Bitcoin Futures ETFs are here (Edition 006)
The good the bad and the Ugly of the Bitcoin Futures ETFs. TLDR: its good for the traders and terrible for the retailers
Hello. Welcome to this week’s edition of Crypto Weekly Roundup Newsletter. We’ll be talking about the Bitcoin Futures ETFs this week.
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Welcome to the future:
Well, it finally happened. After more than eight years, the SEC has given the go-ahead to a Bitcoin ETF. Proshares’s Bitcoin futures-based ETF is set to launch on Monday pending any last-minute regulatory interference. If all goes as planned, it will be the first crypto futures-based product to list on a US exchange. This gives regular folks exposure to the original cryptocurrency via major stock exchanges and is expected to trigger a moon moment as new money rushes into Bitcoin. This is huge news but it is not all positive, not for retail investors at least.
First, a recap. The SEC allowed a Bitcoin futures ETF(exchange-traded fund), but not one pegged to the price of Bitcoin. What this means is the new fund, which is being packaged by a firm called ProShares, won't give you shares backed by Bitcoin, but shares tied a bundle of contracts to buy Bitcoin in the future.
Sound complicated? It is. And what happens when something sounds complicated? The brokers/traders make money, which is exactly what is going to happen with Bitcoin Futures ETF. When you buy a regular ETF, the value of the shares is based entirely on the price of the underlying asset—be it Bitcoin or gold or oil or a basket of S&P stocks. When you're buying a futures ETF, there are other factors at play that lead the price of the shares to diverge from the asset. Savvy futures traders anticipate price quirks like "contango, backwardation, and slippage" and make offsetting trades to account for them.
The obvious winners of the new Bitcoin futures ETF will be professional traders and their wealthy clients, who are familiar with concepts like "contango"(where the futures price of a commodity is higher than the spot price) and are good at making money off it. ProShares will obviously mint money, as they are the first out of the gate in this new frontier of crypto ETFs.
As for losers, you can include retail investors who were hoping to buy a boring Vanguard-style ETF, one that would let them buy Bitcoin just like a stock. What they got instead is an exotic investment option with a lot of fees and Contango bleed. Read through the twitter thread linked below, it shows how Futures ETFs work and how it is bad for a long-term investment. For example, USO ETF(oil ETFs), and look at 5-year total returns:
Spot Crude Index +61.5%
1st-month Crude Futures, manually rolled each month: +31.4%
USO, Futures-based ETF: -37.9%
Other losers are the likes of Grayscale and Gemini. The OGs of the business who have been asking the SEC to approve their ETF applications for years and years—only to see Gensler decide this summer that a futures ETF was the way to go.
Anyway, this is overall great news for the crypto community, it legitimizes Bitcoin as an investment vehicle and the SEC looks more likely to approve a "pure" Bitcoin ETF sooner or later. Then it's only a matter of time until we see ETFs for Ethereum, Solana, and other top crypto assets.
Mainstream Adoption:
Video game platform Steam bans NFTs, crypto, and blockchain-based games, but Epic Games Store welcomes them.
Putin Says Crypto Can’t Yet Replace Dollar in Settling Oil Trades, but suggests they’ll be open to it in the future: Report
Binance launches $1 billion growth fund for Binance Smart Chain
More than 1.1M people signed up for Coinbase’s NFT platform waitlist
Visa to build a program to help Creators, Small Businesses Learn About NFTs and Crypto
Fox Entertainment Gives Away 20,000 ‘Masked Singer’ NFTs
Fiat-Crypto Interface:
Coinbase unveils lobbying push for a brand new US regulator focused on digital assets
CFTC fines Tether and Bitfinex $42.5 million over USDT backing
Payment processing company Stripe is creating a crypto-focused engineering team to 'build the future of Web3 payments' 3 years after closing down support for Bitcoin in 2018
Uniswap Labs hires Democrat communications veteran amid regulatory scrutiny
Coinbase Calls for Single Regulator to Oversee Crypto Markets, it is unlikely to happen considering the current state of Washington DC
JPMorgan Boss Jamie Dimon Says Bitcoin Is Worthless, Questions BTC's Limited Supply🤦♀️
Investments into Crypto:
Charting platform TradingView raises $298 million at $3 billion valuation led by Tiger Global
Cryptocurrency lending platform Celsius Network raises $400 million as valuation puts the company at more than $3 billion
Crypto investment firm Paradigm is raising more than $1 billion for a new fund
Other News:
Intel confirms it won't limit cryptocurrency mining on its new Alchemist graphics cards. Competitor Nvidia had earlier made GeForce RTX cards less desirable for crypto miners, then made a tailormade product for Crypto miners.
A lender received a $340,000 NFT after a loan wasn't repaid
FTX US Aims to Take On OpenSea—First With Solana NFTs, Ethereum Only Weeks Away. Coinbase is right at its heels.
That is it for this week. Thanks for reading this week’s edition of the Crypto Weekly Roundup Newsletter. If you found this informative please share it with your everyone. Thank you!