Ether Futures ETF is Likely Next Step After ProShares Bitcoin Crash Moment, Says Former SEC Official

Hi! Welcome to the fourth and final installment of Need to Know Crypto Edition, ahead of the launch of a new weekly “Distributed Ledger” crypto newsletter, which begins next month. I’m Frances Yue, Crypto Journalist at MarketWatch, and I’m going to bring you the latest and greatest digital assets this week so far.

Another thing, MarketWatch and Barron’s are bringing together the most influential figures in crypto to help identify the opportunities and risks ahead in digital assets on October 27 and November 3. Register now now!

Crypto at a glance

We have witnessed two historic moments for bitcoin BTCUSD,
-2.32%
this week. ProShares Bitcoin Strategy BITO ETF,
-3.23%,
the first bitcoin-linked exchange-traded fund in the United States debuted on Tuesday. After that, bitcoin hit a record high on Wednesday, trading at nearly $ 67,000, breaking its previous high of $ 64,889 in April, according to data from CoinDesk. As of noon as of Friday, bitcoin had risen 5.1% in the past seven days and 48.9% in the past 30 days.

Ether ETHUSD,
-2.54%
also approached its all-time high, trading at $ 4,370 on Thursday, slightly below its high of $ 4,379.11 in May.

Encryption metrics
The biggest winners Price % return over 7 days
B OK

$ 28.3

70.6%

THORChain

$ 10.9

38.9%

Huobi Token

$ 10.2

33.6%

Fantom

$ 2.6

31.2%

Nexo

$ 2.3

30.3%

Source: CoinMarketCap.com to October 22
The biggest declines Price % return over 7 days
To flow

$ 13.6

-22.8%

Telcoin

$ 0.02

-15.9%

Celsius

$ 5

-14.2%

Perpetual protocol

16 $

-12.44%

dYdX

$ 19.9

-12.3%

Source: CoinMarketCap.com to October 22
A bitcoin ETF in grayscale?

On the same day BITO debuts, digital asset manager Grayscale deposited to turn Grayscale Bitcoin Trust GBTC,
-0.45%,
the world’s largest bitcoin fund, to a spot bitcoin ETF, which is different from ProShares’ SEC-approved bitcoin futures ETF.

Grayscale has a good reason. A conversion to an ETF of its current trust structure will help alleviate GBTC’s long-standing problem: stocks haven’t always matched the price of bitcoin. GBTC has been trading at a discount to its net asset value or underlying bitcoin holdings since February, as investors look to alternatives in the stock market for bitcoin exposure, such as bitcoin ETFs in Canada.

Monday, when the crypto market celebrated the SEC approval for BITO, GBTC’s discount on its net asset value widened to 20.5%.

Unlike closed-end funds, an ETF allows designated organizations to create and redeem shares of the ETF to keep its price in line with the net asset value. Thus, GBTC’s handing over will no longer be a problem, if its plan gets the regulatory green light.

Grayscale’s conversion efforts have been going on for years – he submitted a bitcoin ETF request in 2016 only to withdraw it – and he has repeatedly expressed his commitment change its fund structure to maintain its dominant position as the largest manager of crypto assets.

“At Grayscale, we believe that while regulators are comfortable with ETFs that hold futures on a given asset, they should also be comfortable with ETFs that offer spot price exposure of that asset. even active, “Dave LaValle, Global Head of ETFs at Grayscale. Investments said Tuesday.

However, some analysts argue that a bitcoin spot ETF may still be a long way off.

Bitcoin futures have been regulated by the Commodity Futures Trading Commission since 2018, while these products are traded on the Chicago Mercantile Exchange, one of the world’s largest derivatives exchanges. “This is what allowed the SEC to authorize this [bitcoin futures ETF] product. You don’t see this with the underlying [physical bitcoin]Carlo di Florio, global director of services at ACA Group compliance advisor and former director of the SEC, said in a telephone interview with MarketWatch.

“I think there is going to be a lot more work for companies to do to design products that offer investor protection and assurance of market integrity before they see the green light on. [bitcoin] place [ETFs]”said di Florio.

According to di Florio, Ether futures ETFs, which are also traded at CME, may be more predictable than Bitcoin spot ETFs. “Because they are futures,” said di Florio. “And it’s following the same path that made the SEC comfortable with the Bitcoin futures ETF. They are therefore likely to benefit from the same regulatory comfort.

In August, VanEck and ProShares both abandoned their candidacies for ETFs with ether futures two days after the filing of the application. Some analysts suspected that the SEC has contacted both issuers and said ether-linked ETFs are unlikely to be approved, at least not until bitcoin-linked ETFs get the green light.

Darius Sit, managing partner of digital asset trading firm QCP Capital, echoed di Florio’s point, saying an ether futures ETF could be approved before the middle of next year.

Is three a crowd?

VanEck is expected to be the next fund provider to deploy a bitcoin futures ETF. It will be the third bitcoin ETF linked to futures since BITO debuted last Tuesday.

VanEck Bitcoin Strategy ETF is expected to start trading on October 25 (although that may change) and will be listed on the Cboe Global Markets BZX Exchange under the ticker symbol “XBTF”, according to a post-effective filing with the SEC. The expense ratio for the ETF is 0.65%, which means that an investor would pay an annual fee of $ 6.50 for every $ 1,000 invested, which is lower than the expense ratio for the Bitcoin strategy. Valkyrie, which debuted Friday, and ProShares, both of which carry an expense ratio of 0.95%.

Crypto leverage

After bitcoin hit a record high in April, the price of crypto more than halved in about a month. The plunge was exacerbated by leverage in the market as “a ton of new leveraged longs were sold off,” Sam Trabucco, CEO of quantitative crypto trading firm Alameda Research wrote on Twitter.

And this time? Although Trabucco said it is difficult to predict in which direction the price of bitcoin will go, he wrote that “I think the sell-offs are FINALLY starting to be smaller.”

The aggregate open interest of bitcoin futures, which refers to the amount of futures contracts outstanding, is about 20% lower than in April, according to data analysis firm Skew. Futures are derivative contracts that allow investors to speculate on changes in the price of an underlying asset, often using leverage.

“This means the potential for a huge liquidation pullout is MUCH lower,” Trabucco wrote. “I think there is less (but still not zero) chance that a downward movement is really disproportionate.”

“And the same goes for a bullish move, pretty much,” Trabucco noted.

The $ 29,000 NFT Tungsten?

Tungsten is associated with the filament of incandescent bulbs, which could make it a rather anachronistic product. object of desire in the digital community more familiar with LED or light emitting diode light sources.

However, tungsten, also the second hardest substance after diamonds and whose properties of high density, corrosion resistance and tensile strength, when combined with other elements, make it ideal in building aircraft components and military weapons, is the hottest thing in the crypto world outside of virtual assets (and ETFs), right now.

The rabid interest in tungsten has made it a bit of a meme both in the real world and on social media platforms like Twitter.

And like most other memes, its origins are difficult to trace, but interest in tungsten, especially among Illuminati crypto, has leads to an increase of 300% in sales of tungsten cubes for the manufacturer Midwest Tungsten Service within a week, according to reports.

The appetite for tungsten apparently prompted Midwest Tungsten Service to auction a non-fungible token, or NFT, of the 14 inch, 1784 lb Tungsten Cube, the largest the manufacturer has ever produced. When last checked, the highest bid was well over $ 29,000, with a few days remaining on the auction. The successful bidder for the NFT will be entitled to “one visit to see / photograph / touch the cube per calendar year”, as described. The cube is stored in Willowbrook, Illinois.

In mid-October, Yahoo! Finance wrote that tungsten cubes sold on Amazon.com and UK Google searches for tungsten increased 95%.

Crypto companies, funds

In the fund space, BITO BITO,
-3.23%
slipped 3.23% on Friday. The highly anticipated ETF closed its first week at $ 39.5, down from its opening price on Tuesday at $ 41.9. Bitcoin Valkyrie BTF Strategy,
-2.80%,
the second US bitcoin futures ETF, which debuted on Friday, closed its first day with a loss of 2.8% to $ 24.3.

Grayscale Bitcoin Trust GBTC,
-0.45%
closed at $ 48.8, with a daily loss of 0.5% and a weekly gain of 2.8%.

In crypto-related news, Coinbase COIN shares,
+ 0.28%
rose 0.3% to $ 300.8 on Friday and 7.2% last week. MicroStrategy Inc. MSTR by Michael Saylor,
-2.30%
fell 2.3% to $ 718.5 on Friday. It is down 4.2% on the week.

Riot Blockchain Mining Company Inc. RIOT,
-3.94%
shares fell 3.9% on Friday to $ 28.5. It was up 1.54% from a week ago. Shares of Marathon Digital Holdings Inc. MARA,
-2.85%
closed at $ 49.5 on Friday, down 2.9% from Thursday’s close, but up 1.17% on the week. Another miner Ebang International Holdings Inc. EBON,
-3.76%
fell 3.8% to $ 2.05. It is up 4.1% on the week.

Overstock.com Inc. OSTK,
-0.02%
was mostly flat at $ 80.9 on Friday. It climbed 4.2% on the week. Square Inc. SQ,
-4.53%
fell 4.5% to $ 253, with a weekly gain of 1.6%, while Tesla Inc.’s TSLA,
+ 1.75%
shares rose 1.75% to $ 910, posting a weekly gain of 7.9%.

PayPal Holdings Inc.
PYPL,
-1.16%
fell 1.2% to $ 240, recording a 10.4% weekly loss, while NVIDIA NVDA,
+ 0.15%Corp.
rose 0.2% to $ 227, contributing to a 4% weekly gain. Advanced Micro Devices Inc. AMD,
+ 0.41%
rose 0.4% to $ 120 and posted a weekly return of 6.9%.

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