April 25, 2024

What investors need to know about spot bitcoin ETFs

The Securities and Exchange Commission’s (SEC) January 10 deadline for a spot bitcoin ETF decision is less than a week away. Still pending approval, a green light by SEC regulators would allow firms to offer traders bitcoin (BTC-USD) ETFs, such as Grayscale’s Bitcoin Trust (GBTC).

VettaFi Financial Futurist Dave Nadig sits down with Yahoo Finance Live’s Julie Hyman and Josh Lipton in-studio to discuss the possibilities of SEC approval, calling it a “horse race” to have ETF offerings ready to go on the first available trading day.

“I don’t think that this is going to be one of those things where we immediately have $10 billion in new assets show up,” Nadig says on demand. “Remember, one of the funds here is Graycale’s GBTC converting. It already has $25 billion in it, so we know what that demand looks like.”

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor’s note: This article was written by Luke Carberry Mogan.

Video Transcript


JULIE HYMAN: The clock is ticking down now for an SEC approval of a spot Bitcoin ETF in the US in the coming days. The crypto world is going to find out whether 14 different money managers and ETF issuers will be allowed to launch their own spot bitcoin exchange traded funds. Here with what this will mean for crypto traders and what we can expect, Dave Nadig is still with us, VettaFi financial futurist.

This has really been the big topic in the ETF world for the past six months, I don’t know. But it’s obviously heated up. January 10th is the deadline we’re looking at, because that’s when the SEC has to give some sort of answer to one issuer, in particular, ARC and 21shares. But the anticipation is we’ll get an answer on all of them.

DAVE NADIG: Yeah, absolutely.

JULIE HYMAN: So what’s your– what is the next week, two weeks, month going to look like on this?

DAVE NADIG: I suspect the next thing we’ll see is that both the exchanges that are going to have to trade these products and the issuers will finish up their paperwork. There’s a couple of different forms that have to get filed. That’s when we’ll get a bunch of information like, what are the expense ratios going to be? We still don’t know that. These things could come out free. They could come out at 2% We have no idea.

I think everybody’s thinking around 50 basis points is probably the over, under on that. But we have no idea. So we’ll get that when we see that from the issuers. Then we’ll get the approval for these things to trade. And the SEC may or may not give a hard date there to say, everybody can start trading say on January 21. They may simply say, all right, everybody, go, in which case, we might see some of these things start trading next week. We might see a bit of a horse race to see who has their capital markets desk lined up first. And some folks may be ready at 9:30 on one trading day. And other folks may not be able to trade until noon just because there are a lot of operational considerations in getting any ETF off the ground.

JOSH LIPTON: And if and when, Dave– so the SEC greenlights this new product, where would you– what would you expect demand to look like? And where do you think, Dave, maybe the demand comes from? Do you think this is retail, it’s RIAs, it’s institutions?

DAVE NADIG: I think initially, this is pure froth, right? That’s the issue. Because it is the story we’ve all been talking about, because bitcoin is already had a heck of a run in the last few months, I don’t think that this is going to be one of those things where we immediately have $10 billion in new assets show up.

Remember, one of the funds here is Grayscale’s GBTC converting, it already has $25 million in it. So we know what that demand looks like. To me, the real question is when we look back say in a couple of weeks, maybe a month or two, how much incremental demand has there been over that $25 billion? Because that will get redistributed a little bit. You see Grayscale won’t hang on to all of that. It’ll move to a BlackRock product or a VanEck product or somewhere in there.

So when we add all that back up, is there a lot of demand? I think there’s some. Most of the new demand will probably come from what I would consider more portfolio allocators, not traders, not folks who are just trying to take a run on bitcoin. Those folks already know how to do that. They have lots of ways to do that. But if you’re a financial advisor and you’re running a model portfolio, putting a 3% slug in your aggressive version of the model, that’s where I think the initial assets are going to come from.

JULIE HYMAN: And those financial advisors, you talk to those people–

DAVE NADIG: All the time.

JULIE HYMAN: –a lot. How are they making the decision of which one? Is it going to be– I mean, as you know, a lot of the ETF flows right now are fee-based. Is that what it’s going to be? Is it the cheapest one is going to win?

DAVE NADIG: The cheapest one is certainly going to have a bit of a leg. We already know that Invesco and Galaxy are going to waive the fee for the first six months. That’s always a little bit of a gimmick. I don’t think most advisors get sucked into those kinds of fee waivers. If one of the big players, the big known names, say, like a BlackRock or a Fidelity or somebody, comes out with the cheapest one, I think that’s tough to compete against. But interestingly, I think it’s where the volume is in the first couple of weeks that matters more than the cost.

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