GTS ETF’s global co-head of trading and sales, Reggie Browne, stated on Bloomberg TV that if a Bitcoin spot ETF were to start trading, it could experience a premium of up to 8% due to the way US institutions currently handle cryptocurrencies. Browne believes that the complexity of the cash mode will require many brokers to hedge with futures, resulting in an initial premium for the Bitcoin spot ETF. He estimates that the premium could reach as high as 8%.
However, Browne also believes that the market has sufficient liquidity to maintain a “very competitive and small” bid-ask spread for the ETF because market makers are prepared to deal with enough liquidity.
Browne expects that physical creation and redemption will eventually become a reality, despite the current impasse during negotiations with the US Securities and Exchange Commission. Therefore, all companies currently waiting for approval of their ETF applications have chosen the cash mode.
He stated:
“This is to keep moving forward, and after a few more hurdles, the physical mode will be realized.”
However, Bloomberg ETF analyst Eric Balchunas pointed out that the Canadian Bitcoin spot ETF, BTCC, also adopts the cash mode, but its premium is not significant, although occasionally there is a 2% discount premium. He exclaimed that 8% is truly an astonishing figure!
BTCC is a Bitcoin spot ETF launched by Canadian asset management company Purpose Investments Inc. on the Toronto Stock Exchange in February 2021. It has an annual management fee of 1% and currently has assets under management of $2.22 billion, holding a total of 35,521 bitcoins.