What is a Bitcoin spot ETF?

Is an asset that tracks the price of Bitcoin.

Why it is considered a game changer?

Institutional investors and wealthy individuals, using large investment firms like Blackrock, Fidelity or Ark among others, once approved in their countries, will be able to acquire the asset with low risk, since these investment firms are highly regulated. These investors have above 15 trillion dollars invested in these large firms and therefore, once the ETF is approved, it is expected that these firms will allocate at least 1% of their portfolios to it. That will be mean at least $150 billions into Bitcoin, which is remarkable considering the current market cap of the asset is currently $0.5 billion.

An injection of minimum $150 billions translates in a huge demand for Bitcoin with massive potential for price appreciation.

Until now, very few large institutions have acquired Bitcoin, an example Tesla Inc (Nasdaq: TSLA) and Microstrategy (Nasdaq: MSTR), which wrote a document labeled "A summary of some of the key considerations for corporations to keep in mind when investing in bitcoin". The link to the document:

https://www.microstrategy.com/en/bitcoin/documents/key-considerations-for-corporate-investment-in-bitcoin

Let's check the math

  - Bitcoins mined per block: 6.25

  - Time in minutes to mine one block (approx): 10

  - Minutes in one day: 1440

  - Blocks mined per day: 144  ->  (1440  / 10 = 144)

  - Bitcoins mined per day: 900 -> ( 144  x 6.25 = 900)

After the halving, since the Bitcoin mined per block will be reduced to 3.125, we will only have 450 mined per day.

  - Around 4 million across exchanges
  - 900 per day injected in the market 

Assuming Miners sell all 900 every day (which is not the case but we will use as worst case scenario), this means that in order for the price of Bitcoin to keep the current price (around $29.4K as I write this article), $26.5 millions are needed in the market to buy those 900 fresh mined every day, $795 million per month, $9.54 billion per year.

As you can see, the financial energy put into Bitcoin to maintain its current price is already considerable, but nothing in comparison with $150 billion (worst case scenario) injection of fresh capital into buying Bitcoin. The projection is not linear since there are many additional variables to factor in, specially qualitative non quantifiable ones as potential financial crisis, absurd regulations, governments corruption, wars, pandemics, etc, but nevertheless, a close to 15X is plausible, which would rocket the price of Bitcoin to around $441K as soon as the $150 billion are deployed to acquire it. Now, consider that this is worst case scenario and valid only until the end of this halving (the amount of mined Bitcoin per day is reduced by half), which next one is around the end of April 2024.

After the halving, with the current amount of financial energy injected into Bitcoin ($26.5 million), the price would potentially double to around $58.8K, and if 1% of the investment companies applying for an ETF is injected, the math take the potential price of Bitcoin to $882K as soon as that 1% is deployed. The time frame is unknown, but I would assume before the end of 2024, Why? Because the ETFs are being yet again delayed by the SEC in USA for a next decision in 4 to 6 months.

But USA is not the only country where large Investment Companies are applying for ETFs, it is true that the two largest ones are in USA (Blackrock and Fidelity), but there are many more that combined across the world would add up to a massive additional amount of capital injected into Bitcoin.

The first one in Europe, Jacobi Asset Management, issuer of an equity structure for digital assets in Europe with the first Bitcoin ETF, with a total portfolio of approx. $4.8 billion. Assuming 1% (worst scenario) of its portfolio will be deployed into Bitcoin, additional $48 million would be injected. The launch of this ETF was "July 2023", not exact date given and the web site still missing required information. I will assume this capital will be injected between August and December 2023.

Long term impact?

1. Asset appreciation
2. Attempts to control the asset

The first one have been explained above, the more capital is deployed into the asset, and the more time passes, the more valuable and scarce it becomes (one halving every 4 years) and therefore, Bitcoin will continue to appreciate over time by "a lot". Extrapolate to 5% of 15 trillion dollars, then to 10%, etc. Considering that Bitcoin is the best asset in terms of appreciation of the last 10 years, it is plausible that institutional investors will be eager to put more than 1% of their portfolios into Bitcoin, I would assume that 5% for the most conservative and 20% for the most aggressive will be a logical assumption. You do the math, you will get numbers that will explain why so many financial analyst come with such a high numbers in their predictions of the future price of Bitcoin.

The second one is the reason I decided to write this article, recently I read a post from Chris Blec in X, his post was quite interesting, it reads "Pfizer convinced billions of people to inject a mysterious chemical into their body multiple times but you don't think Blackrock can convince normies that their fork is the real Bitcoin?"

Most provocative post which opens the door for debate, one that I am certain is being discussed for years already close door among the Bitcoin community.

Basically, he leads to a possible scenario in which Blackrock or a union of Investment corporations could influence with their resources developers and miners to fork Bitcoin into; for instance; a PoS (Proof of Stake) chain, basically centralizing and controlling Bitcoin. A fork creates a new chain and the users will decide which chain is Bitcoin, users decide by changing their Node into the new chain or not, one Node, one Vote.

This is certainly plausible and the community needs to work on it to shield Bitcoin from those attacks, which eventually can transform Bitcoin into a non valuable asset. For instance, reducing the block time to 1 minute with no other change, that will mean that the amount of Bitcoin mined and injected in the market would be as of today 9000 and not 900, reducing its price dramatically since the offer will increase considerably. Other attack could be to try increasing the block size, this will make it more difficult for people with low resources to run a Node from home and therefore vote with their Node, leads to centralization into fewer Nodes, which is against Bitcoin investors interest.

In my opinion, education is key, those investment funds manage money from wealthy investors, if those investors understand the ethos of Bitcoin and why the asset is so scarce and valuable, they will fight back together with the individual investors for those changes not to be pedaled into the chain. At the end, greed is a very strong motivator and Satoshi understood that perfectly and therefore it is accounted for in the design.

Additionally, a considerable percentage of the Bitcoin investors are quite informed and fear can't be use as a motivator, as it was the case of the pharmaceuticals and their experimental drugs, the Investment companies could use their resources to create campaigns pushing their narrative, but the community will see through that and counter it in the social networks quite fast, in my opinion, in the age of information, the legacy MSM can't easily steer the Bitcoin ecosystem opinion as they could have done with the population up to the 90s, now is a real challenge for them. Proof of that is that they have been fighting Bitcoin with everything they got until now. They short it, talk trash it as much as they could in the legacy MSM, call it rat poison, stated that it will go to zero (while secretly buying it...) and after all that, now they are lining up to buy it and speaking highly of the asset.

We need to be alert, Bitcoin has endured 14 years of attacks and survived thanks to the community and investors, we need to stay vigilant and protect it, run at least one Node at home, remember, one Node, one Vote.

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Fix the Money, fix the World,

Use Bitcoin, be Unconfiscatable

Use Nostr, be Uncensorable

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