All eyes on the first spot bitcoin ETF in the U.S.
The creation of a spot bitcoin ETF is generating a lot of buzz in the crypto industry. This type of financial product holds significance due to its accessibility and potential implications. Similar to the launch of the first gold ETF, trading volumes for various gold instruments skyrocketed after its introduction. Cryptocurrency derivatives trader Gordon Grant believes that under the right circumstances, a spot bitcoin ETF could have a similar effect on the market.
According to Galaxy Digital’s Alex Thorn, if approved, a spot bitcoin ETF could attract billions of dollars in inflows and potentially lead to a 75% appreciation in BTC/USD prices. The inclusion of a spot bitcoin ETF would also impact traders’ decisions and catalyze multiple layers of financial activity in the sector.
Creating an entire value chain
The availability of a spot bitcoin ETF as an investment option for both retail and institutional investors would influence traders’ choices. This accredited financial product would contribute to efficient portfolio theory and impact investment strategies. Additionally, it could lead to the development of derivative markets such as options and futures trading on top of the underlying asset level.
Gordon Grant suggests that these multiple layers of trading, including options, futures, and volatility trading, could result in a complex value chain. This new product would create additional opportunities for market participants and establish a more comprehensive trading dynamic.
Making it easier to access bitcoin
A spot bitcoin ETF would simplify institutional investors’ access to bitcoin exposure. It eliminates the need for institutions to develop their own solutions for holding cryptocurrencies securely. Furthermore, it would impact distribution channels for institutional capital inflow, making it easier for retirement plans and investment managers to include bitcoin in portfolios.
Currently, institutional exposure involves futures ETFs, which often incur additional costs due to rolling over futures contracts. The bitcoin futures market is typically in a state of contango, causing futures prices to be higher than spot prices. This phenomenon, known as contango bleed, contributes to underperformance of futures ETFs compared to bitcoin.
Hot Take: SEC approval and the future of spot bitcoin ETFs
The Securities and Exchange Commission (SEC) plays a crucial role in the approval of spot bitcoin ETFs. While there are expectations that a spot bitcoin ETF could be approved in the near future, nothing is certain until the SEC grants its approval. Bloomberg analysts estimate a 75% likelihood of approval this year, while JPMorgan analysts believe it could happen within months. The approval of a spot bitcoin ETF would revolutionize the market by making it more accessible for institutions to trade bitcoin in the U.S.
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