The Bitcoin spot market still has deficiencies, including price discrepancy across exchanges and platform risks, according to Simeon Hyman, a global investment strategist at ProShares. On Bloomberg TV on Wednesday, Hyman said there are multiple prices for Bitcoin, while futures in the cryptocurrency rely on a combination of prices for settlement everyday. Hyman also cast doubt on how cash creation and redemptions will function in practice.
In that process, broker-dealers exchange cash — as opposed to the underlying security — with the issuer, who then shoulders the responsibility of buying and selling Bitcoin. ETFs typically employ the in-kind mechanism, in which broker-dealers deliver the asset itself to issuers and receive shares of the ETF in return.
“It’s a mature and liquid and regulated place,” Hyman said in reference to the Bitcoin futures market. “The spot market is still a little, let’s call it, weird. FTX, Binance, stuff, things, shaggy hair guy in the news.” In 2021, ProShares Bitcoin Strategy ETF — trading under the ticker BITO — debuted as the first Bitcoin futures exchange-traded fund listed in the U.S.
In the past, US SEC chair Gary Gensler has voiced concerns about the potential for fraud and manipulation in crypto markets. These factors could impact the regulators as it deliberates whether to approve a spot Bitcoin exchange-traded fund. Bitcoin fell 5.6% Wednesday to $42,283, reversing course ahead of an upcoming Jan. 10 deadline that could see the US SEC approve the first exchange-traded fund tied directly to the asset’s spot price.
