Spot Bitcoin ETF Set to Challenge Futures ETF

• The possible approval of a spot Bitcoin Exchange-Traded Fund (ETF) is said to be a threat to Bitcoin futures ETF.

• Investors are expected to make this shift due to the issue of underperformance and higher transaction fees associated with the product.

In 2021, the first-ever Bitcoin-related ETF debuted on the NYSE under the ticker “BITO,” to track the Bitcoin futures market. The reaction was enormous as said by the CEO of ProShares Michael L. Sapir.

According to him, a multitude of investors were anticipating the launch as it opened up exposure to Bitcoin.

BITO will open up exposure to Bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider … or are concerned that these providers may be unregulated and subject to security risks.

Two Years after this approval, spot Bitcoin ETF is yet to make a debut as multiple companies refile their application with the US Securities and Exchange Commission. Following the recent court ruling in the Grayscale Investments and the SEC case, several experts have predicted that a spot BTC ETF would soon get approval. However, this is said to be bad news for Bitcoin futures. The excitement that saw US fund investors moving for the Bitcoin futures contract has declined as collective market value stabilizes at around $1 billion. The spot-based fund is reportedly a better alternative as it accurately tracks the price of coins at a cheaper cost. 

Is Spot Bitcoin ETF Superior?

James Seyffart, an analyst at Bloomberg Intelligence admitted that the spot Bitcoin ETF is a superior product.

We would expect the assets and volume to coalesce around one or multiple spot-Bitcoin ETFs because they are superior products for most types of investors. New money, particularly those looking to buy and hold over longer periods, will be attracted to a spot product, which is also likely to be cheaper and more efficient than the current futures ETFs on US exchanges.

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According to Seyffart, spot Bitcoin ETF could make it a $100 billion market as investors move away from the futures-based fund. Some of the reasons for a possible outflow from Bitcoin futures ETF after the arrival of its spot counterpart have been linked to higher cost and underperformance. 

In a recent report, JPMorgan’s Nikolaos Panigirtzoglou observed that long positions in CME Bitcoin futures are coming to an end leading to limited downside for the crypto market in the near term. Also, positive news including the XRP ruling and the spot Bitcoin ETF’s possible launch has influenced traders to open long positions. 

Recently, the CIO of Valkyrie Investments Steven McClurg, predicted that the first-ever spot Bitcoin ETF approval would happen in the first quarter of 2024. Also, it is 50 percent certain that an ETF will be approved by the SEC in October. While some crypto investors are anticipating a price surge to follow the potential approval, some analysts do not see any considerable impact as the ones approved in Canada and Europe had no impact on the Bitcoin price. 

As of press time, Bitcoin (BTC) was trading at $25,675.32. The asset currently has a bearish market sentiment and has fallen by 0.4 percent in the last 24 hours. 

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