9 C
Amsterdam
29 March 2024
PumpMoonshot
Image default
Altcoins

Bitcoin Futures ETF to Start Testing Market on Tuesday Amid Pullback Talks

The first bitcoin (BTC) futures exchange-traded fund (ETF) to be approved by regulators in the US is said to start trading this week. And although it is only backed by “paper bitcoins” in the form of futures contracts, the ETF is still expected to serve a purpose in the market. Meanwhile, a pullback is now expected after strong BTC rally this month.

Out of the many ETF providers that have filed proposals with the US Securities and Exchange Commission (SEC), the ProShares ETF with the ticker BITO should be the first one to launch as it is said to begin trading on the NYSE Arca exchange when markets open in the US on Tuesday.

And with ETF trading set to commence, traders are not only asking themselves how the ETF will impact the spot price of bitcoin, but also who will use an ETF which does not offer direct exposure to bitcoin.

Advertisement

Meltem Demirors, Chief Strategy Officer of crypto asset management firm CoinSharescalled the bitcoin futures that the ETF will be backed by “notoriously capital inefficient,” and said it “feels like the SEC is taunting the CFTC [Commodity Futures Trading Commission – the regulator in charge of the futures market].”

Others also expressed a similar sentiment, with for instance Eugene Ng of crypto exchange Gemini noting that retail investors can already buy bitcoin directly on exchanges or access it via ETFs listed outside the US, while institutions can buy BTC futures on the Chicago Mercantile Exchange. “I am still scratching my head,” Ng said.

Still, not everyone shared the opinion that a futures-backed ETF is unnecessary. Commenting on the SEC’s decision to allow the ETFs to be listed, Matt Senter, Chief Technology Officer and co-founder of the BTC rewards app Lolli, said that a bitcoin ETF could give bitcoin exposure to some people who for various reasons can’t or don’t want to hold the coins directly.

Advertisement

“By allowing individuals to invest in bitcoin through ETFs that track its underlying value, investors can become familiar with bitcoin while fielding aspects of the ownership experience that may be daunting to crypto novices – such as navigating crypto exchanges, wallets, and private keys,” Senter said in an emailed comment.

And while the traders and investors wait for the launch of the highly anticipated bitcoin ETFs, the bitcoin market looks tight at the moment, according to Chief Economist at Chainalysis, Philip Gradwell. 

Writing in his latest Market Intel Report, Gradwell said that “the 30 day average of bitcoin inflows to exchanges is just 44,000 bitcoin, 30% below the 180-day average” and that institutional investors also appear to be accumulating BTC.

“Since that USD 30,000 low on 20 July, institutional investors, those holding at least 1,000 of bitcoin, have increased their holdings by 172,000 bitcoin and institutional traders have acquired an additional 68,000,” the economist said, adding that “it seems these large players took advantage of low prices to stock up.”

Advertisement

And although tight supply means the market could move higher quickly, Gradwell also noted that a bitcoin ETF means less to the space today than it would have done a few years ago, given that many potential buyers have already taken the effort to learn how to trade actual cryptocurrencies. The delayed ETF has “likely led to greater crypto adoption,” Gradwell said.

“If people had just got crypto exposure from an ETF over the last few years, then the traditional financial system would be much more insulated from disruption than it currently is. As it is, millions of people are now on-boarded into crypto,” Gradwell wrote, emphasizing that this is “actual crypto,” which is a prerequisite to using DeFi and Web 3.0 applications.

As for the immediate market reaction to an ETF launch, some traders and analysts warned over the weekend that a pullback in the bitcoin price may be on the horizon. 

Speaking with CNBC on Friday, Morgan Creek Capital Management CEO and Chief Investment Officer Mark Yusko, said that he “wouldn’t be surprised” if the market consolidates for a bit instead of moving straight to USD 100,000, which he said “a lot of people” think will happen by year end. 

Advertisement

“Look, we’re up 40% this month which is only 15 days old,” the hedge fund manager and noted BTC bull said, adding that the market appears “overbought” and that we could see a “buy the rumor, sell the news” type of situation.

Regardless of the price impact the new ETFs may or may not have, however, it might be that the SEC’s approval could mean trouble for at least one existing regulated bitcoin investment vehicle, namely the Grayscale Bitcoin Trust (GBTC).

It is likely that GBTC will become less attractive to investors now that an ETF exist, given the relatively high fees that GBTC is known for.

As shared by Bloomberg’s James Seyffart on Twitter on Friday, the new ETF will have a fee of 0.95%, less than half of the 2% fee charged by GBTC.

Advertisement

News Source

Related posts

Bank of China ex-advisor calls Beijing to reconsider crypto ban

PumpMoonshot

Binance Partners with France FinTech to Launch a $116 Million Crypto Initiative in Europe

PumpMoonshot

Cardano [ADA] Slids To 5th Spot After Fresh Losses

PumpMoonshot
Verified by MonsterInsights