What happens on the first day of trading in the Bitcoin Spot ETF?

Author: Nikhilesh De, Helene Braun, CoinDesk; Compiler: Songxue, Golden Finance

After ten years of hard attempts, the spot Bitcoin ETF has finally been approved in the United States. Next step: Trade on Thursday morning.

After receiving approval from the U.S. Securities and Exchange Commission on Wednesday afternoon, the highly anticipated products will debut on U.S. markets operated by the New York Stock Exchange, Cboe Global Markets and Nasdaq, and be assisted by major trading firms planning to provide liquidity.

Technically, buying and selling can begin as early as 4 a.m. ET (09:00 UTC), since U.S. stock exchanges are open at that time, and Not with the famous daily market opening ceremony that takes place 5.5 hours later.

These products will allow nearly any retail client to gain exposure to the price of Bitcoin (BTC) using traditional brokerage applications and accounts, and allow traditional financial institutions to invest without going through a cryptocurrency exchange.

Cynthia Lo Bessette, head of digital asset management at Fidelity, one of the issuers of Bitcoin ETFs, said the ETFs provide more options for investors interested in digital assets. The latest offering differs from the U.S.-approved Bitcoin futures ETF in 2021, which invests in derivatives rather than the digital asset itself.

“We have long believed that spot-priced exchange-traded products would be an effective way for investors to gain exposure to Bitcoin,” she said. "As a company, we remain committed to meeting the growing needs of investors, providing them with tools that support their choices and facilitate safe access to the markets."

Similarly, a spokesperson for CBOE Global Markets said , theETF will provide investors with a “transparent and regulated” way to track Bitcoin prices. "This approval marks an important step in establishing cryptocurrencies as a tradable asset class, paving the way for new trading opportunities."

Liquidity Pools

With the launch of 11 spot Bitcoin ETF funds (some of which have billions of dollars in assets ready), liquidity providers and Market players have spent the past few months preparing for this day, ensuring that the Bitcoin market remains stable.

Douglas Yones, head of trading products at the New York Stock Exchange, said theBitcoin spot market, the Bitcoin futures market and the Bitcoin futures ETF will all provide liquidity for the spot ETF on day one. The NYSE also has a number of liquidity programs, he said.

He said:“For market makers in the market, we have dozens of market makers providing liquidity for the ETFs we are about to intervene in, and they have natural hedges. means.""We have a very good price discovery process that will proceed overnight on the New York Stock Exchange and into the open markets, so we expect the market to be very active and liquid tomorrow."

Robert Mitchnick, BlackRock’s head of digital assets, said in an interview that the asset manager will leverage its partnership with Coinbase. The company integrated Coinbase Prime with its own portfolio management tool, Aladdin, in 2021. While he would not reveal how much assets BlackRock had under management when it launched its Bitcoin ETF, he noted that the firm had disclosed a $100,000 seed investment.

"BlackRock is known to have made a seed investment in the ETF," he said. "One of the things that is really important to understand is that we think this is a long process."

Investor interest may grow slowly

Franklin Templeton Head of ETF Products and Capital Markets David Mann said in an interview that it is difficult to predict the inflows in the first few days. While he expects "a lot of excitement" about trading on the first day, he said interest and investment may grow more slowly than people think.

“I wouldn’t be shocked if the vast majority of ETF users who are now considering exposure to Bitcoin in an ETF vehicle would go through the normal review process to ensure they are comfortable with the ETF, which often takes time,” He said.

He said there could be "spurts" butit could take weeks or months for investors to get used to the Bitcoin ETF vehicle and verify that it behaves as they would like Ways to invest money.

BlackRock’s Mitchnick agreed, saying it will be a “long journey” for investors after launch. He cited wealth advisors as an example, saying they may be part of the largest investment channel for ETFs. Since they haven’t had much exposure to investment vehicles that include Bitcoin, there will be an “educational journey” before they allocate funds.

“There will be suitability conversations between advisors and clients,” he said. "It's not something that's going to be achievable out of the gate, even for institutional investors who to date haven't really had a viable solution for their exposure."