Spot Bitcoin ETFs have generated strong enthusiasm among investors in recent months. With just three weeks to go until the SEC decision, the community is on fire. However, Coinbase researchers warn of the risks of this type of digital asset. They identify two main risks.
Bitcoin ETF: The Side Effects of Transaction Flows
For many people, spot bitcoin ETFs are the revolution of the moment. But risks and side effects receive less attention. Coinbase researchers David Duong, Head of Institutional Research and Greg Sutton, Senior Commercial Trader provide their insights. According to David Duong investors focus too much on initial flows regardless of their side effects. What they are most worried about is how the resources will look on launch day.
Most banks and analysts speculated on this topic. JPMorgan predicts billions of dollars outflow from Grayscale’s Bitcoin Trust. Bitwise Research estimates that total assets under management for Bitcoin ETFs could reach $72 billion within five years. This company calls the Bitcoin ETF the most successful launch ever.
Offer and basic business risks
One risk of high demand, Duong said, is supply. Bitcoins must be purchased on regulated sites. But with high demand, issuers may have difficulty purchasing the necessary BTC. Knowing the flows is important because we want to know there is demand. But we should think about “the other side of the tail,” explains Mr. Duong.
The second risk relates to the underlying business, or core trading. that’s the point the difference between the BTC spot price and the CME futures price, futures exchange. If spot bitcoin ETFs are approved to launch in 2024, that could reduce the basis, Greg Sutton said. The basis is likely to decline as investors have more options for exposure.
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I am passionate about cryptocurrencies, a world I discovered barely 3 years ago. My only goal is to inform you about this incredible universe through my articles.
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The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.