Novum Alpha
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Novum Alpha

Bitcoin is Bubbling on ETFs and Stimulus

  • Fiscal stimulus is fueling Bitcoin towards a new all-time-high as risk-on sentiment is fueling inflows into the cryptocurrency
  • Race to launch a Bitcoin ETF is heating up in the U.S. with Grayscale the latest to launch another attempt and hiring a dedicated ETF team to get across the finish line

Although the ink on Biden’s stimulus checks is barely dry, investors are spending money like it’s free.

Risk-on sentiment has gained momentum again and helped push Bitcoin close to its record high set last month, as U.S. President Joe Biden signed the US$1.9 trillion pandemic relief bill into law.

Over the past month, every correction in Bitcoin has presented an opportunity for investors to load up, with each subsequent dip shallower than the previous one, and offering more investors a chance to join in to restart the move upwards.

Up more than seven-fold in the past year amid increasing institutional interest, Bitcoin maximalists are also eagerly anticipating more activity in the ETF market.

An ETF or exchange traded fund would provide easy retail access to Bitcoin for investors, something that has thus far eluded the space.

While Bitcoin ETF-like instruments exist elsewhere, including in Europe and now Canada, there is a growing sense that the holy grail of ETFs, a U.S.-based ETF is close to the finish line.

Even Grayscale, creator of the infamous “Grayscale Premium,” the difference between the cost of a share in Grayscale Bitcoin Trust and the price of Bitcoin, the underlying asset it is meant to track, has thrown its hat into the ETF ring.

A recent search of LinkedIn has revealed that Grayscale, the world’s first institutional-grade gateway to Bitcoin, is looking to hire an entire ETF team from the ground up.

The race to launch a U.S. Bitcoin ETF is heating up, with U.S. regulators already considering several filings for a Bitcoin ETF, including ones from VanEck Associates and Bitwise Asset Management.

Allegations of price manipulation and large swings in the underlying asset have previously been hurdles for a Bitcoin ETF, but competition from other jurisdictions which have gone ahead to approve Bitcoin ETFs may be what eventually sways U.S. regulators.

And first mover advantage matters, which could be why Grayscale is scrambling to throw their hat in the Bitcoin ETF ring.

Last month Canada’s Purpose Bitcoin ETF saw far higher trading volume out the gates than Evolve Fund Group’s Bitcoin ETF, which launched just a day later.

To be sure, Grayscale had filed to create a Bitcoin ETF in the past with the U.S. Securities and Exchange Commission, but it doesn’t currently have any active filing.

Alternatively, Grayscale could simply roll up its US$35 billion Grayscale Bitcoin Trust, the largest Bitcoin fund in the world, into an ETF, which from many regulatory angles would be the simplest and neatest way to get started.

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Phuong Nguyen

Phuong Nguyen

Business Development of Novum Alpha, a leading quantitative cryptocurrency trading firm that specializes in Managed Account and DeFi products