July 14, 2023
Greg Cipolaro

Research Weekly - Estimating the Size of Spot ETF


  • With a spot bitcoin ETF highly anticipated by investors, we look at the opportunity and impact on what that product would look like.
  • Nearly $29B is already invested in existing bitcoin funds around the world, but many in the US have drawbacks a spot ETF could remedy.
  • We do not ultimately know the success of such a product, but we hope the analysis we have laid out is instructional for investors seeking a framework and greater information.

Estimating the Size of a Potential Spot ETF

Bitcoin is up over 20% since BlackRock surprised the investment community by filing for a spot bitcoin ETF on June 15th. With investors excited about the proposition of a spot ETF finally getting approved in the US 10 years after the first registration statement of such a product was filed, we wanted to look at what this financial product might mean for the investment community and the price of bitcoin. Approval is anything but assured, so we encourage investors to probability weight potential fund flows.

There Is Already Significant AUM in Bitcoin Funds

The first thing to understand is that while a spot bitcoin ETF has never been accessible in the US, a significant amount of investment has already been made in existing structures including trusts, such as the Grayscale Bitcoin Trust (GBTC), futures-based ETFs in the US, spot-based ETFs outside of the US, and private funds. Our analysis shows that these products account for $28.8 billion in assets under management, with $27.6 billion invested in spot products. Note: our measurements do not incorporate potential private funds outside the US, which are more difficult to aggregate.

Weekly 1-Jul-14-2023-03-54-22-6602-PM

Bullish Viewpoint is Existing Options Have Drawbacks

The bullish argument for a spot ETF is that even though significant funds have already been invested bitcoin funds, the existing options for investors have several drawbacks that an ETF would alleviate. In addition to the investor protections afforded to exchange-traded products, the brand recognition of BlackRock and the iShares franchise, familiarity with purchase and sale methods through securities brokers, and simplicity of position reporting, risk measurement, and tax reporting, a spot ETF could bring some noted benefits compared to existing alternatives – better liquidity compared to private funds, lower tracking error compared to trusts/closed-end funds (CEFs), and potentially lower costs (certainly compared to GBTC), although fees have not been disclosed yet.

Looking at the Gold Market for Analogies

Given that bitcoin is commonly compared with gold (we like to think of bitcoin as a better version of gold), we believe it is helpful to look at the existing supply of gold and how it is owned. As of June month end, gold ETFs accounted for over $210 billion in AUM worldwide. Nearly half of that AUM, $107.3 billion is in North America. Astonishingly, global ETFs only hold 1.6% of the total gold supply in existence, with central banks (17.1%), bars and coins (20.6%), jewelry (45.8%), and other (14.9%) accounting for much bigger portions of gold holdings. While bitcoin is not held by central banks (outside of El Salvador) and it is not used as an input into other finished products like jewelry and electronics like gold, a more significant portion of bitcoin’s supply is already held in various fund formats (4.9%) compared to gold (1.6%). If we just look at private holdings for both assets, essentially all bitcoins, compared to ETFs and bars and coins for gold, the ratio is more favorable. The share of private investment in gold ETFs is 7.4% compared to 4.9% for various bitcoin funds. Private investment in gold is still primarily held in coins and bars (92.6% of private investment).

Weekly 2-Jul-14-2023-03-54-35-6861-PM

The numbers are striking on an absolute dollar basis - over $210B invested in gold funds, while only $28.8B is invested in bitcoin funds. Bitcoin is about 3.6x more volatile than gold, meaning that on a volatility equivalent basis, investors would require 3.6x less bitcoin than gold on a dollar basis to get as much risk exposure. Still, that would result in nearly $30B of incremental demand for a bitcoin ETF.

Weekly 3-Jul-14-2023-03-54-46-7471-PM

Banks, Brokerages Have Low Exposure to the Bitcoin Futures ETF

By comparing the investor types that own gold ETFs as well as other ETFs, such as oil and volatility, we can get a better sense of where demand for a spot bitcoin ETF might come from. First, the existing main futures ETF, the ProShares Bitcoin Strategy ETF (BITO), enjoys strong ownership from investment advisors already. If anything, investment advisors are over-indexed on their bitcoin ownership compared to gold ETFs. The big opportunity, however, is for ownership from banks and brokerages, who own very little of the BITO ETF in comparison to gold ETFs. We think there are two reasons for that – the fund structure and the recommendation. On the fund structure side, futures-based ETFs are less likely to be owned by these investor types because of the cost of rolling futures vs holding spot (we measured it at 6% annually for bitcoin futures before the BITO launch). For investments for which there is no practical way to access spot markets, such as the oil market, banks and brokerages have demonstrated willingness to own futures-based products, like USO. The bigger issue, we think, is that many banks and brokerage firms have not recommended a strategic allocation to bitcoin in client portfolios. As such, their advisors and internal funds have no allocation to bitcoin as an asset class. While a spot ETF could help institutions overcome the hurdle of owning a futures-based ETF, it likely doesn’t affect the strategic allocation side. For that to change, banks and brokerages will likely have to recognize the return enhancing and risk-reducing (diversification) properties that bitcoin can bring to portfolios.

Weekly 4-Jul-14-2023-03-54-59-5379-PM

Scenario Price Sensitivity

While only for illustrative purposes, we think it might be helpful to investors to understand how a potential spot ETF might impact bitcoin price. These are of course only scenario analyses, and reality might differ than expectations. These scenarios do not embed any discounting and rely on a 10.0x money multiplier (11.36x was observed in 2018), for every $1 of AUM that flows into an ETF it impacts the value (market cap) of bitcoin by $10.

On the lower end, $1B of ETF AUM would be on par with the existing futures-based BITO ETF. On the upper end, $100B would surpass the combined $85B in AUM in GLD and IAU. While we do not know the ultimate success of a spot bitcoin ETF, these seem like helpful ways to bound the analysis. We encourage readers to make their own assumptions and remind them digital asset markets are not always rational.

Weekly 5-Jul-14-2023-03-59-32-2736-PM

The price of bitcoin has already moved substantially since the BlackRock filing. We can use the same framework but in reverse to get a market-implied ETF AUM based on that price movement. This analysis implies all the price movement since the filing was due to hype about the ETF and ignores any other potential price impacts, like the recent SEC vs Ripple Labs outcome.

Weekly 6-Jul-14-2023-03-55-37-0089-PM

Looking Back at the Success of the GLD ETF

The GLD ETF, which launched on November 18th of 2004, is still the high bar in terms of ETF success. Its launch, novelty, subsequent growth, and success are still a marvel nearly 20 years later. Therefore, when thinking about the success and ramp of spot bitcoin ETF, we feel it is instructive to highlight the path of this product. Its success was not a straight line, as interest in gold waned post the Global Financial Crisis, but for those thinking about how a spot bitcoin ETF could develop, this may be helpful.

Weekly 7-Jul-14-2023-03-55-51-4908-PM

Final Thoughts

It has been over 10 years since the first registration statement was filed for a spot bitcoin ETF, and investors are excited once again about the prospects for one of the existing applications to get approved. While we don’t know the ultimate success of such a product or if one will ultimately come to market, hopefully, the analysis we have conducted is helpful in thinking about the go-forward path. A spot ETF is still not guaranteed and so we encourage participants to weight their decisions based on their probabilities of ultimate approval. If the process for past bitcoin ETFs is any guide, the road ahead is likely anything than straightforward. There are likely many twists and turns, and we are dedicated to analyzing any new information as it comes along.

Market Update


Bitcoin was up once again on the week, up 4.5%, powered by continued optimism for a spot ETF and the recent ruling in the XRP vs SEC case. The XRP ruling caused general optimism across the digital asset landscape, spilling over to bitcoin. Every other asset class we track was also up on the week, buoyed by declining inflation numbers. Equities continued their tear, with the S&P 500 up 2.3% and the Nasdaq Composite up 3.4%. Oil was up significantly, 7.1%, as fears of recession still seem remote, and gold rose 2.5% as real yields fell. Bonds rose across the board as the fear of inflation and higher rates receded. Investment grade corporate bonds rose 2.5%, high yield corporate bonds rose 2.5%, and long-term US Treasuries rose 2.2%

Important News This Week


Probability for Approval of a Spot Bitcoin ETF Is Fairly High: Bernstein - CoinDesk

Bitcoin, Coinbase Are Soaring Despite Obstacles Facing Spot Bitcoin ETFs - WSJ

Partnering with Coinbase Could Hinder Bid for Bitcoin ETF - Reuters

Fir Tree Provides Update on GBTC Litigation - Fir Tree

PwC Crypto Report: Rebuilding Confidence in Crypto - PwC

Regulation and Taxation:

Ripple Wins Partial Victory in SEC Lawsuit Over Securities Allegations - CoinDesk

SEC Faces 'Wake up Call' After Ripple Ruling, Though Appeal Likely - The Block

SEC Response to Fox Business News Following Ripple Ruling - Twitter

Crypto’s Dream of an Embrace by China Gets a Reality Check - Bloomberg

2023 Crypto Crime Mid-year Update: Crime Down 65% Overall - Chainalysis

SEC Charges Celsius Network Limited and Founder Alex Mashinsky with Fraud and Unregistered Offer and Sale of Securities - SEC


Crypto Miners Seek a New Life in AI Boom After an Implosion in Mining - WSJ

Upcoming Events

Aug 11 - SEC response date for Ark 21Shares ETF (Aug 13 is a weekend)

Sept 1 - Expected SEC response date for BlackRock iShares ETF

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