Bitcoin futures premium doubles ahead of SEC’s potential approval of an ETF next week

Bitcoin
Bitcoin
  • Bitcoin futures premium has doubled this month as the SEC rules on the potential of approval of several ETFs.
  • SEC Chairman has recently voiced his support for bitcoin ETFs that hold futures contracts rather than directly holding bitcoin.
  • The SEC is set to either approve, deny, or delay bitcoin ETF proposals from four firms over the next two weeks.
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The premium tied to bitcoin futures contracts has doubled this month as investors anticipate the SEC's potential approval of several bitcoin ETFs over the next two weeks.

The SEC is set to either approve, deny, or delay bitcoin ETF proposals from ProShares, Valkyrie Investments, Invesco, and VanEck, which were all submitted to the regulatory agency in August.

While still wary of a pure bitcoin ETF due to concerns for potential fraud, SEC Chairman Gary Gensler has voiced his support in recent weeks for a bitcoin ETF that buys underlying futures contracts on the cryptocurrency rather than directly buying bitcoin itself.

Since Gensler has made clear his thoughts on the possibility of bitcoin futures-based ETF, several issuers have submitted new ETF applications that would utilize that same approach, including Cathie Wood's ARK Invest.

With approval of a bitcoin futures ETF looking more likely than ever, the annualized premium of CME bitcoin futures prices over bitcoin's spot value was 15%, compared to an average of 7.7% over the first nine months of the year, according to the Wall Street Journal.

Given that there could very soon be a surge in demand for bitcoin futures contracts due to the onslaught of new ETFs, the Chicago Mercantile Exchange is planning to raise the limit on the number of bitcoin futures contacts a single firm can hold.

The SEC also seems to be ramping up education about bitcoin futures contracts ahead of their decision on the ETFs later this month. On Thursday, the SEC Investor Education Twitter account shared a link to more information on bitcoin futures and said, "Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits."

Whichever firm receives approval for the first bitcoin futures-based ETF could see a significant first-mover advantage as investors seek exposure to bitcoin in their traditional brokerage and retirement accounts. Bitcoin is up more than 30% so-far in October, and is up just over 100% year-to-date.

Bitcoin price chart
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