Grayscale Investments, known for the Grayscale Bitcoin Trust (GBTC), plans to submit an application early next week to convert its flagship fund into a spot ETF. Grayscale, an influential player in the digital asset space, is now looking to redesign its funds due to competition.
The first Bitcoin Futures ETF is set to trade early next week, adding more competition for the grayscale.
Last Friday, the Securities and Exchange Commission (SEC) approved for the first time the Bitcoin Futures ETF, which is set to trade on the New York Stock Exchange early next week. The move has been hailed by many as a “watershed moment”, where Bitcoin is finally solidifying its legitimacy as an asset class to Wall Street and mainstream investors.
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The ETF, managed by investment firm ProShares, will pay a management fee of 0.95% less than the 2% of Grayscale. Another advantage that the new ETF offers is the lack of a redemption period – something that has plagued GBTC investors since the beginning.
Why Grayscale Potential Spots Bitcoin ETFs Can Future ETFs
The Bitcoin-Futures ETF is a step in the right direction to make cryptocurrency more accessible to everyday investors; However, many crypto investors have argued that the use of ETF derivative contracts, which are traded on the Chicago Mercantile Exchange (CME), would prove to be much inferior to spot ETFs containing real bitcoin.
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Contango, a phenomenon that occurs when futures prices are higher than expected future spot prices, means that investors will lose potential profits as Bitcoin futures contracts expire longer than the spot prices of cryptocurrencies. Joe Orsini, research director at O’Gal Brook Advisors, explains the following disadvantages in his Twitter thread:
Future based # Bitcoin ETFs? Buyer beware.
A thread on Contango to compare the performance of spot WTI crude, first month crude futures and futures-based ETFs using USO ETFs (a futures-based ETF of crude oil).
– Joe Orsini, CFA (oeJoeOrsini_) October 15, 2021
If approved, Grayscale’s spot bitcoin ETF will be supported by the actual bitcoin, rather than the derivative that tracks the value of the cryptocurrency. Grayscale already has a significant share of the world’s bitcoin supply.
Barry Silberts, founder of Digital Currency Group and Grayscale Investments Twitter To indicate impending change of GBTC. He joked, “[f]Friends do not allow friends to buy and hold futures-based ETFs. However, there may still be some truth behind the statement.
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