Monday 18 September 2023

Spot BTC ETF back-of-an-envelope effect estimate

A rough back-of-an-envelope estimate for what the effect of spot BTC ETFs can be on BTC dollar price for a four-year period.

Please provide your feedback and criticism about which assumptions are realistic and which are not. I admit that some of the assumptions are deliberately made restrictive and conservative.

A few assumptions

Assumption 1: The AUM of the companies filing for spot BTC ETF is $17.7T (this is a number often cited so I take it as it is)

Assumption 2: the initial price of BTC when ETF capital allocations start is $26K

Assumption 3: the multiplier (i.e., how much dollars need to flow into BTC to move its price by 1%) is initially set at $200M. This is based on an often cited number from Bank of America analysts who estimate this to be around $100M at the peak of the last bull run and multiplying this by 2 (assuming that BoA were too optimistic in their estimate).

Assumption 4: in every subsequent year of the four-year period this multiplier increases threefold (i.e., in year 2 it becomes $600M)

Assumption 5: companies start with an initial allocation of 0.25% of their AUM and add additional 0.25% of AUM in each subsequent year for a total of 1% of AUM for the period 2024-2028.

Under those assumptions the estimated price of BTC, purely because of ETF flows and no other sources of demand, is estimated to be $195K per BTC at the end of the four-year period.

To put this into perspective, even under these conservative assumptions, that would put the market cap of BTC at 3 times the market cap of silver (an asset that has been around for millennia).



Submitted September 18, 2023 at 02:43PM by MeMyself159 https://bit.ly/3PHRPZa

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