Bitcoin, often referred to as digital gold, has garnered significant attention just among individual investors but also in the institutional realm. A promising development for the cryptocurrency world is the potential approval of a spot Bitcoin ETF in the United States. However, their potential introduction has sparked conversations about their supremacy over their futures-based predecessors.
Anticipation Among Major Players
BlackRock Inc., one of the world’s most influential investment firms, heads the queue of firms eagerly anticipating feedback from regulatory authorities on their applications to initiate the US’s maiden ETFs anchored to Bitcoin’s spot price. Not to be left behind, Grayscale Investments, following its triumph in court, is pursuing its ambition to metamorphose its colossal $16 billion Bitcoin trust into an ETF. The combined weight of these influential financial institutions and Grayscale’s recent legal victory fuel hope that spot ETFs might soon see the light of day.
Spot vs. Futures: The Current Landscape
Currently, US investors aiming to delve into cryptocurrency via funds are limited to products tethered to Bitcoin’s futures contracts. Introduced with great fanfare in October 2021, these funds enjoyed a momentary spotlight but soon witnessed their combined market worth stabilize at roughly $1 billion. However, the potential debut of spot-based ETFs poses a challenge. Experts opine that these funds could provide a more accurate reflection of Bitcoin’s price at potentially diminished costs, potentially edging out futures-based funds.
Some estimates project the US spot Bitcoin ETF domain could burgeon into a staggering $100 billion industry if given the green light.
Shortcomings of Futures-based ETFs
Though futures-based Bitcoin ETFs, such as the ProShares Bitcoin Strategy ETF, initially enjoyed enthusiasm as they signaled a turning point in crypto’s evolution, they have failed to keep pace with Bitcoin’s stratospheric ascent. Factors like futures contracts held and the costs incurred in their rollover have impacted returns, causing discrepancies in fund performance.
The Allure of Lower Fees
As the possibility of spot funds becomes more tangible, their potential lower fees may emerge as a pivotal selling point.
The impending face-off between spot and futures-based Bitcoin ETFs promises to reshape the cryptocurrency investment landscape in the US. The ramifications will be significant, not just for investors but for the broader ecosystem. Only time will tell how this rivalry unfolds and who emerges as the ultimate victor.