Busting Myths: A Look At The Most Shocking Rumors
With the imminent approval of a spot Bitcoin ETF by the SEC, Alistair Milne, CIO of Altana Digital Currency Fund, has addressed several misconceptions surrounding these types of ETFs. One common myth is that spot ETFs could dilute the limited supply of Bitcoin by introducing “paper Bitcoin”. However, Milne clarified that spot ETFs are legally required to invest net inflows in BTC, which will be held by audited custodians. Additionally, ETF providers like BlackRock and Fidelity are preparing for inflows by seeding their ETFs with cash on exchanges to buy Bitcoin when necessary.
Furthermore, the actions of spot ETFs are determined by inflows and outflows rather than discretionary decisions made by fund managers. This means that the buying and selling of Bitcoin by the ETF is purely transactional based on the need to balance inflows and outflows. In contrast to derivative ETFs, spot Bitcoin ETFs involve actual BTC, which strengthens their connection to the cryptocurrency’s market dynamics.
ETF That Underperforms Bitcoin Will Go Out Of Business
To ensure that the ETF is priced as close to the actual market value of BTC as possible, Market Makers (MMs) and others will trade or arbitrage the ETF’s stock against spot Bitcoin. This strategy exploits any inefficiencies for profit and maintains the ETF’s performance in line with Bitcoin’s market movements. Milne emphasized that a spot ETF that underperforms Bitcoin is likely to go out of business since its value is expected to mirror Bitcoin’s market performance.
Milne also addressed concerns about investor movement between different ETF providers. He explained that if Grayscale Bitcoin Trust (GBTC) were to shift to other ETFs, it would have minimal impact as GBTC would be instantly at par value. Any sellers would likely be those who bought at a discount and want to rotate back to self-custody.
The Trustworthiness of ETFs
Another myth revolves around the trustworthiness of ETFs and the reliance on traditional auditing methods. Milne countered this by highlighting that BTC holdings in spot ETFs will be attested to by audited custodians and verified by reputable firms. These firms will require proof of control over the keys for all addresses, ensuring the security and integrity of the holdings.
Hot Take: Spot Bitcoin ETFs Will Shape the Market
The imminent approval of a spot Bitcoin ETF by the SEC is set to have a significant impact on the cryptocurrency market. These ETFs will bring increased liquidity and trading volume to spot BTC, reducing the influence of unbacked derivative volumes. The strict regulatory frameworks governing spot ETFs ensure transparency and accountability, dispelling myths about diluting Bitcoin’s limited supply or engaging in manipulative practices. As investors eagerly await the approval, it is clear that spot Bitcoin ETFs will play a pivotal role in shaping the future of cryptocurrency investment.
By
By
By
By
By
By