Spot Bitcoin ETFs Could Trade 8% Above Fair Value: Renowned Expert

Jake Simmons

1 year ago

3 mins read

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In a recent interview with Bloomberg, Reggie Browne, Co-Global Head of ETF Trading and Sales at GTS, shared insightful predictions regarding the potential trading dynamics of spot Bitcoin exchange-traded funds (ETFs). Browne foresees these ETFs trading at a significant premium, estimating as high as 8% above their net asset value (NAV).

Why Spot Bitcoin ETFs Could Trade At A 8% Premium To NAV

“I think the spreads will be very competitive and tight. The market maker community is resilient and prepared to offer a lot of liquidity,” Browne stated. However, he highlighted a critical concern, saying, “I think it’s going to be the premium to NAV… US broker dealers can’t trade Bitcoin cash inside their broker dealers. So you’re going to have to trade hedges over futures and trade it on a premium, and then take that off, and I think there is a lot of complexity there.”

This complexity, according to Browne, arises from the cash creation model forced by the SEC and regulatory constraints that limit direct Bitcoin trading within US broker dealers, compelling them to rely on futures for hedging. He expressed, “What I think, potentially, you could see 8% of premium above fair value. It’s a big number, but let’s see how it plays out.”

Additionally, Browne touched upon the subject of in-kind creations and redemptions, aspects that were points of contention during negotiations with the Securities and Exchange Commission (SEC). Despite the challenges, he remains optimistic about their future implementation. “Absolutely, I think this was really just to get the ball moving… the in-kind will come after we climb a couple of mountains,” Browne remarked.

Echoing Browne’s sentiments, Eric Balchunas, a Bloomberg ETF expert, commented on the potential premium, expressing surprise at the anticipated high rate. He drew a comparison with Canada’s spot ETFs, which are also cash creations but have much smaller premiums, despite occasional spikes.

[Browne] thinks bid-ask spreads on spot ETFs will be tight but (thx to cash only creations) premiums could be as high as 8%. That’s really high and I’m a bit shocked tbh. For context Canada spot ETFs are cash creations and their premiums are very small.. albeit the occasional 2% day.

The crypto community is closely monitoring the SEC as it approaches a critical deadline to decide on the first batch of several spot Bitcoin ETF applications by tomorrow, January 10. Prominent asset managers such as BlackRock, Fidelity, Ark Invest, Bitwise, Franklin Templeton, Grayscale, WisdomTree, and Valkyrie are among those with pending applications.

Browne believes that the approval of spot Bitcoin ETFs could attract substantial investor interest, projecting massive inflows over the first year. “I expect investors to add at least $2 billion to spot Bitcoin ETFs within the first 30 days they trade, if approved. For the full year, I see $10 billion-$20 billion in the funds,” he noted. This prediction underscores the significant interest and potential market impact of spot Bitcoin ETFs.

At press time, BTC traded at $46,768.

Bitcoin price — BTC price rallied to $47,000, 1-day chart | Source: BTCUSD on TradingView.com

Featured image from Shutterstock, chart from TradingView.com

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

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