Key facts:
The growth of bitcoin ETFs is bullish for the price of the digital currency.
BlackRock’s IBIT fund leads capital inflows among bitcoin ETFs.
The adoption of bitcoin (BTC) ETFs by investment advisors has exceeded expectations, becoming one of the fastest-growing phenomena in the history of the exchange-traded fund market.
Although some analysts, such as Jim Bianco, have characterized Although these advisors’ purchases are considered “small,” a closer look at the data reveals a notable trend.
Matt Hougan, director of the Bitwise exchange, shows that if you look at the BlackRock bitcoin ETF (IBIT)it is seen that has attracted $1.45 billion in net flows from investment advisors alone.
While this may seem minor compared to the $46 billion total that has flowed into bitcoin ETFs, this amount positions IBIT as the second-fastest-growing ETF launched in 2024. Among more than 300 ETF launches this year, only the ESG-focused KLMT ETF surpasses IBIT in assets under management. However, KLMT was driven by a single $2 billion investment and has low market activity, with an average of just 250 shares traded per day, and no significant adoption by investment advisors.
Hougan says about this situation:
“The truth is that investment advisors are adopting bitcoin ETFs faster than any other ETF in history. It’s just that their historic flows are dwarfed by even more historic purchases from other investors.”
Matt Hougan, CEO of Bitwise.
ETF adoption is bullish for bitcoin
The accelerated growth of Bitcoin spot ETFs will have significant effects on the price of Bitcoin in the long term. As funds backed directly by the digital currency, the companies that manage them are obliged to acquire Bitcoin to guarantee the backing of investors’ assets. This massive acquisition of BTC tends to reduce the available supply on exchanges, which, by simple law of supply and demand, pushes the price up.
A clear example of this phenomenon can be seen in commodity ETFs such as gold. When the first ETFs backed by physical gold were launched, management companies had to acquire large quantities of the metal to back their funds, which generated strong upward pressure on its price. The same principle applies to spot bitcoin ETFs, where the acquisition of BTC by funds such as BlackRock, Bitwise or others manages a significant part of the total supply of bitcoin in circulation.
Unlike traditional raw materials, Bitcoin has a limited supply of 21 million units.which further exacerbates the effects of institutional demand on its price. As more investment advisors and other institutional players adopt these ETFs, the growing demand for bitcoin could reduce the availability of the asset in the market, driving up its value in a sustained manner. This also cements bitcoin as a long-term strategic asset class, as its supply cannot be adjusted to meet increased demand.
This article was created using artificial intelligence and edited by a human on the editorial staff.
