Bitcoin is back on the track and is trading at over $57,000. The coin is chugging towards its poised bull run for the fourth quarter. The star crypto has been receiving impeccable, acceptance and adoption in recent times. Which are all set for the next leg-up. The much-anticipated futures ETF are yet to arrive, which hold the potential to bring fortunes for the coin.
However, popular crypto traders and analysts, Lark Davis opine the other way round. He believes, the futures ETF to be inferior in comparison with the spot ETF.
Although, the futures ETF will pump the market post-approval. But it is the spot ETF, which market wants and needs. Moreover, the host of CNBC and a crypto trader, Ran Neuner, speculates the approval of three ETF’s by the end of October. To which the speculation of October 27th being very much important for the crypto space is making a huge noise. However, it is pretty unclear whether it’s related to Bitcoin ETF or not.
Bitcoin Futures & Spot ETF’s- A Glance
Bitcoin futures ETF are similar to conventional futures contracts. Where investors never take possession of the digital asset, while acquiring exposure to the values of Bitcoin. The futures ETF are backed by futures contracts. Due to market sentiments, the price of bitcoin futures may vary from the current price of Bitcoin. Hence, the price of Bitcoin futures ETF might follow the price of Bitcoin differently at times.
Bitcoin spot ETF is pretty different from the futures ETF. The spot ETFs are backed by the actual digital coin. And hence, there lie lower risks of price divergence with the spot ETFs. In simpler terms, it is like buying the real coin and not its substitute.
Why Are Crypto Traders Declined Towards Futures ETF?
The futures ETF withholds a significant number of perks over the spot ETF. And has a few shortcomings for traders looking out for investments.
- One of the biggest setbacks of futures ETF is the contango effect. This occurs when the future price, exceeds the spot price.
- When the futures contracts expire, the business issuing contracts must renew the contracts by selling the expiring ones. And buying the newer ones using the revenue from the sold ones.
- These might be prone to manipulations.
- If the price of the Bitcoin futures ETF is lower than the price of a new contract. The trader needs to shell out more for the same number of new contracts.
The shortcomings set apart, the introduction of the futures ETF, could possibly be a stepping stone towards spot ETF. As these hold the potential to accelerate Bitcoin and the industry in general to newer heights. With the speculations of the approval of three ETFs, we can expect a parabolic uptrend shortly.