By
Chimamanda U. Martha
April 26th, 2024
Butterfill stated that since the launch of spot Bitcoin ETFs in the US, the average daily demand for Bitcoin has increased to 4500 on trading days, while only approximately 921 new Bitcoin are produced each day.
James Butterfill, a crypto analyst and CoinShares Head of Research, emphasized in a blog post that Bitcoin (BTC) could experience a positive demand shock in the coming months driven by inflows from Registered Investment Advisors (RIAs).
Bitcoin Demand Shock – Key Catalysts
An important factor noted by Butterfill that could contribute to this potential positive demand shock is the lack of spot Bitcoin Exchange-Traded Fund (ETF) in the RIA market.
“Generally, fund platforms used by RIAs require three months of trading data before they can include newly issued ETFs. Thus, there might be an influx of investments from the RIA market as it becomes accessible,” Butterfill noted.
The analyst added that the Carsen Group is the only investment advising firm allowing RIAs to trade spot Bitcoin ETFs. However, considering the massive scale of the RIA industry, which is believed to be worth approximately $50 trillion in assets, prospective inflows into Bitcoin will be phenomenal. Butterfill explains this by claiming that if only 10% of RIAs allocated 1% of their portfolios to Bitcoin, it could result in an additional $50 billion in inflows.
Butterfill’s analysis is rooted in current crypto market dynamics. He stated that since the launch of spot Bitcoin ETFs in the US, the average daily demand for Bitcoin has increased to 4500 on trading days, while only approximately 921 new Bitcoin are produced each day.
According to him, this imbalance in supply to demand suggests that ETF issuers majorly source Bitcoin from the secondary market, resulting in a 74% decrease since their 2020 peak in holdings for Over-The-Counter (OTC) desks.
Meanwhile, Buterfill’s view is supported by recent data which shows that net inflows into spot Bitcoin ETFs have reached record highs. Last week alone, net inflows for the top ten Bitcoin ETFs totaled $2.57 billion, a 15% rise from the previous week. Notably, BlackRock Inc’s (NYSE: BLK) IBIT emerged as the biggest participant, with inflows totaling $2.48 billion, followed by Fidelity’s FBTC and VanEck’s HODL, which recorded inflows of $717.9 million and $247.8 million respectively.
However, amid this surge in demand, Grayscale Investments, which converted its GBTC fund, recorded outflows of $1.25 billion. Similarly, Invesco’s BTCO also contributed $29.4 million in outflows. Despite these outflows, overall net inflows since spot Bitcoin ETF trading began on January 11 have exceeded $12 billion.
Understanding the Role of RIAs
For traders and investors not familiar with the term, Registered Investment Advisors are an important subset of financial consultants distinguished by their fiduciary commitment to work in their clients’ best interests. Unlike other financial advisors, RIAs are required to offer the lowest-cost solutions that meet their clients’ needs.
As highlighted in a recent Forbes report, RIAs are registered with either the SEC or state securities regulators, which ensures regulatory monitoring and client safety. They provide full financial advice beyond investment management, including retirement planning, insurance, and estate preparation.
