Bitcoin, the largest cryptocurrency by market value, has been on a scintillating run since the start of 2023. And more upside could be on the way. Market observers believe the approval of multiple U.S.-listed spot bitcoin ETFs is imminent.
Some analysts and experts believe that event will be a “sell the news” proposition. Others see it as a potentially seminal event for the ETF industry and for the cryptocurrency world at large. As such, there could be tangible benefits for funds such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO).
The ETF rallied alongside bitcoin last year. It more than doubled on an annual basis as the digital currency did the same. In other words, SATO is highly correlated to bitcoin’s price action. That’s obviously a positive when the cryptocurrency is rising as it has been to start 2024. Potentially bolstering the case for more SATO upside this year are expectations that bitcoin’s recent rally is still in its early innings.
Consider the Spot Bitcoin ETF Outlook
It’s possible that spot bitcoin ETFs are approved as soon as this week. With that in mind, some market observers are speculating about the possible longer-ranging effects on prices of the digital currency. Standard Chartered believes it’s possible a spot bitcoin could trigger a quadrupling in bitcoin prices.
“If ETF-related inflows materialize as we expect, we think an end-2025 level closer to USD 200,000 is possible. This assumes that between 437,000 and 1.32mn new bitcoins will be held in spot US ETFs by end-2024,” observed Standard Chartered Head of FX Research Geoff Kendrick.
From current levels, bitcoin would need to more than quadruple to get to $200,000. Assuming such a move materializes, SATO could potentially notch significant upside along the way.
There is some historical precedent that SATO investors might want to consider. Going back about two decades to the launch of the first physically backed gold ETF, the launch of that fund sent spot gold prices to a fourfold increase over the next seven years. Some of that move was helped by gold ETFs’ increasing demand for the yellow metal – a scenario that’s expected to play out with spot bitcoin funds.
“We use this 4.3x increase as our base case for Bitcoin, but we expect the BTC gains to occur during a short one- to two-year period because we expect the BTC ETF market to mature more quickly,” added Kendrick. “This measure is at an all-time low as a percentage of total supply in circulation. In other words, supply is more price-inelastic than it has ever been.”
VettaFi LLC (“VettaFi”) is the index provider for SATO, for which it receives an index licensing fee. However, SATO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SATO.
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