It is believed that the approval of a spot BTC ETF could potentially drain the entire circulating supply of the crypto asset but some analysts in the industry have opposite opinions.
The potential approval of a spot Bitcoin (BTC) exchange-traded fund (ETF) in the United States has triggered speculation among market observers, noting that the imminent launch of the investment product could drain the supply of the token.
In a post on X, a crypto enthusiast with the pseudonym The Bitcoin Therapist said it would not be long until traditional investors move their funds from conventional assets to BTC.
A Flood of New Money on the Horizon
According to him, when a spot bitcoin ETF eventually receives approval from the Securities and Exchange Commission (SEC), institutions and other corporate entities will push their customers into purchasing the crypto asset, reducing the current circulating supply of bitcoin.
“There’s no telling how quickly the supply will be drained while institutions push their clients into an ETF. We’re in uncharted territory. A flood of new money is on the horizon,” he wrote.
Bitcoin was launched in 2009 with a total supply of 21 million coins. However, only 1.4 million of the crypto assets are yet to be mined and introduced into the market.
In September last year, another crypto enthusiast and entrepreneur, Lark Davis, predicted that the introduction of BTC spot ETFs in the US market could bring fresh capital into the industry. Davis estimated the move would see up to $30 billion in cash into BTC.
Additionally, the digital asset entrepreneur and investor claimed that spot bitcoin ETF issuers would acquire 50% of all bitcoins available on crypto exchanges such as Binance, Coinbase, Kraken, Gemini, and CryptoCom to back up their ETFs.
“Estimates are that a spot Bitcoin ETF would bring 20-30 billion fresh cash into Bitcoin. That would buy about half of all coins on exchanges at current prices. For reference, here is what happened to gold when it got its first ETF approved on US markets,” he wrote on X.
Industry Executives Disagree with the Prediction
While the Bitcoin Therapist and Lark Davis believe that the approval of a spot BTC ETF could potentially drain the entire circulating supply of the crypto asset, several executives and analysts in the industry have different opinions.
In an interview with Cointelegraph, Valkyrie CEO Leah Wald said no one can purchase the entire BTC in circulation. According to her, a company or government could attempt to buy significant portions of bitcoin but cannot acquire all the assets in circulation.
“Theoretically, a company or government could attempt to buy a significant amount of Bitcoin, but acquiring all Bitcoin in circulation is highly impractical, and we still have a significant, unreleased supply of Bitcoin,” Valkyrie CEO Leah Wald told Cointelegraph.
She further noted that BTC’s decentralized nature and the fact that many holders may not be willing to sell at any price serves as a natural barrier against monopoly.
Another industry executive, Matt Hougan, the chief investment officer at Bitwise, also “believes that no one can theoretically establish a monopoly on Bitcoin.”
The Bitwise executive cited the scarcity principle that says the price of a scarce good will rise to meet the demand.
“In other words, if someone tried to ‘corner Bitcoin’, the price would rise and rise and rise as more and more reluctant sellers were met,” Hougan said.
On January 3rd, CEO Samson Mow echoed Hougan’s viewpoint, expressing confidence in the difficulty of buying the entire circulating supply of Bitcoin. He emphasized that the exorbitant prices, fueled by products like a spot Bitcoin ETF, make it challenging to accumulate all available BTC. Mow pointed out that as the supply for sale decreases, the price at which people are willing to sell tends to rise.
