Crypto Expert Identifies ‘Major Issue’ With Spot Bitcoin ETFs

Daniel Roberts, the co-CEO of Bitcoin mining company Iris Energy, has raised a “major issue” with the Spot Bitcoin ETFs. This, he believes, could lead to a “major problem” in the long run as these funds continue to gain interest from more investors. 

What Is The Major Issue With Spot Bitcoin ETFs

Roberts raised concerns over Bitcoin’s limited supply in an X (formerly Twitter) post, something which he believes could be an issue with the Bitcoin ETFs. He noted how this class of ETFs happens to be the first with an underlying asset whose supply is capped at a particular amount. BTC’s maximum total supply is 21 million BTC, and no more can be mined after that.  

According to Roberts, a major problem could arise when these ETFs buy the 30% of available Bitcoin or if those holders also refuse to sell. Usually, to create more shares in the ETF, the issuer will need to acquire more BTC and hold them as the underlying asset for the fund. As such, Roberts’ concern stems from what could happen if there were no more Bitcoin to acquire. 

However, following his remarks, other X users tried to allay his concerns. One user in particular stated that this wasn’t exactly a problem as Bitcoin’s price would just increase until trades began to clear. This price increase will likely force some to sell as they will be looking to gain profits from their BTC investment. 

BTC price falls following spot ETF trading day | Source: BTCUSD on Tradingview.com

How Did The Spot ETFs Fare On Day 1

Bloomberg analyst James Seyffart provided some insights into how the Spot Bitcoin ETFs fared on their first day of trading. He mentioned in an X post that these funds recorded over $4.6 billion in trading volume, with Grayscale’s GBTC accounting for half of it. BlackRock and Fidelity came behind in second and third, recording just over $1 billion and $712 million, respectively. 

BlackRock may, however, have been the biggest winner on the day, as Seyffart hinted that a large portion of GBTC’s trading volume might have been outflows rather than inflows. Grayscale was reported to have put their fee at 1.5%, which is why the Bloomberg analyst argues that investors may have offloaded their GBTC shares for Spot Bitcoin ETFs with lower fees. 

ProShares Bitcoin Strategy (BITO) ETF also had quite a busy day, breaking its all-time volume record with $2 billion traded on the day. Bloomberg analyst Eric Balchunas suggested that redemptions might have accounted for some of the trades with investors of the BTC futures ETF moving their funds to a Spot Bitcoin ETF. 

Analysts at crypto analysis firm K33 had previously predicted that this was likely to happen as institutional investors will look to rotate some of their funds to the Spot ETFs.

Featured image from Freepik, chart from Tradingview.com