Coinbase researchers: The launch of a spot Bitcoin ETF in the U.S. may lead to two potential risks

2023-12-21 10:32:55

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ChainCatcher news, Coinbase's Head of Institutional Research David Duong and Senior Sales Trader Greg Sutton stated that the introduction of a spot Bitcoin ETF in the U.S. could lead to a "regulated" Bitcoin shortage. Once these ETFs begin trading, two key risks may arise: the first risk is that the launch of a spot Bitcoin ETF could create issues for institutional procurement of BTC, as issuers need to purchase enough Bitcoin to hold in the ETF; the second risk involves a more popular institutional trading strategy known as "basis trading," which refers to exploiting the price difference between the spot price of Bitcoin and Bitcoin futures contracts.

According to data from Velo, potential profits from basis trading have surged by 20% over the past two weeks due to a significant increase in trading volume of both spot and futures contracts for Bitcoin. However, as institutional investors increasingly invest directly in Bitcoin (through spot ETF products), the basis will narrow, leading to a substantial decrease in the profitability of the trades.

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