The Future of Bitcoin with ETF Introduction: Learning from Past ETF Trends

In his latest Substack post¹, Anthony Pompliano, provides an update on the historic approval of the bitcoin spot ETF. He mentions that all eleven issuer applications were greenlit by regulators and were set to begin trading. Pompliano introduces Matt Hougan, CIO at Bitwise Investments and former CEO of ETF.com, to provide insights on the situation. He highlights Hougan's deep understanding of ETF history and notes that Bitwise, one of the approved issuers, also happens to offer the lowest fees among the issuers.

Here's what Matt Hougan, Bitwise had to say:

1. On the Historical Impact of Gold ETFs:
   • "The price of gold rose for nine straight calendar years after the first gold ETF launched in the U.S. on November 18, 2004. It is the longest streak of consecutive positive years in gold’s recorded history."
   • "Over this time period, gold ETFs attracted $89 billion in inflows worldwide, vacuuming up 2,667 metric tons of gold. That’s 86 million ounces—more gold than the countries of China, Switzerland, and Russia hold combined."
2. On Investor Flows into Bitcoin ETFs:
   • "Everyone wants to know how much money will flow into bitcoin ETFs. That’s hard to say: I’ve seen long-term flow estimates of $30 billion to $200 billion."
   • "But one thing we do know is that the flows won’t come all at once. In fact, it’s more likely that they will build over time."
3. On Bitcoin ETFs and Existing Bitcoin Access Methods:
   • "One of the biggest questions investors have about the launch of bitcoin ETFs is whether they will tap into new demand or whether they will simply cannibalize other ways of accessing the market. My experience with gold suggests they will find new demand."
   • "The reason is simple: The launch of the ETF helped establish gold as a mainstream investment and dramatically increased the number of investors interested in the space."

Hougan's insights draw on the history of gold ETFs to shed light on the potential impact of bitcoin ETFs. He suggests that, like gold ETFs, bitcoin ETFs could attract significant investment over time and expand the overall market for bitcoin, rather than merely shifting existing investments.

Footnote:

Adapted from: Pompliano, Anthony. "What Will a Bitcoin ETF Mean for Bitcoin? Lessons From ETF History." The Pomp Letter, 11 Jan. 2024, pomp.substack.com/p/what-will-a-bitcoin-etf-mean-for.