAs).
This surge in demand, known as a positive demand shock, could be triggered by substantial capital inflows into the Bitcoin market.
Spot Bitcoin ETFs and RIAs
James Butterfill, Head of Research at CoinShares, pointed out a dynamic that could spark such a demand shock. He noted that spot Bitcoin exchange-traded funds (ETFs) have not yet been made accessible to the RIA market.
Fund platforms used by RIAs typically require three months of trading data before they can include newly issued ETFs. Therefore, as these ETFs become accessible, there could be a significant influx of investments from the RIA market.
Currently, only the Carsen Group, an investment advisory firm, has allowed the trading of spot Bitcoin ETFs. Considering the RIA market represents about $50 trillion in assets, the potential inflows could be substantial.
For example, if 10% of RIAs chose to invest 1% of their portfolios in Bitcoin, this could lead to approximately $50 billion in additional inflows.
Bitcoin Demand and Supply
Butterfill also pointed out the increasing demand and decreasing supply dynamic within the Bitcoin market. The launch of multiple spot Bitcoin ETFs on January 11 has led to an average daily demand of 4500 Bitcoins, while only an average of 921 new Bitcoins were minted per day.
The newly minted Bitcoin supply cannot keep up with the demand, leading ETF issuers to source Bitcoin mainly from the secondary market. Data shows that over-the-counter (OTC) desk coin holdings have fallen by 74% since their 2020 peak, likely due to ETF demand.
Last week, U.S. spot Bitcoin ETFs witnessed record inflows. Combined, the ten spot Bitcoin ETFs reached $2.57 billion in inflows, up 15% from the previous week. BlackRock’s IBIT generated $2.48 billion in inflows, followed by Fidelity’s FBTC with $717.9 million and VanEck’s HODL with $247.8 million.
However, Grayscale’s converted GBTC fund saw $1.25 billion in outflows, and Invesco’s BTCO also contributed $29.4 million in outflows. Since spot Bitcoin ETF trading began on January 11, total net inflows have exceeded $12 billion.
The largest digital asset by market cap has increased by 1.92% in the past 24 hours, currently trading at $68,200. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, has increased by 2.45% to 152.93 in the past 24 hours.
