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How are BTC spot ETFs different? A brief analysis of 3 types of BTC ETFs and 3 types of BTC futures

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BTC spot ETF market = BTC spot market

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Original author: TVBee

Editor's note: As 2023 draws to a close and we welcome the new year, the approval of Bitcoin spot ETFs by the US SEC is a topic of particular concern for every cryptocurrency user. Cryptocurrency blogger TVBee has explained the differences between three types of BTC ETFs on X, and BlockBeats has summarized them as follows:

BTC Spot ETF vs. BTC Futures ETF: What's the Difference? - A Graph to Help You Understand 3 Types of BTC ETFs & 3 Types of BTC Futures

First, let's talk about it

About BTC Futures

Currently, there are three mainstream BTC futures, including:

The first type: perpetual futures on platforms such as Binance and OKEx.

The second type: CME's BTC futures, which are settled in cash, so other than having a settlement period, they are similar to the first type.

The third type: BAKTT's BTC futures, which are settled in cash.

About BTC Futures ETF

Currently, the vast majority of BTC futures ETFs are based on CME's BTC futures.

About ETF

ETF (Exchange Traded Fund), is a type of fund that is traded on an exchange.

ETFs can be created based on a basket of assets or a single type of asset, which we can refer to as the underlying assets.

ETF represents a portion of ownership in the underlying assets. This means that ETF products support redemption, which is the exchange of ETF for an equivalent amount of underlying assets.

Therefore, ETF products cannot be issued out of thin air. The issuer needs to hold equivalent underlying assets before issuing ETFs.

3 Types of BTC ETF

Based on BTC spot, ETF.

Many industry practitioners believe that BTC spot ETF is a positive development, and this viewpoint is correct.

However, some people believe that "spot ETFs and futures ETFs are different. Futures ETFs can be approved, but spot ETFs have not been approved due to regulatory reasons. Therefore, when BTC spot ETFs are approved, it indicates that BTC has gained recognition in regulation, which is good news for BTC." This view is not entirely wrong, but it is not comprehensive.

BlackRock and other institutions' spot ETFs may be the biggest substantive positive news for BTC in history.

Due to the issuance of ETF products, it is necessary to hold equivalent underlying assets. To issue a BTC spot ETF, it is necessary to hold equivalent BTC spot. Therefore:

BTC Spot ETF Market = BTC Spot Market

That is to say, global large-scale financial institutions like BlackRock are likely to have new BTC investors who have not participated in the existing cryptocurrency market. These investors may be more accustomed to or restricted by regulatory conditions, and can only purchase ETF products issued by institutions. The greater the demand for BTC spot ETFs in the market, the more BTC spot institutions need to hold.

Therefore, the issuance of BTC spot ETF products by large financial institutions can bring incremental funds and a broader international market to BTC spot.

The BTC spot ETF market in Hong Kong can also expand the Asian market for BTC.

Based on BTC Futures ETF

Currently, multiple financial institutions have issued BTC futures ETF products. However, these BTC futures ETF products are based on CME's BTC futures, which are settled in cash. Therefore, the BTC futures ETF market cannot bring incremental funds to the BTC spot market.

基于现金的 BTC

Cash-based BTC

ETF based on cash-settled BTC, the issuing institution holds cash to issue BTC ETF, and cash is redeemed upon redemption. Naturally, it will not bring capital flow to the BTC spot market.