Deficiencies in the Spot Bitcoin Market
Simeon Hyman, a global investment strategist at ProShares, has pointed out the shortcomings of the spot Bitcoin market. He highlighted the discrepancies in prices across exchanges and the risks associated with different platforms.
There is anticipation among cryptocurrency stakeholders regarding the potential approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January.
The Issue With Bitcoin ETFs
During an interview on Bloomberg TV, Hyman emphasized that there are multiple Bitcoin prices on different exchanges. Futures contracts in the cryptocurrency rely on a combination of these prices for daily settlement.
Hyman also expressed uncertainty about how cash creation and redemptions would work in this context. In traditional ETF creation and redemption processes, broker-dealers exchange the asset itself for ETF shares. However, with Bitcoin, cash is exchanged with the issuer who manages BTC buying and selling.
Hyman mentioned the maturity, liquidity, and regulation in the Bitcoin futures market compared to the perceived “weirdness” of the spot market. He alluded to platforms like FTX and Binance and certain industry figures.
Fidelity Investments’ Spot Bitcoin ETF
Fidelity Investments has taken a significant step toward launching a spot Bitcoin exchange-traded fund (ETF). The company filed a registration of securities with the SEC for its Fidelity Wise Origin Bitcoin Fund.
This move signals Fidelity’s intention to register it as a publicly traded security. With over $4.5 trillion in assets, Fidelity Investments joining other entities seeking approval for a spot Bitcoin ETF could be a notable development in the broader acceptance of digital assets in traditional investment portfolios.
Analyst James Seyffart commented on Twitter that although Fidelity filed for securities registration, the ETF still requires 19b-4 approval and an effective S-1 document. The 19b-4 approval is pending, and the S-1 document is in the preliminary stage. Further developments are expected in the coming week.
The Impact on the Crypto Market
Fidelity Investments’ filing for a spot Bitcoin ETF has caused some turbulence in the crypto market. Matrixport’s claim that the SEC might reject all ETF applications led to over $540 million in liquidations.
Bitcoin’s price has plunged by 5% over the last 24 hours, reaching $42,865. The market is closely watching for updates or decisions from the SEC, especially ahead of the January 10 deadline that could see the approval of the first exchange-traded fund tied directly to spot Bitcoin’s price.
Hot Take: Uncertainty Surrounding Bitcoin ETFs
The spot Bitcoin market faces deficiencies and discrepancies in prices across exchanges, raising concerns about its practical functioning. While there is anticipation for spot Bitcoin ETFs’ approval, there are challenges associated with cash creation and redemptions in this context.
Fidelity Investments’ filing for a spot Bitcoin ETF represents a significant step toward wider acceptance of digital assets in traditional investment portfolios. However, further approvals are required before the ETF can be launched.
The filing has had an impact on the crypto market, causing turbulence and liquidations. Bitcoin’s price has experienced a decline, with attention focused on updates or decisions from the SEC ahead of the upcoming deadline.
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