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Wednesday, December 1, 2021

Bitcoin ETF Is In Danger Of Hitting Upper Limit

The Bitcoin ETF is on its track to reach a limit on the amount of futures contracts that it would be allowed to contain- after it became too popular too soon. After it started trading just a few days ago, the ProShares ETF went on to reach 1,900 contracts for the month of October, and currently, there is just a 2,000 front-month limit that was imposed by the Mercantile Exchange of Chicago.

As of now, there are already around 1,400 contracts for the month of November, and there is also an overall maximum limit of around 5,000 open contracts as reported by Bloomberg. One of the solutions to this problem would be to offer bigger contracts, but they would also be carrying the danger of distancing themselves too much from the prices of BTC. 

Bitcoin ETF Going Above The Level of Resistance

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Nate Geraci, the President of the advisory firm- the ETF store- has spoken about how the fund could start diverging itself from the established prices in the market. They further spoke about how the ETF was now being forced to obtain the price exposure of Bitcoin at far higher and higher prices as it moved through the futures curve. It is also being understood that the launch of products such as the Valkyrie BTC Strategy ETF, which will start its trading from the 25th of October, could dilute the demand for the fund of ProShares.

Eric Balchunas, the senior ETF analyst at Bloomberg, has spoken about how the momentum- even in the face of competing products- will be extremely hard to stop. In his report, he spoke about how the unprecedented early volume of this Bitcoin ETF did make it like a snowball that was simply tumbling down a hill- with most of the assets and liquidity begetting more liquidity and assets. 

Balchunas also believes that the success of the Bitcoin ETF may help accelerate the approval for another spot-based BTC ETF. 

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