The approval of a spot bitcoin exchange-traded fund (ETF) in the U.S. could inject substantial new capital into the cryptocurrency market. Glassnode’s latest analysis on the subject provides a deep dive into how spot bitcoin ETFs could reshape market demand and supply, signaling a new era for bitcoin’s integration into mainstream financial markets.
Glassnode: Spot Bitcoin ETF Could Be a Catalyst for Major Demand and Increase Volatility
An influx of demand would confront relatively limited liquid bitcoin (BTC) supply, potentially amplifying volatility, Glassnode researchers detail in a report published on November 20. The study by the blockchain data firm Glassnode indicates there’s significant pent-up demand for a spot bitcoin ETF product.
The analysts estimate up to $70.5 billion could flow into the market from stock, bond, and gold investors allocating just a fraction of assets. Even more conservative projections see tens of billions entering in the first years.
Bitcoin supply held by long-term holders (LTH) vs. short-term holders (STH).
Unlike existing bitcoin investment vehicles, a spot ETF would provide institutions with direct and regulated bitcoin exposure. This could attract major inflows even if some capital shifts from current proxy funds. Historical data shows new access unleashing asset demand.
“To understand the market dynamics that will likely unfold post-ETF introduction, we now need to turn our attention to bitcoin’s available supply,” Glassnode’s study explains.
The analysis highlights how prolonged accumulation has tightened BTC’s circulating supply. Over 76% is now held long-term, concentrating coins in holders less responsive to price swings. Glassnode’s research shows short-term and active trader supplies recently hit multi-year lows.
The growth in illiquid supply is evident as investors move assets into holding wallets. In contrast, exchange balances reflect the opposite trend, signaling limited market liquidity even with rebounding trading volumes. Despite heightened interest from institutions, tradable Bitcoin supply continues to be limited, according to insights from Glassnode’s research.
Glassnode’s B2B contributor Marcin Miłosierny says that as a result, even modest spot ETF inflows could significantly move prices. Analyzing bitcoin’s realized market cap helps gauge sensitivity. When small inflows drive large valuation changes, market impact potential is high. The report states:
The impact of the first spot bitcoin ETF goes beyond the symbolic. It also represents a potentially significant influx of new demand. With the prevailing long-term HODLing pattern exacerbating bitcoin’s scarcity, the introduction of an ETF could dramatically shift the market dynamics.
Glassnode summarizes that the approval of a spot bitcoin ETF signifies a pivotal moment for institutional involvement. However, the ensuing changes in supply and demand could significantly heighten market volatility. “By keeping an eye on the shifts between these two cohorts, traders and investors can better navigate the complex landscape of the Bitcoin onchain,” the report concludes.
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