GB Market Commentary 06/07/2022
by Marcus Sotiriou
Bitcoin is consolidating above $20,000 at time of writing, whilst negative sentiment remains among market participants. CoinShares reported inflows of $51 million into the newly launched product ProShares Short Bitcoin Strategy ETF (BITI). This product bets against the price of Bitcoin, showing that institutions are bearish on the asset. However, the inflows could be attributed to the product being one of the first to allow institutional traders to gain short exposure, as opposed to an increase in negative sentiment.
This increase in short bitcoin funds inflows comes weeks after institutional investors withdrew over $423 million from crypto focused funds. This is a result of the current uncertainty with the macro environment, as risks of a recession worsen.
Despite many institutions showing interest in a long Bitcoin spot ETF, the SEC rejected Grayscale’s recent application to convert the Grayscale Bitcoin Trust to a spot bitcoin exchange-traded fund (ETF). The SEC noted the failure by Grayscale Investments to respond to concerns about market manipulation and concluded that the proposal lacked a proper method of protecting investors.
Grayscale Investments, the world’s largest digital currency asset manager, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) challenging their decision.
Grayscale CEO Sonnenshein said, “We believe American investors overwhelmingly voiced a desire to see GBTC convert to a spot bitcoin ETF, which would unlock billions of dollars of investor capital while bringing the world’s largest bitcoin fund further into the U.S. regulatory perimeter.” Grayscale says 99% of letters submitted to the SEC support spot Bitcoin ETF. I agree with Sonnenshein and believe America’s delay may work against them as other countries offer Bitcoin spot ETFs first, with the Netherlands launching one next month. By aiming to protect investors, the SEC may be harming them instead as some turn toward the Futures ETF which is accompanied by intermediaries with added fees.