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Breaking 10 billion in the first week, dig deeper into the big winner behind Bitcoin ETF

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There are 11 Bitcoin spot ETFs, more than 70 institutions participate, and Wall Street’s top capital is involved.

Original Title: "First Week Breaks 10 Billion, Digging Deep into the Big Winners Behind Bitcoin ETF"

Original Author: Peng SUN, Foresight News

On January 17th, Yahoo data showed that just one week after the US Securities and Exchange Commission (SEC) officially approved a Bitcoin spot ETF, its cumulative trading volume has exceeded $10 billion. Among them, Grayscale, BlackRock, and Fidelity dominate, accounting for about 90% of the total trading volume. Bloomberg analyst Eric Balchunas also stated that Grayscale's Bitcoin spot ETF has lost $500 million, and BlackRock is most likely to surpass Grayscale and become the "king of liquidity".

So, with such a huge trading volume of Bitcoin spot ETFs, besides the 11 issuers and their affiliates, which unknown institutions will benefit from it? Inspired by Diana Biggs, a partner at 1kx, in her article "Understanding the Status and Potential of Cryptocurrency ETPs Before the Launch of Bitcoin Spot ETFs", the author has fully combed through 11 latest Bitcoin spot ETF filings submitted to the SEC, and discovered that there are at least 24 ETF issuers and their affiliates, and at least 48 other stakeholders behind them. In other words, 72 beneficiaries have emerged, and top Wall Street capital represented by BNY Mellon, State Street Bank, UOB Bank, JPMorgan, Jane Street Capital, Macquarie Capital, and Virtu have also entered the game.

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Image source: 1kx

Trustee & Broker & Lender & Online Trading Platform & Execution Agent

Coinbase

Coinbase is the largest cryptocurrency exchange in the United States and has won a lawsuit against the U.S. Securities and Exchange Commission (SEC).

Currently, Coinbase has become the Bitcoin custodian for 8 institutional ETFs including ARK 21Shares, Bitwise, Grayscale, Wisdomtree, CSOP/Galaxy, BlackRock, Franklin Templeton, and Valkyrie. Additionally, Coinbase also serves as the primary broker, trading credit lender, inter-exchange venue, or primary executing agent for these 8 ETFs.

In addition, most ETFs' Connected Trading Venues also include Bitstamp, LMAX, Kraken, and four non-bank market makers who cannot be named due to confidentiality restrictions.

Gemini Trust Company, LLC

Gemini Trust Company, LLC is the custodian of VanEck's Bitcoin.

Gemini Trust Company is a cryptocurrency exchange owned by Tyler Winklevoss. In 2022 and 2023, cryptocurrency trading company Genesis filed for bankruptcy due to FTX's collapse, which led to Gemini being involved in debt disputes and legal proceedings with Genesis and its parent company DCG. Gemini also faced investigation and prosecution by the US government. On December 13, 2023, Gemini Trust sent an email to creditors outlining a proposed restructuring plan, which has now been submitted for a vote.

On the other hand, in April 2023, Gemini launched a non-US cryptocurrency derivatives platform called Gemini Foundation. On January 17, 2024, Gemini received approval from the French financial market regulator Autorite des marches financiers (AMF) to launch in France, and the company also stated that it will be launching its products to retail and institutional clients in France in the coming weeks.

Stock Exchange

Chicago Board Options Exchange (Cboe BZX Exchange)

Out of the 11 Bitcoin spot ETFs, ARK 21Shares, WisdomTree, CSOP/Galaxy, VanEck, Fidelity, and Franklin Templeton have chosen to list on the Chicago Options Exchange.

Cboe BZX Exchange's parent company is Cboe Global Markets (formerly known as CBOE Holdings, Inc.). Cboe is the world's largest options exchange and has been supporting the cryptocurrency and digital asset business in recent years. It has now launched a regulated cryptocurrency exchange and note exchange, Cboe Digital. Before the SEC approved the listing of Bitcoin ETF, Cboe Australia and Cboe Europe had already supported Bitcoin spot and Ethereum ETF products. On January 12th of this year, Cboe Digital also launched margin futures for Bitcoin and Ethereum.

NYSE Arca, Inc

Bitwise, Grayscale, and Hashdex have chosen to list their ETFs on NYSE Arca, Inc, a subsidiary of the New York Stock Exchange.

NYSE Arca, Inc is an all-electronic securities exchange under the New York Stock Exchange, formerly known as the Archipelago Exchange, which was established in Chicago in November 1994. In 2006, it merged with the New York Stock Exchange, making it the top exchange for ETF listing and trading in the United States, as well as trading over 8,000 securities listed in the United States. The New York Stock Exchange was founded in 1792 and is currently the largest stock exchange in the world.

Previously, futures ETFs for Bitcoin, Ethereum, and other cryptocurrencies have been listed on NYSE Arca, Inc. The New York Stock Exchange has also applied for a trademark focused on virtual goods and NFTs, including an "online marketplace" for offering NFTs and virtual goods.

NASDAQ

BlackRock and Valkyrie have chosen to list their ETFs on NASDAQ.

Nasdaq is an American electronic stock exchange, founded in 1971. It is currently the second largest securities exchange in the world, second only to the NYSE.

Nasdaq had previously cancelled its plans to launch cryptocurrency custody services in July 2023, but in September, it jointly applied with Hashdex for a spot Ethereum ETF called "Hashdex Nasdaq Ethereum ETF". In addition, Nasdaq Ventures, a subsidiary of Nasdaq, has a portfolio of investments in blockchain and digital assets.

Robinhood

On January 12, 2024, Robinhood announced that 11 Bitcoin spot ETFs are now available for trading to all US customers in retirement and brokerage accounts through Robinhood Financial.

Robinhood is a US stock and cryptocurrency trading platform that offers completely free services online. The company has received massive investments from top VC firms such as Sequoia Capital, Andreessen Horowitz, and Ribbit Capital.

Robinhood has launched its cryptocurrency wallet, Robinhood Wallet. Its subsidiary, Robinhood Crypto, was launched in Nevada in October last year.

Manager & Transfer Agent & Cash Custodian & Fund Accountant & Registrar

New York Mellon Bank

The Bank of New York Mellon, founded in 2007 through the merger of The Bank of New York and Mellon Financial, is primarily engaged in securities services and asset management.

New York Mellon Bank has been involved in the cryptocurrency and digital asset business for a long time. It has obtained approval from New York regulators to provide cryptocurrency custody services and has a dedicated digital asset department. The bank has participated in blockchain project investments and focuses mainly on compliance in the areas of digital currencies, tokenized securities, and blockchain payments. Caroline Butler, the global head of digital assets at New York Mellon Bank, is also a co-chair of the Global Digital Asset Market Committee of the US Commodity Futures Trading Commission (CFTC).

In this Bitcoin spot ETF, The Bank of New York Mellon serves as the ETF manager, transfer agent, and cash custodian for ARK 21Shares, Bitwise, Grayscale, JPMorgan/Galaxy, BlackRock, and Franklin Templeton. Additionally, The Bank of New York Mellon is also an authorized dealer for Hashdex and can participate in purchasing shares.

道富银行

translates to

Daofu Bank

in English.

State Street Bank and Trust Company, commonly known as State Street Global Services, is a subsidiary of State Street Corporation (founded in 1792 and the second oldest bank in the United States). It is a trust company headquartered in Massachusetts, providing services to mutual funds and their advisors, collective investment funds, corporations and public pension funds, insurance companies, operating companies, and non-profit organizations. As of June 30, 2018, State Street Bank surpassed Bank of New York Mellon to become the world's largest custodian bank.

In the field of encryption, Dao Fu Bank has also been committed to "multi-faceted solutions for tokenized securities and native tokens", and has an independent digital asset business. It has cooperated with the encryption custody institution Copper to launch cryptocurrency custody services and served as the manager of the encryption asset management company Iconic Holding.

The participation of Dao Fu Bank in the issuance of Bitcoin spot ETFs by WisdomTree, VanEck, and Fidelity is shown in the following table:

Bank of America

U.S. Bancorp is a bank holding company founded in 1891 in the United States. It is currently the fifth largest bank in the country with over 3,000 branches and more than $20 billion in assets. It ranks 117th on the Fortune 500 list and has been designated as a systemically important financial institution by the U.S. Financial Stability Oversight Council.

US Bank is one of the few banks that provides customers with a blockchain-based 24/7/365 digital payment solution, and launched its cryptocurrency custody service in 2021. It has also invested in Ownera, a securities tokenization infrastructure company, in the past.

U.S. Bancorp Fund Services, LLC, a subsidiary of U.S. Bancorp, is an investment advisory company that provides a single-source solution to support various investment strategies and products, including mutual funds, alternative investments, and ETFs. U.S. Bancorp Fund Services, LLC is the parent company of U.S. Bank N.A., and U.S. Bank Global Fund Services is a wholly-owned subsidiary of U.S. Bank N.A., providing custody, lending, fund, and banking services.

U.S. Bancorp Fund Services, LLC, U.S. Bank N.A., and U.S. Bank Global Fund Services participated in Valkyrie and Hashdex's ETFs. U.S. Bank, N.A. is the custodian of Hashdex ETF, and its subsidiary, U.S. Bank Global Fund Services, is the registrar, transfer agent, sub-administrator, and fund accountant of Hashdex ETF. U.S. Bank, N.A. is the cash custodian of Valkyrie ETF, and U.S. Bancorp Fund Services, LLC is the administrator and transfer agent of Valkyrie ETF.

Trustee

Delaware Trust Company

Delaware Trust Company is a provider of corporate trust and agency services, responsible for safeguarding assets and representing the interests of ETP holders or investors.

CF benchmarks

CoinDesk Indices

Lukka, Inc.

Coin Metrics

Virtu Americas LLC

Marex Capital Markets Inc.

Marex Capital Markets Inc. is the authorized trader for Invesco Galaxy Bitcoin ETF. It is a global financial services platform that provides market-making, execution and clearing, hedging and investment solutions, price discovery, as well as data and consulting services to financial market clients.

JP Morgan Securities LLC

J.P. Morgan Securities LLC is the authorized trader for the Bitcoin spot ETFs of four institutions: Jing Shun/Galaxy, BlackRock, Fidelity, and Hashdex.

Morgan Stanley Securities is an investment management company and a subsidiary of Morgan Stanley, providing global clients with wealth planning, education assistance, research, securities, brokerage solutions, consulting plans, and investment portfolio management services.

ING Bank & ING Bank Clearing US

The ABN AMRO Bank is an authorized trader for Hashdex ETF, while ABN AMRO Clearing USA LLC is an authorized trader for VanEck ETF.

ABN AMRO Bank is the third largest bank in the Netherlands, headquartered in Amsterdam and directly supervised by the European Central Bank. In September 2023, ABN AMRO Bank registered digital green bonds on a public blockchain using Tokeny and Fireblocks' digital wallet services. In November, ABN AMRO Bank provided clearing services for options trading conducted by Wintermute Asia, a cryptocurrency derivatives trading department under Wintermute, on CME Group.

The Clearing Corporation of the United States (CCP) is mainly engaged in the clearing business of listed stocks, options, and futures, with its headquarters located in Chicago.

In addition, Hashdex's authorized dealers include Goldman Sachs & Co., BNP Paribas, Credit Suisse, Citadel Securities LLC, Jeffries Group LLC, Mirae Asset Financial Group, Royal Bank of Canada, UBS Group AG, Societe Generale Group, and Wells Fargo Bank, N.A., to name a few.

Market Maker

Cumberland DRW LLC

Cumberland DRW is a cryptocurrency market maker that specializes in institutional-sized markets for Bitcoin and other cryptocurrencies, providing trading, settlement, investment management, and intraday trading services to US clients. Its parent company is the large trading firm DRW Holdings. Cumberland invests heavily in blockchain projects, and its on-chain activities have become a market indicator.

Cumberland DRW has served as the counterparty for the spot Bitcoin ETF trades of JPMorgan/Galaxy and Fidelity.

JSCT, LLC

JSCT, LLC is the parent company of Jane Street Capital, LLC. Although Jane Street Capital is the authorized trader for 10 ETFs, JSCT, LLC is still the market maker/trading counterparty for Grayscale, JPMorgan/Galaxy, Fidelity, and Franklin Templeton's 4 ETFs.

Flow Traders

Flow Traders is the market maker/trading counterparty for Grayscale, JPMorgan/Galaxy Bitcoin Spot ETF.

Flow Traders is a proprietary trading firm that provides liquidity to the securities market through high-frequency and quantitative trading strategies as a market maker. Flow Traders was originally founded in Amsterdam and has offices in New York, London, Milan, Paris, Cluj, Shanghai, Singapore, Chicago, and Hong Kong. Flow Traders is one of the largest ETP market makers in the world, providing liquidity to over 13,000 ETPs listed in North America, Europe, and the Asia-Pacific region. As of 2020, Flow Traders is the largest ETF market maker in Europe.

Flow Traders announced in 2019 that it would begin trading cryptocurrencies and invest in multiple Web3 projects, including Tonic, Ondo Finance, Elwood Technologies, Thalex, Pragma Network, Sei Labs and Sei Network, GoGoPool, Infinity Exchange, C3, Crossover Markets, Econia Labs, Membrane Labs, and Rulematch. Additionally, Flow Traders is one of the five market makers for Worldcoin's WLD token.

Flowdesk

Flowdesk is a grayscale market maker. This is a French encrypted financial services company that completed a $30 million Series A financing in June 2022, with participation from Coinbase, Ledger, and others. Currently, Flowdesk has been appointed by Forge, a subsidiary of French bank Societe Generale, as the new market maker for the Euro stablecoin EUR CoinVertible (EURCV).

StoneX Financial Inc. – FCM

In the S-1 document submitted to the US SEC on December 29, 2023, Valkyrie designated StoneX Financial Inc. as its primary liquidity provider (LMM). However, in the S-1 documents submitted on January 8th and 9th, 2024, Valkyrie did not mention StoneX Financial Inc. as its primary liquidity provider.

Currently, Hashdex has appointed StoneX Financial Inc.'s FCM department as the clearing broker for its ETF.

StoneX Group is an institutional-level financial services franchise operator that provides global clients with digital platforms, end-to-end clearing and execution services. Currently, StoneX Group offers over 300 OTC products with a trading volume of 4.4 trillion and its business scope covers more than 180 countries. StoneX Group was founded in 1924 and was officially listed on NASDAQ in 1994.

StoneX Financial Inc. is a subsidiary of StoneX Group. Its FCM division serves as the agent of StoneX Financial Ltd. (authorized and regulated by the Financial Conduct Authority in the UK) in the US, as well as a clearing member of the Commodity Exchange (COMEX) and the New York Mercantile Exchange (NYMEX), and a registered futures commission merchant (FCM) with the US CFTC.

Clearing Broker

Phillip Capital Inc.

Phillip Capital Inc. is also the clearing broker for Hashdex's Bitcoin spot ETF issuance.

Phillip Capital Inc. is a futures commission merchant (FCM) and brokerage trader under the Phillip Capital Group. It is headquartered in Chicago and was established in 2010. Phillip Capital Inc. has full clearing membership qualifications for the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), Commodity Exchange (COMEX), New York Mercantile Exchange (NYMEX), ICE US, NFX, and CFE. The Phillip Capital Group was founded in Singapore in 1975 and is regulated by the Monetary Authority of Singapore.

In terms of encryption, the Zhishang Exchange page shows that Phillip Capital Inc. provides cryptocurrency services. In 2022, Phillip Capital Group issued digital wine futures tokens based on wine, and its subsidiary Phillip Nova, established in 1983, provides cryptocurrency futures trading services.

Marketing Agent

Paralel Distributors LLC

Paralel Distributors LLC is the marketing agent for Valkyrie Bitcoin Spot ETF.

Paralel Distributors LLC is registered with the SEC in the United States as a broker-dealer and a member of the Financial Industry Regulatory Authority. The majority of its equity is held by Paral Technologies LLC. Prior to becoming a marketing agent for Valkyrie, the author did not find any evidence of Paralel Distributors LLC's involvement in the cryptocurrency industry.

Foreside

Foreside (Foreside Financial Group, LLC) is a provider of distribution and compliance services for clients in the asset management industry, offering regulatory and compliance consulting, distribution, registered representative licensing, chief compliance officer for funds, and financial executive services. Foreside Fund Services, LLC and Foreside Global Services, LLC are both wholly-owned subsidiaries of Foreside Financial Group, LLC.