In a recent podcast coinbase Researchers have revealed potential pitfalls associated with the imminent launch of a Bitcoin spot exchange-traded fund (ETF) in the United States. These risks, overlooked in ETF projections, may impact Bitcoin availability and trading strategies.
Imminent Risks to Bitcoin Accessibility and Institutional Trading Strategies
As the countdown to the approval of a potential spot Bitcoin ETF continues, experts at Coinbase have highlighted two significant risks that could emerge once trading begins.
The first concern relates to Bitcoin sourcing for these ETFs. David Duong, head of institutional research at Coinbase, and Greg Sutton, senior sales trader, highlighted the potential shortage of “regulated” Bitcoin as ETF issuers would need to raise enough Bitcoin for their funding.
Risk Analysis: Impact on Bitcoin Sourcing and Basis Trading
Duong warned of the difficulties issuers may face in obtaining enough bitcoin from regulated entities, especially if demand surges. Although this scenario represents increased demand, it also introduces sourcing risks that could severely impact Bitcoin availability.
On the other hand, Sutton raised a second risk associated with popular institutional trading strategies: “Basic deal.” This strategy leverages the price difference between spot Bitcoin and BTC futures contracts.
Current ETF Environment and Ongoing SEC Considerations
Amid these discussions, applications for 13 positions are currently pending. Bitcoin ETF A ruling from the U.S. Securities and Exchange Commission (SEC) is awaited. Analysts predict approval is likely by Jan. 10, with entities such as Grayscale urging in-kind repayment of cash generation in recent meetings with the SEC.