ETF Expectations Could Drive Bitcoin to $150K Valuation

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The bitcoin market is not ready to handle an exchange-traded fund (ETF), according to Thomas Lee of Fundstrat Global Advisors LLC.

The co-founder told Bloomberg that the cryptocurrency’s market capitalization is too small to cater to the demand of ETF investors. He noted that such a trading product could attract $13 billion worth of orders in the very first year of its launch. Therefore, bitcoin should likely be around $150,000 – almost fifteen times its current valuation – to impeccably support an ETF product.

The statement followed years of efforts made by several high-profile financial organizations to launch a Bitcoin ETF. But owing to concerns raised by the US Securities and Exchange Commission (SEC), all their efforts failed. The securities regulators commented that the bitcoin spot market – for starters – was too volatile and unregulated for an otherwise regulated ETF product. According to Mr. Lee, the SEC has taken the right decision to reject about ten crypto-ETFs. Even they should wait for bitcoin to swell further in terms of the market cap before it powers a mature trading product.

“The SEC needs to punt the ETF until crypto becomes bigger,” he said. “But demand for an ETF is monstrous.”

Chicken and Egg Situation

Mr. Lee’s comments established a valuation standard for Bitcoin. It somewhat reflects that traders should stop expecting a crypto ETF until the spot market attracts hundreds of billions worth of additional investment. Speculators believe bitcoin’s scarcity – especially after next year’s halvening event that would reduce the cryptocurrency’s supply rate by half – could send its value soaring high. There is no concrete metric to estimate how high bitcoin would go.

But, given the worsening macroeconomic scenario led by rising government debts, dovish central bank policies, and a conniving US-China trade situation, many believe big investors would allocate a portion of their investment portfolio to bitcoin. Even a 1 percent grant could shoot the cryptocurrency prices above $100,000.

“Somewhere between and year and a year-and-a-half after the [May 2020] halving, so say before Christmas 2021, bitcoin should be or should have been above $100,000,” noted market analyst PlanB after pricing-in his popular Stock-to-Flow model. “If that’s not the case, then all bets are off and [the model] probably breaks down. I don’t expect that to happen.”

Then, others believe that a regulated Bitcoin ETF would be the one that would make institutional investors feel safe about the cryptocurrency. Tom Alford of writes that bitcoin could rise by almost 500 percent after the SEC approves a Bitcoin ETF. His reasons are simple: Because Gold also rose by a similar margin after the launch of its first ETF.

“[Gold ETF] kickstarted the biggest bull run in gold’s history,” wrote Mr. Alford. “Prices rose from just $331.60 per ounce to a high of $1,917.90. That’s an incredible 478% increase in price after the gold ETF was launched.”

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