Amid hopes that a spot bitcoin exchange traded fund or multiple versions of that product will soon debut in the U.S., the digital currency is on a torrid pace in 2023.
What could prove even more accretive for ETFs such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO) is the point that some cryptocurrency market observers believe this year’s bitcoin rally is the start of something more substantial.
New analysis by Bernstein speculates that bitcoin, the largest digital currency by market capitalization, could be trading at $150,000 by mid-2025. The Bernstein forecast implies that digital currency could more than quadruple in the span of just 20 months. The giant of cryptocurrencies traded $35,470 as of this writing.
Bitcoin Rally Could Boost SATO
SATO is an equity-based ETF, but its largest holding is the Grayscale Bitcoin Trust (GBTC), which has clear ties of its own to digital currency price action. After GBTC, the bulk of the SATO roster comprises cryptocurrency miners. Those shares are highly correlated to the assets they mine.
One way of looking at those scenarios is that, regardless of the positive or negative catalysts, SATO is levered to the digital currency’s price action. That’s something to consider if the aforementioned Bernstein forecast proves anywhere close to accurate.
“You may not like bitcoin as much as we do, but a dispassionate view of bitcoin as a commodity suggests a turn of the cycle,” noted Bernstein analyst Gautam Chhugani. “A good idea is only as good as its timing.”
Not surprisingly, the Bernstein analysis highlights the cryptocurrency’s April 2024 halving as a potential spark for the digital asset. Over its albeit brief trading history, it has often rallied in advance or following a halving. In simple terms, halvings make bitcoin mining more difficult, thus limiting the introduction of already limited supply to the market.
Of course, it’s hard to ignore the possible effects approval of a spot bitcoin ETF could have on the digital currency itself as well as ETFs like SATO. Traders could opt to sell the digital currency on approval news or add to those positions in anticipation of higher prices.
“We expect US regulated ETFs to be the watershed moment for crypto and we expect a SEC approval by late 2023/Q1, 2024,” Chhugani wrote. “Post halving, we expect the bitcoin spot demand via ETFs to outstrip miner selling by 6-7 times at peak. We expect bitcoin ETFs to be equivalent to 9-10% of spot bitcoin in circulation by 2028.”
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