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Nasdaq’s Hashdex mixed Ether ETF filing joins crypto ETF race

September 13, 2023 Coin Telegraph

Coin Telegraph

Known as the Hashdex Nasdaq Ethereum ETF, this investment fund is the first filing for futures and spot Ether holdings under the ‘33 Act and is overseen and supervised by Toroso Investments.

The Nasdaq stock exchange has submitted an application to the Securities and Exchange Commission (SEC) seeking approval to list an Ethereum Exchange-Traded Fund (ETF) offered by Hashdex, an asset management company. This ETF is designed to include a combination of spot ether holdings and futures contracts in its portfolio and pioneering a new approach to cryptocurrency investment within the regulatory framework.

Known as the Hashdex Nasdaq Ethereum ETF, this investment fund is the first '33 Act Ethereum futures filing of futures Ethereum under the ‘33 Act and is overseen and supervised by Toroso Investments. Toroso Investments is registered as a commodity pool operator with the Commodity Futures Trading Commission (CFTC) and is also a member of the National Futures Association.

The current surge in cryptocurrency ETF applications has placed significant emphasis on whether the proposed funds intend to include futures contracts or spot assets. While the SEC has granted approval for the former, the latter remains unapproved. Fund managers appear to be exploring a middle-ground option, testing their chances in this regulatory landscape.

The primary investment goal of the Hashdex fund is to ensure that its shares mirror the daily fluctuations in the Nasdaq Ether Reference Price. To achieve this objective, the fund intends to allocate its assets to investments in ether, ether futures contracts traded on the CME, as well as cash and cash equivalents. Nasdaq said in the 19b-4 form:

"Instead of holding 100% spot Ether, which could make it more susceptible to price manipulation in the spot market, the Fund will hold a mix of Spot Ether, Ether Futures Contracts, and cash,"

The Fund aims to decrease its reliance on the spot market and address worries regarding potential manipulation in unregulated Ether spot exchanges by including Ether Futures Contracts and cash in its holdings, it elaborated.

Hashdex joined the competition for a spot Bitcoin (BTC) exchange-traded fund in the United States. However, Hashdex’s approach differs from recent filings as it won’t depend on the Coinbase surveillance sharing agreement, opting to acquire spot Bitcoin from physical exchanges within the CME market.

In the previous week, both Ark Invest and 21Shares submitted applications to the SEC for a spot ether ETF, a type of ETF also being pursued by VanEck. The SEC has thus far deferred its determinations on all the applications it has received for spot cryptocurrency funds.

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Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

‘Binance is the crypto market’: Arcane crowns the exchange 2022’s winner

January 4, 2023 Coin Telegraph

Arcane

Following the fallout of FTX, implementing zero fee BTC trading and some notable global acquisitions Binance’s market dominance has surged throughout 2022.

During a year plagued by crises such as the collapse of FTX and Celsius, data shows that crypto exchange Binance has emerged as the clear “winner” of 2022 according to Arcane Research.

A Jan. 3 report from Arcane highlighted that Binance saw its market dominance soar throughout 2022. As of Dec. 28 last year it had captured 92% of the Bitcoin (BTC) spot market and 61% of the BTC derivatives market by volume:

“There are no other evident ‘winners’ of 2022 other than Binance when it comes to the crypto market structure and market dominance. No matter how you look at it in terms of trading activity, Binance is the crypto market.”

Binance’s BTC spot market dominance was 45% at the start of 2022 meaning that it more than doubled, while its share of the BTC derivatives market increased by almost one third.

*Real BTC daily volume vs Binance spot volume vs Binance market share. Source: Arcane Research.*

The “spot trading volume” is an indicator that measures the total amount of Bitcoin being transacted on spot exchanges on any given day.

The report suggests the increase in Binance’s BTC spot market dominance predated the fallout of the second largest exchange by volume FTX, and began to surge after it removed fees for certain trading pairs on Jul. 7, 2022.

The exchange also made some notable acquisitions to boost its global coverage in 2022 such as the Japanese trading platform Sakura Exchange BitCoin and Indonesian digital currency brokerage firm Tokocrypto.

Binance has been one of the few exchanges to increase the number of staff it employs over the year while its peers such as Kraken and Coinbase have been forced to lay off staff during the current crypto winter.

Looking ahead to 2023, Arcane predicted in a Dec. 30 report that Binance would implement trading fees again in 2023 which would lead to a “normalization of the market dominance.”

As noted in a Jan. 3 report from digital asset data firm CryptoCompare, removing fees allows exchanges to attract customers but they “must be wary to remain profitable” and “cannot employ this strategy for long periods of time without hurting their bottom line.”

Binance could also be subject to increased regulatory scrutiny in 2023 — particularly relating to its native token BNB (BNB) — as following the fallout of the FTX empire there has been an increased focus on crypto regulations globally.

Analysis from Bitcoin advocate Nic Carter suggested while Binance’s CEO, Changpeng Zhao, has been vocal about his support for exchanges providing proof-of-reserves (PoR), the PoR provided by Binance was incomplete as “it only covers Bitcoin, which only represents 16.5% of their client assets.”

Overwhelming support for Grayscale BTC Trust ETF conversion proposal

February 15, 2022 Coin Telegraph

Bitcoin

Investors air their thoughts as to why the SEC should approve the conversion of Grayscale’s BTC Trust into a spot ETF.

The U.S. Securities and Exchange Commission has allowed comments and feedback on a proposed rule change that would convert Grayscale’s Bitcoin Trust to a spot-based exchange-traded fund (ETF).

A notice of filing a proposed rule change to list and trade shares of Grayscale Bitcoin Trust as a spot-based ETF has generated a long list of comments with a large majority in approval.

Bloomberg’s senior ETF analyst Eric Balchunas had a look through some of the more recent comments on Feb. 15 observing that 95% are in favor of the proposed conversion.

Just glancing through the many comments from ppl to the SEC re converting $GBTC to an ETF and 95% are in favor of it and most using real names and pointing to the stupefying fact that futures ETF ok but spot not. eg: pic.twitter.com/j15iNYnh8R
— Eric Balchunas (@EricBalchunas) February 14, 2022

Several respondents to the SEC proposal argued that the regulator had already approved futures-based exchange-traded products so a spot-based product should logically come next. The U.S. risks falling behind other countries such as Canada which has already approved such investment products, others added.

A spot-based fund would be physically backed by the asset itself as opposed to backing by futures contracts from the Chicago Mercantile Exchange (CME) which is how existing Bitcoin ETFs operate.

Another comment pointed out that the current fund creates arbitrage opportunities that can take advantage of retail traders.

“The current structure of the closed end fund has led to price of the fund trading at a premium and discount to net asset value which has created arbitrage opportunities for more sophisticated traders to take advantage of unsuspecting retail investors.”

Grayscale’s Bitcoin Trust has been trading at a massive discount in recent months as investors speculate and hedge on the ETF being approved by the SEC. At the time of writing, the fund was trading at a discount of 24.75% according to Ycharts. This means that with BTC currently priced at around $43,600, the discounted fund price would be equivalent to around $32,500.

One investor said that he invested his life savings into the fund and is tired of the SEC trying to protect people, adding that the regulator is just out to “help the rich.” The financial regulator has repeatedly cited a lack of investor protection as a reason for delaying or rejecting crypto-based investment products.

Grayscale originally hinted at converting the world’s largest BTC fund into a spot ETF in October. On Feb. 4, the SEC delayed the decision on the conversion of the $37 billion GBTC fund citing the same familiar concerns regarding manipulation, liquidity, and transparency.

Grayscale hints at plans to convert Bitcoin trust into BTC-settled ETF

October 18, 2021 Coin Telegraph

Bitcoin

Grayscale looks to be seeking to restructure its Bitcoin Trust into a physically-backed fund after the SEC approved a Bitcoin futures ETF.

Institutional investment giant Grayscale is reportedly considering converting its Bitcoin Trust into a physically settled exchange-traded fund (ETF).

On Oct. 17, Barry Silbert, the CEO of Grayscale’s parent company Digital Currency Group, hinted that Grayscale is making plans to convert its Bitcoin Trust into a spot-settled Bitcoin fund.

After having taken to Twitter to criticize the cash-settled Bitcoin futures ETF recently approved by the U.S. Securities and Exchange Commission (SEC), Bitcoin commentator Preston Pysh chimed in to ask Silbert when Grayscale’s Bitcoin Trust would be converted into a BTC-settled ETF. “Stay tuned,” Silbert responded.

stay tuned
— Barry Silbert (@BarrySilbert) October 17, 2021

However, Grayscale Bitcoin Trust investors appear to have been unsettled by Silbert’s remarks, with Twitter user “svrgnindividual” questioning what a restructure would mean for investors holding shares in Grayscale’s Bitcoin Trust.

“What happens to us Grayscale investors once the spot ETF is approved? Is our investment converted into ETF shares?” they tweeted.

Rumors of Grayscale’s purported ambitions for a Bitcoin ETF began circulating late week after a CNBC report citing anonymous insiders claimed that Grayscale was waiting for the Securities and Exchange Commission to finally approve a Bitcoin ETF.

On Oct. 15, the SEC announced it had accepted the registration of securities from ProShares Trust’s futures-based Bitcoin (BTC) exchange-traded fund. ProShares’ ETF offers investors exposure to contracts that speculate on the future price of BTC that are settled in cash.

Despite the ETF’s approval being cited as the primary catalyst for Bitcoin’s recent bullish market action, many analysts have criticized the fund for its cash-settled structure, instead advocating for the SEC to approve a Bitcoin ETF that is backed by and settled in BTC.

According to Grayscale’s latest holdings update on Oct. 15, the firm boasts $52.6 billion in assets under management (AUM) — 73% of which is held in the Bitcoin Trust. The data suggests that Grayscale’s Bitcoin stash comprises roughly 620,000 BTC or 3.3% of Bitcoin’s total supply.

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