What are the obstacles to re-listing Bitcoin futures ETFs and more important spot ETFs?

ProShares Bitcoin Strategy ETF (stock code: BITO) was officially listed for trading on October 19, and the transaction amount on the first day exceeded 1 billion U.S. dollars. This is the second-highest ETF on the issue day in history. The Valkyrie Bitcoin Strategy ETF (stock code: BTF) after BITO has a much lower transaction amount on the first day, only about 78 million U.S. dollars, and subsequent Bitcoin ETFs will gradually lose their first-mover advantage

What are the obstacles to re-listing Bitcoin futures ETFs and more important spot ETFs?

(The first picture is from Marco Verch Professional Photographer)

Source: https://twitter.com/EricBalchunas/status/1450460291750371336

On the second day, the BITO transaction value continued to hit a new high, reaching 1.294 billion, a two-day increase of 5.87%. As of the close of trading on November 3, the price of BITO was US$40.4, a decrease of 3.67% since the opening of the market on the 19th. During the same period, the drop of Bitcoin spot was 2.13%, slightly smaller than the drop of BITO. However, since BITO tracks Bitcoin futures in recent months, and as the expiration date approaches in recent months, futures prices will gradually converge to the current price, so it is understandable that the rate of return during this period is slightly lower than that of Bitcoin spot. Comparing the premium trends of BITO and G BTC , you will find that at least BITO is more effective in price tracking.

What are the obstacles to re-listing Bitcoin futures ETFs and more important spot ETFs?

Source: TradingView

As of November 1, the performance of GBTC far outperformed the spot, which achieved a positive return of 2.66% in this wave of crypto market decline. GBTC is a trust with Bitcoin as the investment target. In theory, the price of Bitcoin should be closely tracked. Therefore, the phenomenon of large discounts or premiums will create a lot of arbitrage space. Obviously, for investors who are in the traditional financial market and want to invest in crypto assets, futures ETFs are a better alternative to crypto assets, which to a certain extent will seize GBTC’s market share.

Because of this, on the second day after BITO went public, Grayscale immediately submitted a document to the SEC to convert the trust into an ETF. The difference is that Grayscale applies for spot bitcoin ETFs instead of futures. The reason is that futures-based ETFs have some shortcomings, that is, the risk of futures premiums mentioned above. The closer to the expiration date of the current contract, the smaller the futures premium. , And when rolling to the next near-month futures, the premium will increase significantly, so this interferes with the tracking effect. However, the current SEC Chairman Gary Gensler said that he prefers ETFs that only pass Bitcoin futures. Therefore, there is still a lot of resistance to the adoption of crypto-asset spot ETFs.

In fact, this resistance may not only come from the regulatory authorities, but also from the ETF itself. According to statistics, if the bitcoin held by trust funds, listed companies, governments, and digital currency projects are added together, as of the end of 2020, Wall Street already holds 47.9% of the bitcoin supply at that time. If the adoption of spot ETFs is opened up on this basis, the giant whale’s holdings of Bitcoin will continue to soar. The gradual trend towards centralization of holdings is a blessing or a curse for the crypto world itself, I am afraid it is still unknown.

In addition, the development of futures ETFs will hinder the adoption of spot ETFs to a certain extent. Although futures ETFs have rolling costs, spot ETFs also have to charge an additional management fee, which may not be superior in cost. For ordinary investors, they don’t care whether the ETF they buy holds Bitcoin. What they care about is whether this ETF can bring themselves the same amount of gains as Bitcoin’s appreciation. Therefore, the expansion of the futures ETF scale will meet the needs of a large number of ordinary investors, which will reduce people’s demand for spot ETFs. In the first quarter of 2021, the trading volume of perpetual contracts reached US$14.32 trillion. This 14.32 trillion did not really hold encrypted assets, but it did not bring the same investment effect as investors. Therefore, instead of raising the currency price by setting up a spot ETF, it is better to rush the contract funds to the spot to make a greater contribution to the currency price. Of course, this is impossible to achieve. In the same way, spot ETFs do not have much temptation for investors in futures ETFs.

At present, the popularity of BITO has faded slightly, but as of the close of November 3, the daily transaction amount has always been maintained at more than 200 million U.S. dollars. With the subsequent listing of Bitcoin futures ETFs, the scale will be further expanded, which may reduce the number of retail investors. The demand for spot ETFs.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-are-the-obstacles-to-re-listing-bitcoin-futures-etfs-and-more-important-spot-etfs/
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