Bitcoin ETF approved or one of the largest issuances in history

Author: BEN STRACK, blockworks Compiler: Jinse Finance, Shan Ouba

VettaFi’s Dave Nadig predicts investors could move $10 billion in assets from Grayscale Investments’ Bitcoin Trust (GBTC) to Bitcoin OTC within two weeks if the Bitcoin OTC ETF is approved Exchange-traded funds (ETFs). While the prospect of a bitcoin over-the-counter-traded fund (ETF) entering the U.S. market is uncertain, it could be one of the largest ever if the SEC approves the offering, industry watchers said.

Bitcoin over-the-counter funds could prompt investors to reallocate billions of dollars from Grayscale Investments’ Bitcoin Trust (GBTC), the Canadian Bitcoin ETF, and other cryptocurrency products. Bloomberg Intelligence analyst James Seyffart said on the ETF Prime podcast on July 5 that the Bitcoin OTC fund “could be the biggest launch ever, or at least one of the biggest.”

Meanwhile, a physically-backed bitcoin ETF could be preferred because it meets more due diligence requirements, provides bankruptcy protection for fund issuers and closely tracks bitcoin prices. James Butterfill, director of research at CoinShares, said he expects higher demand for physically-backed bitcoin ETFs, especially if an asset management giant like BlackRock launches the product.

GBTC asset restructuring?

Assets in crypto investment products hit $37 billion last week, the highest level since June 2022, according to CoinShares. Dave Nadig, a financial futurist at the data company VettaFi, pointed out in the ETF Prime podcast that if the Bitcoin OTC fund is approved, GBTC investors can sell their GBTC shares and reinvest the funds in the Bitcoin OTC fund.

Approve all at once? Who won the asset?

After the spot bitcoin ETF is approved, funds are expected to be reallocated, including transfers from Grayscale Investments and GBTC. There are currently eight registered Bitcoin ETFs, and other companies such as Global X, First Trust and Charles Schwab may also launch similar products.

Industry watchers have suggested that the SEC should approve multiple proposals at the same time, rather than allowing one company to launch first, to avoid adverse effects on the market. Factors such as brand influence, capital market depth, and number of institutions may play an important role in which Bitcoin ETF can achieve a leading position in the market.

Exchanges also stand to gain more from listing winning products, as they are primarily paid based on trading volume rather than asset size. Even with just $1 billion in assets, a fund could still be one of the most traded ETFs ever.