Bloomberg Senior ETF Analyst Eric Balchunas predicts that Bitcoin (BTC) is experiencing a surge in demand due to newly launched ETFs in the U.S., which combined with dwindling available supply could trigger a short-term hype cycle.
Balchunas notes that Bitcoin's scarcity and the small number of traders, most of whom simply hold the asset, means that the free float, that is, the number of shares available for trading, is quite small:
“The more demand from ETFs, the more free float is impacted. The more free float is affected, the higher the price, which creates more demand. So you can have an upward spiral that continues for a while.”
The analyst had closely followed the launch of Bitcoin spot ETFs and predicted that these ETFs would see an upper-band inflow of $10-15 billion. However, these ETFs reached $7 billion in just one month. “If the price is consistent, they will probably make much more than I expected,” Balchunas noted.
The movement of Bitcoin ETFs started to remind him of a craze, Balchunas said, comparing it to Ark Invest, which had a hot spell for about a year. “The way people are talking and the volume growth paired with the price increase, it all feeds into each other,” he added.
But Balchunas said he is cautious about the ability of ETFs to sustain recent levels of fund inflows. According to Balchnas, if ETFs continue at this pace, there will be approximately $150 billion in inflows within the year, which is ten times what he estimates. The analyst said, “This would be crazy.”
He also warned that rising Bitcoin prices may not be sustainable and predicted a possible correction period that could bring people to their senses.
*This is not investment advice.
