As Bitcoin ETFs Go Global, What It Mean for the Future Price of Bitcoin?

For the first four months of the year, Bitcoin’s (CRYPTO:BTC) investment thesis focused on the launch of new spot Bitcoin ETFs in January. This made perfect sense, as they represented a potentially vast, untapped source of new money flowing into Bitcoin. As a result, Bitcoin rose from $45,000 in early January to an all-time high of $73,750 in March.

But now something completely unexpected happens. The flow of investors into new Bitcoin ETFs is slowing, spot Bitcoin ETFs recently launched in Hong Kong have failed, and the price of Bitcoin has fallen 20% from its peak in March. So is it time to rethink the ETF investment thesis for Bitcoin?

What happens when Bitcoin ETFs go global?

It is important to place the recent launch of US spot Bitcoin ETFs in a global context. On the contrary, the US was late to the Bitcoin ETF party. Before the new Bitcoin ETFs launched in January, more than a dozen spot Bitcoin ETFs already existed around the world, including key markets like Canada, Germany, and Brazil.

But the size and popularity of the new US Bitcoin ETFs have eclipsed everything that existed before and have become the new stars of the Bitcoin ETF universe. Within 30 days of launch, the new US ETFs accounted for 83% of all assets managed by spot Bitcoin ETFs worldwide. The largest new spot Bitcoin ETF in the United States – iShares Bitcoin Trust (NASDAQ: IBIT) – has enjoyed an incredible 71-day streak of positive net inflows.

That’s why the launch of spot Bitcoin ETFs in Hong Kong on April 30 was so eagerly awaited. If Bitcoin ETFs had such a big hit in the US, surely they would do the same in Asia, right? And in fact, if you read the headlines ahead of Hong Kong’s opening, you’d think people across Asia were lining up to own a piece of the new ETFs.

But that’s not what happens. The first day of trading was a failure in every respect. Less than $10 million changed hands; This was well below the $100 million estimated a few days ago. In fact, the new ETFs performed so poorly on launch date that they were blamed for Bitcoin falling below $62,000.

Has the ETF investment thesis been broken?

Of course, all sorts of reasons could arise for Hong Kong ETFs to fail at debut, including a worsening macroeconomic environment. But we now have a growing body of evidence to suggest that the concept of investing in Bitcoin through ETFs may be primarily a US-specific phenomenon.

Image source: Getty Images.

This means the Bitcoin ETF investment thesis popularized by Wall Street, with the ETF investment product becoming the engine of mainstream Bitcoin adoption around the world, may need some repair. Perhaps we shouldn’t flatter ourselves so soon about the new Bitcoin ETFs in Hong Kong or the upcoming launch of new Bitcoin ETFs in Australia.

The story continues

An even more troubling thought is that the launch of new US Bitcoin ETFs could signal a market top, not a bottom. The last major launch period for Bitcoin ETFs took place in 2021. This was the peak of the Bitcoin craze during the previous crypto bull market cycle. More than 14 new ETFs have launched in 2021, all designed to capitalize on investor interest in Bitcoin. At the end of the year, the crypto bull market is over.

Global supply and demand for Bitcoin

From my perspective it all comes down to supply and demand. It may sound simple, but if demand for Bitcoin exceeds supply, the price must rise. This leads me to think that Bitcoin’s long-term dynamic continues to be positive. According to BlackRock (NYSE: BLK), three major types of institutional investors (sovereign wealth funds, pension funds and endowments) are preparing to invest in Bitcoin ETFs.

Since Bitcoin is currently approaching its maximum lifetime supply of 21 million, this new source of institutional investor demand should mean a much higher price over time. Therefore, stop worrying about the price of Bitcoin in the short term and adopt a longer-term perspective. As long as investors continue to put money into new ETFs, the price of Bitcoin is likely to rise.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in Bitcoin and recommends it. The Motley Fool has a disclosure policy.

What Does the Future Price of Bitcoin Mean as Bitcoin ETFs Go Global? originally published by The Motley Fool