Recent market volatility has put a spotlight on spot-Bitcoin exchange-traded funds (ETFs). As reported by Bloomberg, several major US-listed Bitcoin ETFs experienced record-high discounts to their net asset value (NAV) after Bitcoin itself saw a significant price drop. This raises questions about the unique challenges of these investment vehicles in a volatile market.
Bloomberg data shows that funds like the iShares Bitcoin Trust (IBIT) and the Fidelity Wise Origin Bitcoin Fund (FBTC) traded well below their NAV. ETF analyst James Seyffart notes that while these discounts aren’t unprecedented, they do stand out given the historical range of premiums and discounts for these funds.
Experts offer explanations for this phenomenon. Teddy Fusaro, president of Bitwise, attributes the dislocations to factors like end-of-month rebalancing and Bitcoin’s price-calculation mechanisms used by ETFs. These factors can lead to temporary discrepancies between market prices and NAV.
However, Bloomberg underscores that Bitcoin’s inherent volatility poses unique complexities for ETF investors compared to traditional asset classes. This same volatility also creates lucrative opportunities for authorized participants, the specialized traders responsible for maintaining price alignment between ETFs and their NAV.
Virtu Financial Inc. CEO Douglas A. Cifu, as reported by Bloomberg, highlights these volatility-driven opportunities as a reason for continued optimism in crypto ETFs, despite the recent discounts.
The current macroeconomic climate, with the potential for delayed Federal Reserve rate cuts, adds further pressure to the crypto market. As Bloomberg notes, speculative assets like Bitcoin often struggle in such environments.
WallachBeth Capital’s ETF director Mohit Bajaj suggests that the observed discounts could persist depending on Bitcoin’s price trajectory.
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