26 months after bitcoin futures ETFs launch, traders brace for a spot product

Bitcoin futures ETFs were approved more than two years ago — now, a spot product threatens to take over market share

article-image

愚木混株 cdd20/Unsplash modified by Blockworks

share

Bitcoin spot prices continue to whipsaw on shifting expectations about if and when an ETF will get the go-ahead from US securities regulators.

The ongoing will-they-launch parlor game has analysts speculating about what might happen to the product’s predecessor: the bitcoin futures ETF. 

The US Securities and Exchange Commission approved ETFs that track bitcoin futures markets in October 2021. Those approvals were a watershed moment for bitcoin and crypto, giving individual investors and advisors access to bitcoin exposure in their traditional brokerage and retirement accounts for the first time. 

Now, with a spot product looming — and potentially several — some expect some investors to lose interest in the once-novel futures products. 

“Futures-based bitcoin ETFs have been useful to some investors in the absence of spot-bitcoin ETFs,” Zach Pandl, managing director of research at Grayscale, said. “Because futures-based ETFs typically underperform, as we look ahead, we expect institutional investors to utilize futures-based bitcoin ETFs in a limited capacity as these investors may also interface directly with the CME and do not require the ETF wrapper.” 

Grayscale is currently vying for approval to transform its Grayscale Bitcoin Trust into an ETF, an effort supported by an August 2023 court ruling in which a federal judge barred the SEC from denying spot bitcoin ETFs under reasons it has given in the past. 

The ProShares Bitcoin Strategy ETF (BITO), which was the first of its kind to hit the market, raked in $950 million in trading volume on its opening day in October 2021, the second-highest in history for a new ETF at the time. It was the fastest ETF to hit $1 billion in assets under management in history. Bitcoin gained close to 20% the month futures ETFs were approved and started trading. 

Despite hitting a record-high assets under management of $1.47 billion late last year, BITO is now down about 5.5% year to date. The product, much like bitcoin itself, posted positive returns in 2023 of around 95%, but since its launch is trading 46% lower. 

The second bitcoin futures product to launch, Valkyrie’s Bitcoin Strategy ETF (BTF), expanded to include ether futures in October 2023. BTF is also in the red so far this year. The product rallied 100% in 2023, but remains about 45% lower since its launch 26 months ago. 

Spot bitcoin prices ended 2023 around 150% higher and currently are up 3% year to date. 

The bitcoin futures market is “mature, liquid and regulated,” ProShares Global Investment Strategist Simeon Hyman said during a Bloomberg TV appearance Wednesday. “There are a lot of things we don’t know about the spot market…things that we do know that futures solves.”

Pricing is complicated in spot markets, Hyman said, plus “we don’t know exactly how cash create in a spot ETF will work.” 

Crypto asset manager Hashdex in 2023 filed to transition its Bitcoin Futures ETF, which launched in 2022, to track spot bitcoin prices. Hashdex proposed sourcing spot bitcoin prices from CME’s futures exchange. The SEC in November delayed its decision on the transition to Jan. 1, 2024, but then opened up a public comment period, so the deadline no longer applies. 

The SEC has until Jan. 10 to approve or deny Ark and 21Shares’ bitcoin ETF application. 

Analysts have their eyes peeled for any of the 13 issuers currently trying for a spot ETF to file their updated 19b-4 forms, a sign Bloomberg Intelligence senior ETF analyst Eric Balchuans said will show approval is “imminent.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg

Research

The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.

article-image

Partnering with EtherFi and Angle, the fully on-chain perp DEX features bespoke collateral

article-image

Sponsored

Gavin Wood introduced the next evolutionary step for the Polkadot network: the Join-Accumulate Machine, or JAM

article-image

The side events were the places to be at Consensus 2024, according to attendees

article-image

Also, who’s come out swinging in the spot ether ETF fee war — and who could undercut them

article-image

I know it is not in their nature, but US regulators could learn a lot by researching the digital asset frameworks that overseas regulators have already gotten right

article-image

Also, the ETF hype train can count out at least one member