iTunes folder inside a Dropbox Smart Sync folder

I have my 250Gb 15years old iTunes library which is taking lot of disk space on my iMac 27.

Most of the songs have been imported from my cd's in pre-iCloud times.

I would like to gain some hard disk space:

Opt 1 move iTunes folder to on an external disk

Opt 2 what about moving iTunes folder into Dropbox folder and enable Dropbox's Smart Sync?

This way most of the library would be online only and be downloaded to my Mac only when needed. Not sure perhaps if iTunes like this..

I think iCloud library works in some similar way but I cannot rely on this as most of my music isn' t available on Apple Music..

Thanks!