Recurring market commentary on what’s happening in the crypto markets, summarized by the Crypto Broker team at Crypto Finance AG.
I know that you probably heard it over a hundred times over the weekend… But it does look like the SEC will approve the first ETF on Bitcoin Futures.
Are ETFs on bitcoin futures suitable for retail clients?
There has been a broad discussion about whether or not this product really suits retail customers. Especially from a performance point of view, you can argue that it is not perfect. I am referring here to the negative carry that most likely would prevail if the underlying asset was in a bull market. In a normal market, the expected conditions would be that the negative carry would be around 5-10% on an annual basis. If you add that to the TER (total expense ratio), it ends up being an expensive product (compared to just spot buying bitcoin and self-storing it).
I think there are better products out there if you are a retail investor and would like to get exposure, but not physically buy bitcoin, and instead get it through a traditional product. E.g. the Grayscale Bitcoin Trust (GBTC), which is currently trading at a 15% discount to the spot price.
A big step forward for the crypto industry
But I do not want to make this short market commentary a rant against the SEC. I think it is a pretty big step forward for them and also for the crypto industry. I believe the SEC needs more certainty that the largest crypto spot exchanges are playing by “their” rules to approve a spot-based ETF. But don’t forget: crypto moves about 10x faster than the traditional financial world. So, let’s give the regulatory body a bit of time to catch its breath.
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