- Situation: Despite no approval for spot Bitcoin ETFs in the U.S, there is yet increasing sentiment that they might pose a significant threat to the futures-based funds introduced earlier.
- Potential New Entrants: BlackRock Inc. and Grayscale Investments are leading the charge, waiting for regulatory approval to launch the U.S.’s first ETFs linked to Bitcoin’s spot price. The recent legal victory for Grayscale and the weight of major issuers like BlackRock might sway regulators in favor of approval.
- Current Market: As it stands, U.S. investors looking for exposure to Bitcoin can only invest in products that track Bitcoin futures contracts. These funds, introduced in October 2021, initially saw a surge but have since leveled off with a combined market value of around $1 billion.
- Market Analysis: Analysts believe spot-based funds would more closely mirror Bitcoin’s price at potentially lower costs. James Seyffart from Bloomberg Intelligence believes that these spot ETFs are superior for most investors. Bloomberg Intelligence further estimates that if approved, the U.S. spot Bitcoin ETF market could swell to $100 billion.
- Performance of Futures ETFs: Bitcoin-futures ETFs, especially the $914 million ProShares Bitcoin Strategy ETF (BITO), did have an enthusiastic reception, representing a significant step in the crypto industry. However, they’ve lagged behind Bitcoin’s performance, primarily because of the costs associated with futures contracts. Spot ETFs are expected to provide more accurate reflections of real-time supply and demand.
- Implications: If spot-based ETFs get the nod, futures-based funds might see significant outflows. This could also divert trading activity and liquidity from Bitcoin futures markets in the U.S.
- Response from ProShares: ProShares emphasizes the robust liquidity and security features of BITO, highlighting its significant daily trading volume in 2023.
- Fee Wars: Spot ETFs might have an edge over futures ETFs in terms of potentially lower fees. In an already competitive ETF market, fees could become a significant differentiating factor. As Roxanna Islam of VettaFi points out, spot ETFs might need to undercut on fees to stay competitive, especially if there’s a surge in approvals for such products.
- Outlook: With major financial players entering the field, the future ETF landscape might become crowded, with little space for smaller players.
Dogecoin Rises on Speculation of X Payments Integration
November 23, 2024
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