Expert Predicts Premiums for Spot Bitcoin ETFs

Spot Bitcoin ETFs are expected to trade at a significant premium to NAV. This was stated in an interview with Bloomberg by Reggie Browne, co-head of ETF trading and sales at GTS.

The expert cited the regulatory environment, which allows American institutions to interact with cryptocurrency, as the reason.

“Broker-dealers in the US cannot conduct cash-settled Bitcoin transactions between clients. Some can, but not most. Therefore, you will hedge with futures and trade at a premium, then unwind it. To me, this will cause quite a few difficulties,” the specialist explained.

According to Browne, due to this reason and the existing premium in Bitcoin futures, investors will have to pay “some crazy number.” Hypothetically, this figure could reach 8%, he suggested.

The expert expressed hope that there will be enough liquidity to keep the spread “competitive and tight.”

“Market makers are ready to offer good conditions for this [ETF] structure,” Browne emphasized.

According to the expert, at some point, creation and redemption in-kind will become a reality.

This issue previously became a stumbling block during negotiations with the SEC. Ultimately, all companies that applied to launch the product settled on a fiat redemption model, he added.

“They decided to do this to start the game. In-kind redemption will come after climbing a couple of mountains,” Browne predicted.

Earlier, Bloomberg analyst Eric Balchunas noted that the trading volume of the GBTC from Grayscale, which the Commission may allow to convert into an exchange-traded fund, reached ~$0.5 billion.

$GBTC traded close to half a billion today, which is more than 99% of the 3000 current ETFs, and reminder that they are bringing a (volume) gun to a knife fight if they launch with everyone else. That said, the 1.5% fee will act as a repellent. Another fascinating sub-plot. pic.twitter.com/506EG3PR7t

— Eric Balchunas (@EricBalchunas) January 8, 2024

“This is more than 99% of the 3000 current ETFs. Reminder that they [Grayscale] are bringing a (volume) weapon to a knife fight,” the specialist wrote.

Previously, ForkLog reported on the company’s reduction of the management fee from 2% to 1.5% as part of the anticipated conversion of GBTC into a spot exchange-traded fund.

Venture investor Nic Carter and BitMEX experts have also shared their views on the inefficiency of spot Bitcoin ETFs given SEC requirements.