Holding Bitcoin in ‘best interest’ of spot ETF issuers — Analyst
In the world of cryptocurrency, there is an ongoing debate about the best way to track and hold Bitcoin for exchange-traded fund (ETF) issuers. Some analysts argue that actually holding Bitcoin is in the “best interest” of ETF issuers, while others believe that a cash-create model is more effective.
One school of thought suggests that holding physical Bitcoin is the best way to ensure accurate tracking of the digital asset. This approach would involve ETF issuers purchasing and securely storing the actual Bitcoin, allowing investors to indirectly own the asset through shares of the ETF. Proponents of this method argue that actually holding Bitcoin would provide a more transparent and reliable way to track its value.
However, there are critics of this approach who believe that a cash-create model would be more practical for ETF issuers. This model involves utilizing cash to create synthetic Bitcoin holdings that would represent the value of the digital asset. Critics argue that this method would be easier to administer and manage, as it eliminates the need for storage and security concerns associated with physically holding Bitcoin.
Despite the ongoing debate, it is important to note that the Securities and Exchange Commission (SEC) has not yet approved any Bitcoin ETFs. The SEC has expressed concerns regarding market manipulation, liquidity, custody, and valuation. As such, the discussion around the best way to track and hold Bitcoin for ETF issuers is still largely theoretical.
The Argument for Holding Physical Bitcoin
Proponents of holding physical Bitcoin argue that it provides a more accurate and trustworthy representation of the asset’s value. Some key points in favor of holding Bitcoin include:
1. Transparency: Holding actual Bitcoin allows for greater transparency in tracking its value. Investors can be confident that the ETF accurately represents the price movements of the digital asset.
2. Ownership: Holding Bitcoin gives investors direct ownership of the underlying asset. This ensures that investors are truly participating in the cryptocurrency market and can benefit from its potential growth.
3. Verification: Holding physical Bitcoin allows for independent verification of the asset’s existence. Investors can audit the holdings and confirm that they indeed exist, providing a higher level of trust.
The Case for the Cash-Create Model
Advocates for the cash-create model argue that it offers a more practical and efficient solution for ETF issuers. Some key points in favor of the cash-create model include:
1. Ease of Administration: The cash-create model eliminates the need for physical storage and security measures associated with holding Bitcoin. This makes it easier to administer and manage the ETF, reducing operational costs.
2. Accessibility: The cash-create model allows ETF issuers to offer exposure to Bitcoin without the need for investors to directly own and manage the digital asset. This can make it more accessible to a wider range of investors who may be hesitant to handle cryptocurrencies themselves.
3. Risk Management: By utilizing cash to create Bitcoin holdings, ETF issuers can mitigate risks associated with holding the actual asset. This includes concerns about theft, loss, or potential regulatory hurdles.
Overall, the debate surrounding the best way to track and hold Bitcoin for ETF issuers is still ongoing. Both approaches have their merits, and the decision ultimately lies with regulators and issuers. Until the SEC provides clarity and approves Bitcoin ETFs, the discussion remains largely hypothetical.