Deficiencies in Spot Bitcoin Market Amid ETF Expectations Revealed

Simeon Hyman, a global investment strategist at ProShares, has highlighted the deficiencies in the spot Bitcoin market, citing discrepancies in prices across exchanges and risks associated with various platforms.

Notably, expectations among cryptocurrency stakeholders have been centered on the potential approval of a series of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission in January.

The Issue With Bitcoin ETFs

During an appearance on Bloomberg TV, Hyman emphasized the presence of multiple Bitcoin prices across different exchanges. At the same time, futures contracts in the cryptocurrency rely on a blend of these prices for daily settlement.

He also expressed uncertainty regarding the practical functioning of cash creation and redemptions in this context.

In the creation and redemption process of ETFs, broker-dealers traditionally exchange the asset itself for ETF shares in an in-kind mechanism. However, in the case of Bitcoin, cash is exchanged with the issuer, who manages the buying and selling of BTC.

Hyman referenced the maturity, liquidity, and regulation in the Bitcoin futures market, compared to the perceived ‘weirdness’ of the spot market, mentioning platforms like FTX and Binance and alluding to certain figures in the industry.

Further Applications for Spot Bitcoin ETF

Fidelity Investments has taken a significant step toward launching a spot Bitcoin exchange-traded fund (ETF) by filing a registration of securities with the SEC.

The firm submitted Form 8-A for its Fidelity Wise Origin Bitcoin Fund, signaling its intent to register it as a publicly traded security. With over $4.5 trillion in assets, Fidelity Investments, joining the list of entities seeking approval for a spot Bitcoin ETF, could mark a notable development in the broader acceptance of digital assets in traditional investment portfolios.

James Seyffart, a Bloomberg ETF Analyst, commented on X that the Fidelity filing is a securities registration, and the ETF still requires a 19b-4 approval and an effective/approved/completed S-1 document. He added that the 19b-4 approval is pending, and the S-1 document remains in the preliminary stage. Seyffart expects further developments, with attention focused on the coming week.

The filing by Fidelity Investments for its spot Bitcoin exchange-traded fund (ETF) has introduced some turbulence to the crypto market. A claim by Matrixport suggesting that the SEC might reject all ETF applications led to over $540 million in liquidations in the crypto market.

Bitcoin has plunged 5% over the last 24 hours, falling to $42,865. The market is closely watching for any updates or decisions from the SEC, especially ahead of the January 10 deadline that could see the approval of the first exchange-traded fund tied directly to spot Bitcoin’s price.