Opinion: Bitcoin ETF approval requires capitalisation to reach $2 trillion

Ark Investment Management CEO Katie Wood doubts US regulators will approve a bitcoin exchange-traded fund (ETF) before BTC’s market capitalisation reaches $2 trillion.

„Demand has to be met, so it has to exceed a trillion dollars. I think it needs $2 trillion before the US Securities and Exchange Commission (SEC) has confidence in bitcoin ETFs,“ Wood said at the ETF Trends Immediate Edge online conference on Tuesday, 26 January.

Bitcoin’s market capitalisation hovered below $600bn on Tuesday.

Wood was optimistic about bitcoin’s prospects under Gary Gensler, the former CFTC chairman and MIT professor appointed by US President Joe Biden to head the SEC.

Gensler has become the SEC’s most knowledgeable chairman on cryptocurrencies and blockchain, as he served as advisor to the Digital Currencies Initiative at MIT and conducted research on blockchain and financial technology.

Wood’s presentation on Tuesday also made bold predictions about the price of bitcoin if „institutional adoption“ continues. Wood said that if every S&P 500 company invested 1% of its assets in bitcoin, its price would rise by $40,000.

„An institutional allocation of 2.5% to 6.5% could raise the price of bitcoin from $200,000 to $500,000,“ Wood said in her presentation.

Pantera Capital predicts six-figure bitcoin price

Pantera Capital predicts six-figure bitcoin price in August 2021

Investment firm Pantera Capital has forecast a Bitcoin price of over US$115,000 in a recent report. In addition, the hedge fund looks at the value of Ethereum and explains the differences between the current rally and the 2017 bubble.

115,212 US dollars. That’s where the BTC price is expected to be in August 2021 – at least if Pantera Capital’s forecasts are anything to go by. The hedge fund published this six-figure estimate in its January newsletter and at the same Bitcoin Benefit time referred to the price forecast from April 2020 for January 2021, which was expected to be exactly the same. The analysis is based on the „Halving Stock-to-Flow Projection“. This compares the reduction in supply in relation to the outstanding bitcoin stock and the subsequent impact on the price.

To explain: In the protocols of „digital gold“, mechanisms are implemented that halve the amount of bitcoin created in a four-year cyclical process. This means that miners only receive half of the BTC per generated block. Since Bitcoin are limited to 21 million, „halving“ thus delays the moment of exhaustion, whereby the cryptocurrency increases in value with each shortage. The last „bitcoin halving“ took place in May 2020 and reduced the reward to 6.25 BTC per block created.

From these factors, the investment fund predicted a BTC price of US$38,061 in mid-January 2021. In the report, one can see the further predicted price development of the digital store of value:

According to the report, the digital store of value would crack the 100,000 mark as early as mid-July, before reaching a new all-time high of 115,212 US dollars in August. Dan Morehead, CEO of Pantera Capital, sounded a bit more cautious in an interview. He said:

I wouldn’t bet our life savings on it happening. But I think it’s possible and we’re well on our way to making it happen.

Bitcoin rally: 2017 versus today

The report also explores the question of what exactly distinguishes the current Bitcoin rally from the 2017 crypto bubble. The result is relatively simple: hype.

In mid-2017, for example, many investors fell in love with newly issued tokens (ICOs), most of which had no real benefit. Bitcoin, for example, accounted for only 39 per cent of the market capitalisation of the entire crypto sector in December 2017, while the shares of all other tokens came to just under 25 per cent. According to the author, this circumstance has now fundamentally changed. The crypto leader was now able to almost double its share to 72 per cent, while altcoins had to cope with a decline to 10 per cent. Ripple even lost 14 per cent in this comparison. Ethereum was another beneficiary. According to the report, the cryptocurrency was able to increase its share.