The below is from a recent edition of the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
The ProShares bitcoin futures ETF under the ticker $BITO hit the market for a significant moment in bitcoin’s history yesterday. It turned out not to be a “sell the news” type of event as the bitcoin price hovered around $64,000, right under the previous all-time high.
The fund traded $280 million worth of shares in the first 20 minutes, putting it in the top-15 opening-day launches of all time. The current level of volume traded for the entire day settled around $993 million.
On the same day, Barry Silbert and Grayscale filed to convert their Grayscale Bitcoin Trust vehicle (GBTC) with $41.4 billion (value at $64,000 price) into a bitcoin spot ETF. Although a bitcoin spot ETF will be a better vehicle for bitcoin exposure relative to a futures ETF, Gary Gensler of the U.S. Securities and Exchange Commission (SEC) has reiterated his support for futures ETFs that register under the Investments Company Act of 1940, which he has said “provides significant investor protections” that come with Commodity Futures Trading Commission regulation and oversight.
He has not iterated support for the spot ETF products filed under the Securities Act of 1933 in a separate approval process, indicating we could be far off from a spot ETF until this position changes.
The market’s expectations on if we are getting a spot ETF can be tracked via proxy through the Grayscale Bitcoin Trust premium/discount rate. As the likelihood increases of a spot ETF coming to market, we would expect to see the current significant discount of 20.53% move closer to 0. If Grayscale is able to convert its trust into a spot ETF, which has been its long-term strategy, investors have additional upside to the bitcoin price through buying these discounted shares. But since July, the discount has been in decline and fell an additional 5.4% this week.