The Devaluation of Bitcoin and Crypto ETFs by DTCC
The Depository Trust and Clearing Corporation (DTCC) has declared that exchange-traded funds (ETFs) linked to Bitcoin (BTC) or cryptocurrencies have no collateral value as investments. In an announcement, the DTCC stated that digital asset-linked ETFs would be subject to a 100% โhaircut.โ
DTCC Decision on Cryptocurrency Investments
- The DTCC, which offers clearing and settlement services in the US financial markets, has determined that ETFs or investment vehicles containing Bitcoin or other cryptocurrencies as underlying investments will not receive collateral value.
- These assets will be subject to a 100% haircut, effective April 30, 2024, impacting position values on the companyโs collateral monitor.
Impact on Financial Applications
- Following the implementation of these changes, entities will no longer be able to utilize Bitcoin or crypto-linked ETFs as collateral when seeking credit or financing through the DTCC.
Rise in Institutional Investments
- In March, CoinShares reported that institutions had invested a record $2.9 billion into crypto products, driven primarily by Bitcoin ETFs.
Analysis by On-Chain Analysts
- On-chain analyst Willy Woo highlighted that daily capital inflows into the Bitcoin network, influenced largely by ETFs, had reached $2 billion per day. This surge in activity mirrors levels seen in previous bull markets.
Future Outlook for Bitcoin ETFs
- Woo predicts that the current uptrend in capital inflows, driven by spot ETFs, is likely to continue with the potential for even higher levels of investment. Approximately 30% of total flows are attributed to ETFs at present.
Hot Take: Examining the Impact of DTCCโs Decision on Bitcoin and Crypto ETFs
As the Depository Trust and Clearing Corporation (DTCC) devalues Bitcoin and crypto ETFs by denying them collateral value, the landscape of cryptocurrency investments undergoes a significant shift. This decision restricts the use of these assets as collateral, impacting financial institutions and investors who rely on them for various financial transactions.
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