“It is not a question of if but when a bitcoin spot ETF will gain approval from the SEC”— Paul Ebeling
The ProShares Bitcoin Strategy ETF, ticker BITO turned heads last wk when it took in more than $1-B of assets in 2 days, was the fastest ETF ever to mark that milestone.
The new ProShares fund’s returns are falling short of the performance of bitcoin in cryptocurrency markets.
BITO is also underperforming the Grayscale Bitcoin Trust, or GBTC, which at $35.23-Bis the world’s largest bitcoin fund. Grayscale is a unit of Digital Currency Group, which also owns CoinDesk.
From 19 October when the ProShares ETF started trading, through Tuesday, BITO shares were down by 2.45%. Bitcoin is down 1% over the same frame, and GBTC is up 7.5%.
The has rekindled criticism of the SEC decision to allow an ETF focused on bitcoin futures but not an ETF that would be backed directly by bitcoin, known as a “spot ETF.”
Grayscale is pushing hard to convert GBTC into a spot bitcoin ETF, citing some of the disadvantages of a futures-based ETF. Those include the risk of “roll costs” or “contango bleed” – a source of underperformance that stems from the unique structure of futures markets.
BITO’s launch has helped to drive up the price of bitcoin futures on the Chicago-based CME exchange, which in turn “has also been driving spot prices higher,” Grayscale noted in Tuesday in its newsletter.
“The product has seen strong inflows since launch, demonstrating investor appetite for accessing the crypto markets,” Grayscale wrote. “But it may also come at the expense of US bitcoin futures ETF investors.”
Market signals reveal the tension in the battle among the ETF aspirants.
GBTC’s price is currently trading at a 17% discount to the market price of its underlying bitcoin.
The GBTC discount will evaporate if the trust is allowed to convert to an ETF.
Grayscale says that it’s committed to converting GBTC to an ETF.
Have a prosperous day, Keep the Faith!