Bitcoin has a chance of surging in the final few months of 2021, as the first crypto exchange it is pegged to will be launched on Tuesday.
According to Tom Lee, Fundstrat founder and crypto enthusiast, the rollout of ProShares Trust fund could help catalyze further purchase in bitcoin BTCUSD, by a host of new individual investors. Fund provider ProShares was set to launch the Bitcoin Strategy ETF under the ticker BITO on Tuesday, which is the first U.S. ETF connected to crypto, a milestone for the nascent digital-asset sector that was born just back in 2008.
The prospect of an ETF, which in theory will offer investors access to bitcoin without having to worry about custody of the virtual asset, has driven bitcoin prices to near a record $70,000.
Lee says that one of the two main factors likely to push bitcoin prices higher is the expectation that the launch of the new ETF will draw significant inflows. A second reason is that a fraction of investors are now exposed to bitcoin and its ilk. with a new avenue to ownership likely to support further buying.
Fundstrat estimates that 93 million households own stocks, while 40 millions own bitcoin, with average account balances per household at about $10,000 for Bitcoin, a fraction of the average $200,000 that households own in equities.
Crypto is about 1% of all allocated liquid assets, wrote the Fundstrat founder see chart above Nevertheless, Lee s back-of-the-envelope research suggests inflows into the prospective ETF will serve as a key, new, near-term driver for bitcoin price.
We don't know the exact number of households that own bitcoin in the U.S. but we know for sure that it is not as distributed as equities, Lee said in a Monday research note.
Lee speculated that ETF demand for bitcoin could rise by $50 million a day if BITO proves anywhere near as popular an ETF as Invesco QQQ Trust QQQ, for example. The QQQs are some $190 billion in assets, and one of the other funds related to bitcoin, Grayscale Bitcoin Trust GBTC, has about $32 billion in assets, making it the largest crypto wealth fund.
Lee argued that based on current supply, with miners producing $10 million in bitcoin a day, appetite for the world's No. 1 crypto will far exceed demand on a stock-to-fly basis.
Fundstrat estimates that the resulting price level to achieve equilibrium with that supply demand dynamic is around $268,000.