A brief analysis of the differences between BTC spot and ETF

What are the differences between BTC spot ETFs? One chart shows you 3 types of BTC ETFs & 3 types of BTC futures

Let’s start with some science

About BTC Futures

There are currently three mainstream BTC futures:

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

The second type: CME's BTC futures are settled in cash, so except for the settlement period, everything else is similar to the first type.

The third type: BAKTT’s BTC futures, this type of BTC futures is settled in spot.

About BTC Futures ETF

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

About ETFs

ETF (Exchange Traded Fund), exchange traded fund.

ETFs can be created based on a basket of assets or a certain type of asset. We can call these corresponding baskets of assets or certain assets the underlying assets or underlying assets.

ETFs represent a portion of the ownership of the underlying assets, which means that ETF products support redemption, that is, exchanging the ETF for an equivalent value of the underlying assets.

Therefore, ETF products cannot be issued out of thin air. Issuers need to hold underlying assets of equal value before they can issue ETFs.

3 BTC ETFs

ETF based on BTC spot

Many friends think that BTC spot ETF is good news, and this view is correct.

However, some people think that "spot ETFs are different from futures ETFs. Futures ETFs can be approved, but spot ETFs have not been approved because of regulatory reasons. So when BTC spot ETF is approved, it means that BTC has been recognized by regulators, which is good for BTC." This view is not wrong, but it is not enough.

Spot ETFs from institutions such as BlackRock may be the biggest substantive positive in the history of BTC.

Because issuing ETF products requires holding an equivalent value of underlying assets. To issue BTC spot ETFs, you need to hold an equivalent value of 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 crypto market. They are more accustomed to or restricted by regulatory conditions and can only buy ETF products issued by institutions. The greater the market demand for BTC spot ETFs, 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.

Hong Kong's BTC spot ETF market can also expand the Asian market for BTC.

ETFs based on BTC futures

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

BTC based on cash

ETF is based on cash BTC. The issuing institution holds cash to issue BTC ETF, and redeems cash when redeeming. Naturally, it will not bring capital flow to the BTC spot market.