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Bitcoin futures ETF's are already allowed - several exist and they track the BTC:USD rate relatively accurately. I'm not sure that a spot price ETF is really a

Bitcoin futures ETF's are already allowed - several exist and they track the BTC:USD rate relatively accurately. I'm not sure that a spot price ETF is really a huge breakthrough in terms of actual mechanics. But approval is an opportunity to create hype and buzz around cryptocurrency.

okwubodu 3y ago
> several exist and they track the BTC:USD rate relatively accurately They are terrible assets with severe discount/premium swings reaching the high 40%s [0]. The ratio's only tightening now that a potential arbitrage opportunity is on the table. [0] https://ycharts.com/companies/GBTC/discount_or_premium_to_nav https://ycharts.com/companies/GBTC/discount_or_premium_to_na...
- initplus 3y ago
  GBTC is it's own weird separate thing, with a whole bunch of red flags. It's not yet an ETF. They don't even distribute the fund prospectus online, it's only available by email request. Tracking for actual BTC futures ETF's is quite good. Arbitrary example: https://ycharts.com/companies/BITO/discount_or_premium_to_nav https://ycharts.com/companies/BITO/discount_or_premium_to_na... GBTC has diverged so far because it doesn't have a public creation/redemption mechanism. Matt Levine briefly touched on this recently: https://www.bloomberg.com/opinion/articles/2024-01-04/put-the-bitcoins-in-the-box https://www.bloomberg.com/opinion/articles/2024-01-04/put-th...
dcolkitt 3y ago
Bitcoin futures are correlated but nowhere near a 1:1 proxy for spot markets. Crypto markets are known for very steep "contango" in the curve, and it's not unusual for the price of the 30 days futures to be more than $1000 away from the current Bitcoin price. The issue isn't just additional volatility and tracking error, but the fact that the con tango creates a "roll yield" which affects the long-term returns of the strategy. To keep constant maturity exposure, the futures ETF has to constantly "roll" its positions into further dated contracts. In particular because the market tends to be in contango it means further dated futures tend to be higher priced than near dated futures. So usually the futures ETFs in their daily rebalancing are selling cheap near dated contracts for more expensive longer dated contracts. Hence the roll yield tends to be negative. Then add all the transaction costs from daily rebalancing. It should be clear why the futures strategy has inferior returns to simply holding spot. Spot Bitcoin ETFs truly are a game changer compared to futures ETFSs.

okwubodu 3y ago

> several exist and they track the BTC:USD rate relatively accurately They are terrible assets with severe discount/premium swings reaching the high 40%s [0]. The ratio's only tightening now that a potential arbitrage opportunity is on the table. [0] https://ycharts.com/companies/GBTC/discount_or_premium_to_nav https://ycharts.com/companies/GBTC/discount_or_premium_to_na...

initplus 3y ago
GBTC is it's own weird separate thing, with a whole bunch of red flags. It's not yet an ETF. They don't even distribute the fund prospectus online, it's only available by email request. Tracking for actual BTC futures ETF's is quite good. Arbitrary example: https://ycharts.com/companies/BITO/discount_or_premium_to_nav https://ycharts.com/companies/BITO/discount_or_premium_to_na... GBTC has diverged so far because it doesn't have a public creation/redemption mechanism. Matt Levine briefly touched on this recently: https://www.bloomberg.com/opinion/articles/2024-01-04/put-the-bitcoins-in-the-box https://www.bloomberg.com/opinion/articles/2024-01-04/put-th...

dcolkitt 3y ago

Bitcoin futures are correlated but nowhere near a 1:1 proxy for spot markets. Crypto markets are known for very steep "contango" in the curve, and it's not unusual for the price of the 30 days futures to be more than $1000 away from the current Bitcoin price. The issue isn't just additional volatility and tracking error, but the fact that the con tango creates a "roll yield" which affects the long-term returns of the strategy. To keep constant maturity exposure, the futures ETF has to constantly "roll" its positions into further dated contracts. In particular because the market tends to be in contango it means further dated futures tend to be higher priced than near dated futures. So usually the futures ETFs in their daily rebalancing are selling cheap near dated contracts for more expensive longer dated contracts. Hence the roll yield tends to be negative. Then add all the transaction costs from daily rebalancing. It should be clear why the futures strategy has inferior returns to simply holding spot. Spot Bitcoin ETFs truly are a game changer compared to futures ETFSs.