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What is the current status of compliant cryptocurrency products as the Bitcoin spot ETF approaches?

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According to the classification of underlying assets, these products can be divided into two categories: physical collateral and synthetic collateral.

Original Title: "Bitcoin Spot ETF Approaching, What is the Current Status of Cryptocurrency Compliance Products?"

Original Source: DigiFT RESEARCH

ETF Outlook: The Revival of the Cryptocurrency Market

With the gradual entry of cryptocurrencies into the mainstream view over the past decade, starting with Grayscale's GBTC, the flow of funds from traditional markets into the cryptocurrency market has received increasing attention. The recent market recovery is closely related to traditional institutions: according to CoinShares' statistics on the flow of encrypted assets, there have been more than ten consecutive weeks of net inflows since early October, except for a small amount of selling in December. The price of Bitcoin has also risen from around $25,000 to over $45,000.

It is widely believed that this is an expression of investors' expectations for the US SEC to approve Bitcoin spot ETFs from multiple traditional asset management giants in January. Based on past ETF approval processes, the longest time the SEC has given for final approval is 240 days. Hashdex and Ark&21 shares, as the earliest institutions to submit applications for Bitcoin spot ETFs in this batch, must be approved by the SEC by January 10, 2024. If this Bitcoin spot ETF is approved, it is highly likely that subsequent institutions such as BlackRock and Fidelity will also be approved for their Bitcoin spot ETFs.

Before the approval of a Bitcoin spot ETF in the United States, the capital market had already had compliant channels to gain exposure to cryptocurrency assets. As early as 2013, Grayscale's GBTC had already launched, allowing investors to purchase shares of the GBTC trust through traditional brokerage channels and indirectly hold Bitcoin.

In the past few years, there have been hundreds of ETPs related to cryptocurrency assets listed on traditional trading markets in Europe, and investors in the relevant regions can purchase cryptocurrency assets through traditional channels. Large asset management giants have also issued Bitcoin spot ETF products in non-US capital markets, such as the Bitcoin spot ETF FBTC launched and traded by Fidelity on the Toronto Stock Exchange (TSX) in Canada in 2021.

There is no shortage of channels to purchase cryptocurrency assets in the market, so why is there such a focus on the US Bitcoin spot ETF? What are the differences between this type of product and existing compliant channels for purchasing cryptocurrency assets?

Compliance status of encrypted asset investment channels

According to CoinShares, a digital asset issuance agency, the weekly statistics of the global compliance cryptocurrency asset products' fund flow are collected. The data includes products issued by major institutions, investments in cryptocurrency assets, and products traded in traditional financial channels, including various ETPs (Exchange Traded Products) and trust products. This data can reflect the flow of funds in traditional finance, especially the investment funds of institutional investors in cryptocurrency assets. The latest data is as of December 31, 2023. The asset management scale of each region is divided according to the location of the exchange:

These channels mainly invest in assets:

The main asset provider is:

Among them, the top five asset management issuers in terms of scale and their product structures are as follows:

Grayscale Investments LLC

· Introduction: Grayscale Investments is a leading global cryptocurrency asset management firm headquartered in the United States. Founded in 2013, Grayscale is a subsidiary of Digital Currency Group and launched the Bitcoin Trust product GBTC in the same year.

· Main products: Grayscale Bitcoin Trust (GBTC)

· Legal structure: Trust (physical collateral)

· Fee: 2% management fee.

· Trading Platform: OTCQX

· Issue Date: 2013.09.25 (inception date)

· Investor requirements: Only open to qualified investors and institutional investors.

· Issuer's total AUM of encrypted assets: 33,370 (unit: million US dollars, as of December 31, 2023).

CoinShares XBT

· Introduction: CoinShares is a leader in the cryptocurrency ETP industry, providing investors with convenient and reliable exchange-traded products (ETPs) for accessing a diverse range of digital assets. CoinShares' XBTProvider is the first entity in Europe to offer compliant products that allow investors easy access to Bitcoin and Ethereum.

· Main products: Bitcoin Tracker One (COINXBT SS)

· Legal structure: Tracking Certificate (Synthetic Guarantee)

· Fee: 2.5% management fee.

· Trading Platform: Nasdaq Stockholm

· Release Date: 2015.05.18

Investor Requirements: Nordic Retail Investors.

· Issuer's total AUM of encrypted assets: 2,374 (in millions of US dollars, as of December 31, 2023).

21 Shares AG

· Introduction: 21Shares is the world's largest issuer of cryptocurrency exchange-traded products (ETPs), established in 2018 and headquartered in Zurich, Switzerland. Its products include the first physically-backed Bitcoin and Ethereum ETPs traded on exchanges.

· Main products: 21Shares Bitcoin ETP (ABTC)

ProShares ETFs

Purpose Investments Inc ETFs

Compared with other existing financial products in the current market, why is the SEC-approved Bitcoin spot ETF so important? There are two main reasons:

· More investors. The United States is one of the largest financial markets, and Bitcoin spot ETFs listed on mainstream exchanges can reach qualified investors, institutional investors, and retail investors at the same time. Trust products such as GBTC can only be traded by qualified investors in the OTC market, and similar Bitcoin spot ETF products are traded on exchanges in Europe, Canada, and other regions. Compared with the US market, the liquidity is worse and the fund size is smaller.

· More diversified investment channels. Traditional asset management departments, such as various fund managers and financial advisors, find it difficult to incorporate cryptocurrency assets into their investment portfolios without Bitcoin spot ETFs.

更好的接受度： Better acceptance:

· Solved the compliance issue of encrypted assets; these products will have higher compliance clarity, attracting more investment and the development of related ecosystems.

As the largest capital market, if the Bitcoin spot ETF is approved, it will have a huge impact on the cryptocurrency asset market. These impacts are not only the influx of more extensive sources of funds, but also the compliance of various Bitcoin network participants around the world, as well as changes in Bitcoin network activities. We will continue to observe the impact of these asset compliance on cryptocurrency assets and look forward to shaping a new generation of capital markets with cryptocurrency assets.