Spot Bitcoin ETF capital: Could funds potentially buy up all BTC in circulation?

A company or a government might attempt to buy a significant amount of Bitcoin, but it would likely get tricky pretty fast, as the price will only continue to rise, analysts say.

The long-awaited potential approval of a spot Bitcoin (BTC) exchange-traded fund (ETF) in the United States could mean the market sees Bitcoin supply suddenly drop as funds snap up as much as they can, some market observers have predicted. With prominent firms like Ernst & Young expecting U.S. Securities and Exchange Commission (SEC) approval to trigger massive demand from institutions, will the financial giants behind these ETFs leave any actual Bitcoin on the market for the rest of us?

A U.S.-based spot Bitcoin ETF could bring up to $30 billion of fresh cash into Bitcoin, crypto entrepreneur and investor Lark Davis estimated in September 2023. In such a scenario, spot Bitcoin ETF issuers would buy up about 50% of all Bitcoin on crypto exchanges to back their ETFs, he projected.

Although many industry watchers expect spot Bitcoin ETFs to fuel massive demand and thus positively affect the BTC price, some execs like BitMEX co-founder Arthur Hayes believe that successful ETFs could “completely destroy” Bitcoin. According to ARK Invest CEO Cathie Wood, some investors might “sell on the news” of spot Bitcoin ETF approval in the short term.

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