Bitcoin Spot ETFs Could Trade at a Premium, Says GTS Co-Global Head of ETF Trading
According to Reggie Browne, the co-Global Head of ETF Trading and Sales at GTS, bitcoin spot ETFs could trade at a premium once trading begins. Browne explained that U.S. institutions currently cannot trade bitcoin against cash within their broker-dealer, resulting in the need for trade hedges over futures and potentially causing complexity and additional costs for investors. He suggested that this premium could be as high as 8%. However, Browne also noted that there is enough liquidity in the market to keep the spread competitive and tight.
Creations and Redemptions
Browne expressed his belief that in-kind creations and redemptions will eventually become a reality for bitcoin ETFs, although negotiations with the Securities and Exchange Commission (SEC) have been challenging. Currently, all companies waiting for ETF applications to be approved have settled on the cash-only model. Browne stated that the initial focus was to get the ball rolling with cash-only models, but in-kind options would be explored in the future.
The SEC’s Deadline Approaches
The crypto community has been eagerly awaiting the SEC’s decision on the first batch of bitcoin ETF applications from various asset managers. The SEC is currently reviewing 13 applications from companies such as Ark Invest, BlackRock, Fidelity, Grayscale, WisdomTree, Franklin Templeton, and Valkyrie. The potential size of the market was demonstrated by Grayscale Investments’ GBTC fund, which traded nearly half a billion dollars on a single day.
Hot Take: Bitcoin Spot ETFs May Face Premium Trading
GTS co-Global Head of ETF Trading and Sales Reggie Browne predicts that bitcoin spot ETFs could trade at a premium due to restrictions faced by U.S. institutions. The inability to trade bitcoin against cash within their broker-dealer may result in complex trading strategies and additional costs for investors. Browne suggests that this premium could be as high as 8%. However, he reassures that there is sufficient liquidity in the market to maintain competitive spreads. Browne also believes that in-kind creations and redemptions will eventually be possible for bitcoin ETFs, despite initial challenges with the SEC.
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