Long-Term Impact of Spot Bitcoin ETFs: A Comparison to Gold’s Blueprint

Introduction

The director of digital assets strategy at Vaneck, Gabor Gurbacs, has shed light on the long-term impact of spot bitcoin exchange-traded funds (ETFs). He argues that, once the U.S. Securities and Exchange Commission (SEC) approves a spot bitcoin ETF, bitcoin's price trajectory could mimic that of gold after 2004, but at an accelerated pace.

The Market Impact of Spot Bitcoin ETFs

Gabor Gurbacs, the director of digital assets strategy at Vaneck, recently shared his insights on the long-term implications of U.S. spot bitcoin exchange-traded funds (ETFs) on the social media platform X Sunday. Vaneck is one of the asset management firms that have applied for the launch of a spot bitcoin ETF with the SEC.

Underestimating the Impact of Spot Bitcoin ETFs

Gurbacs acknowledges that people often overestimate the initial impact of U.S. bitcoin ETFs, which he expects to be in the range of a few hundred million dollars, mainly from recycled funds. However, he believes that the long-term impact of spot bitcoin ETFs is often underestimated.

He states, "People tend to hype the current thing but remain myopic about the big picture. Bitcoin is revolutionizing its own capital markets systems and products well beyond the ETF, and that's not factored into the price. The question is not what Blackrock adopts, but what Bitcoin company is the next Blackrock," emphasizing the potential for growth in the industry.

Comparing Bitcoin to Gold

Gurbacs draws parallels between bitcoin and gold, highlighting the potential for bitcoin to follow a similar trajectory. He references a previous post made on December 6, in which he explains how the approval of a U.S. spot bitcoin ETF could generate trillions of dollars in value for bitcoin.

He points out that the introduction of the SPDR Gold Shares ETF (GLD) on November 18, 2004, led to a significant increase in gold's market cap. Over the following eight years, gold's price quadrupled from $400 to $1,800, resulting in the addition of approximately $8 trillion to its market cap, which grew from around $2 trillion to $10 trillion.

Gurbacs emphasizes that bitcoin's current market cap is approximately $750 billion, less than one-third of gold's market cap in 2004. However, he believes that upon the approval of a U.S. spot bitcoin ETF, bitcoin's price trajectory could mirror that of gold in 2004 and the subsequent years, but at a much faster pace.

He adds, "I also believe that only a few $10 billion will come from bitcoin ETP adoption, and it won't happen all at once." Nevertheless, Gurbacs suggests that the boost will still be significant, given the relatively low bitcoin float and systematic scarcity due to halving schedules.

Legitimizing and Destigmatizing Bitcoin

Gurbacs asserts that the approval of a spot bitcoin ETF will legitimize and destigmatize bitcoin, leading to further adoption outside of the ETF. He predicts that nation states and sovereign wealth funds will hold bitcoin directly, securing optionality for mining and their own bitcoin-based capital markets. He draws a parallel to the adoption of gold by central banks, which played a crucial role in driving up gold's price.

Conclusion

While the initial impact of spot bitcoin ETFs may be overestimated, the long-term implications are often underestimated. Gabor Gurbacs of Vaneck believes that a U.S. spot bitcoin ETF approval could result in a price trajectory for bitcoin similar to gold in 2004 and thereafter, but at a much faster pace. The legitimization and destigmatization of bitcoin through ETFs may lead to further adoption and increased value for the cryptocurrency.

What are your thoughts on the impact of spot bitcoin ETFs on bitcoin? Share your opinions in the comments below.

Frequently Asked Questions

How to open a Precious Metal IRA

The first step is to decide if you want an Individual Retirement Account (IRA). If you do, you must open the account by completing Form 8606. You will then need to complete Form 5204 in order to determine which type IRA you are eligible. This form should not be completed more than 60 days after the account is opened. Once this is done, you can start investing. You can also contribute directly to your paycheck via payroll deduction.

To get a Roth IRA, complete Form 8903. Otherwise, the process will look identical to an existing IRA.

To qualify for a precious Metals IRA, there are specific requirements. The IRS stipulates that you must have earned income and be at least 18-years old. You can't earn more than $110,000 per annum ($220,000 in married filing jointly) for any given tax year. Contributions must be made regularly. These rules apply regardless of whether you are contributing directly to your paychecks or through your employer.

You can use a precious-metals IRA to purchase gold, silver and palladium. You can only purchase bullion in physical form. This means you won't be allowed to trade shares of stock or bonds.

You can also use your precious metals IRA to invest directly in companies that deal in precious metals. Some IRA providers offer this option.

However, there are two significant drawbacks to investing in precious metals via an IRA. First, they're not as liquid as stocks or bonds. This makes them harder to sell when needed. Second, they don't generate dividends like stocks and bonds. You'll lose your money over time, rather than making it.

What does a gold IRA look like?

The Gold Ira Accounts are tax-free investment options for those who want to make investments in precious metals.

You can purchase physical gold bullion coins anytime. You don't have to wait until retirement to start investing in gold.

The beauty of owning gold as an IRA is you can hold on to it forever. Your gold holdings won't be subject to taxes when you pass away.

Your gold will be passed on to your heirs, without you having to pay capital gains taxes. Because your gold doesn't belong to the estate, it's not necessary to include it on your final estate plan.

You'll first have to set up an individual retirement account (IRA) to open a gold IRA. Once you've done that, you'll receive an IRA custody. This company acts as a middleman between you and the IRS.

Your gold IRA custodian is responsible for handling all paperwork and submitting the required forms to the IRS. This includes filing annual returns.

After you have established your gold IRA you will be able purchase gold bullion coin. Minimum deposit is $1,000 You'll get a higher rate of interest if you deposit more.

You'll have to pay taxes if you take your gold out of your IRA. You will be liable for income taxes and penalties if you take the entire amount.

You may not be required to pay taxes if you take out only a small amount. There are exceptions. There are some exceptions. For instance, if you take out 30% or more from your total IRA assets, federal income taxes will apply plus a 20 percent penalty.

It is best to not take out more than 50% annually of your total IRA assets. You'll be facing severe financial consequences if you do.

What are the fees associated with an IRA for gold?

$6 per month is the Individual Retirement Account Fee (IRA). This includes account maintenance fees and investment costs for your chosen investments.

If you wish to diversify your portfolio, you may need to pay additional fees. These fees vary depending on what type of IRA you choose. Some companies offer free check accounts, but charge monthly fee for IRA accounts.

A majority of providers also charge annual administration fees. These fees are usually between 0% and 1%. The average rate is.25% each year. However, these rates are typically waived if you use a broker like TD Ameritrade.

What are some of the benefits of a gold IRA

The best way to invest money for retirement is by putting it into an Individual Retirement Account (IRA). It's tax-deferred until you withdraw it. You have total control over how much each year you take out. There are many types of IRAs. Some are better for those who want to save money for college. Some are better suited for investors who want higher returns. Roth IRAs are a way for individuals to make contributions after the age of 59 1/2, and then pay taxes on any earnings upon retirement. But once they start withdrawing funds, those earnings aren't taxed again. This account may be worth considering if you are looking to retire earlier.

An IRA with a gold status is like any other IRA because you can put money into different asset classes. Unlike a regular IRA where you pay taxes on gains, a gold IRA doesn't require you to worry about taxation while you wait to get them. People who want to invest their money rather than spend it make gold IRA accounts a great option.

Another benefit of owning gold through an IRA is that you get to enjoy the convenience of automatic withdrawals. It means that you don’t have to remember to make deposits every month. Direct debits could be set up to ensure you don't miss a single payment.

Finally, the gold investment is among the most reliable. Because it isn't tied to any particular country its value tends be steady. Even in times of economic turmoil, gold prices tend not to fluctuate. Therefore, gold is often considered a good investment to protect your savings against inflation.

Should You Purchase Gold?

In times past, gold was considered a safe haven for investors in times of economic trouble. Many people today are moving away from stocks and bonds to look at precious metals, such as gold, as a way to diversify their investments.

While gold prices have been rising in recent years they are still low relative to other commodities, such as silver and oil.

This could be changing, according to some experts. According to them, gold prices could soar if there is another financial crisis.

They also mention that gold is becoming more popular due to its perceived worth and potential return.

These are some important things to remember if your goal is to invest in gold.

Consider whether you will actually need the money that you are saving for retirement. You can save for retirement and not invest your savings in gold. However, when you retire at age 65, gold can provide additional protection.
You should also be aware of what you are getting into before you buy gold. There are many types of gold IRA accounts. Each offer varying degrees of security and flexibility.
Remember that gold is not as safe as a bank account. Losing your gold coins could result in you never being able to retrieve them.

If you are thinking of buying gold, do your research. You should also ensure that you do everything you can to protect your gold.

Statistics

Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)

External Links

How To

How to hold physical gold in an IRA

The easiest way to invest is to buy shares in companies that make gold. But, this approach comes with risks. These companies may not survive the next few years. Even if they do survive, there is still the possibility of losing money to fluctuating gold prices.

You can also buy gold directly. You will need to either open an online or bank account or simply buy gold from a reliable seller. These options offer the convenience of easy access, as you don't need stock exchanges to do so. You can also make purchases at lower prices. It's also easy to see how many gold you have. So you can see exactly what you have paid and if you missed any taxes, you will get a receipt. There's also less chance of theft than investing in stocks.

However, there are disadvantages. You won't get the bank's interest rates or investment money. Additionally, you won’t be able diversify your holdings. You will remain with the same items you bought. Finally, the tax man might ask questions about where you've put your gold!

BullionVault.com is the best website to learn about gold purchases in an IRA.

—————————————————————————————————————————————————————————————–
By: Kevin Helms
Title: Long-Term Impact of Spot Bitcoin ETFs: A Comparison to Gold's Blueprint
Sourced From: news.bitcoin.com/vaneck-director-people-tend-to-underestimate-long-term-impact-of-spot-bitcoin-etfs/
Published Date: Tue, 02 Jan 2024 03:30:47 +0000