The market in the second half of 2021 can be described as exciting, with frequent ups and downs, and a sharp adjustment in the secondary market, which is uncharacteristically different from the US stock market and approaching the highest in history. Bloomberg's announcement that it will not reject the Bitcoin futures ETF before the deadline ignited the entire market. Let's explain this new derivative systematically.
It is known that the common forms of investment tracking Bitcoin in traditional financial markets mainly include: ETF, ETN and OTC markets.
The full name of ETF is Exchange-Traded Funds, that is, index funds that can be traded on exchanges. At present, the Canadian Purpose and 3iQ markets have been traded through Bit ETF.
The full name of ETN is Exchange-Traded Note, which is a bond (Note) that can be traded on the exchange. It is a certificate issued by a brokerage or a bank to pay the return on the tracked assets when it matures. VanEck Vectors' VBTC is a standard ETN product.
The full name of ETP is Exchange-Traded Product, which is an ETF-type product that can be traded. ETF has developed many structural changes: Trust, ETN (Exchange Traded Note), Swap based ETF, ETC (Exchange Traded Commodity)…etc. Some research institutes will collectively refer to the variants of the above ETFs as ETP. ABTC of 21Share in Europe is an ETP product.
Trust Trust/Fund, the most famous is Grayscale's GBTC product. Another well-known one is CoinShares. It should be pointed out here that the Bitcoin Trust became a trust due to historical reasons, not its original intention.
The predecessor of Grayscale Trust was a fund in the process of applying for ETF, but because it was not approved by the SEC as an ETF before, it was converted into a trust. It is essentially a fund that cannot be traded on an exchange. In order to pass supervision, the compromise has become a compliance trust that cannot be withdrawn. At present, the GBTC secondary circulation platform is in the OTC market of OTCMKTS.
Futures ETFs are very different from spot ETFs. Spot ETFs that have been applied for many times in the US market before have been difficult to pass, part of the reasons are as follows:
Bitcoin itself has spot characteristics and is not a cash deposit. There is no bank or third party for custody, and another set of compliance custody and private key security management solutions is required;
A complete secondary platform to buy and exit at a fair price does not appear in the market. What we are talking about here is not emerging bitcoin exchanges, but traditional trading platforms such as Nasdaq, CME, CBOE, etc. that have complete pre-market, after-market, bulk, market maker seats, and clearing and settlement systems;
Bloomberg mentioned that the Bitcoin futures ETF that is not rejected is the ETF based on CME Bitcoin futures proposed by ProShares and Invesco Ltd.
Bitcoin futures ETF is a Bitcoin ETF based on CME futures (futures-backed);
Issuer Proshares is a well-known traditional ETF issuer;
These two points indicate the nature of its trading venue and ETF approach. CME is the well-known Chicago Mercantile Exchange, the largest derivatives exchange in the United States and even the world, and the main trading platform for derivatives with a century-old name in the United States. ProShares is a common ETF asset company in US stocks. Its products include indexes such as S&P 500 Index ETF, Nasdaq 100 Index, volatility and leveraged ETF products, etc. The futures ETF mechanism itself also has its own characteristics. It will keep rolling and adjusting positions, old contracts will continue to expire for delivery, and new contracts will continue to be created.
Recently, the real-time market intelligence website Skew of the encrypted derivatives market shows that the futures open positions are close to the highest point in history, and the Bitcoin futures ETF will continue to attract attention.
