Bitcoin near six-month high amid inflation concerns as first futures ETF looms ahead
Analysts predict at least one Bitcoin futures-based exchange traded fund (ETF) will debut in the U.S. this month. The fund would purchase Bitcoin futures contracts, mainly trading on the Chicago Mercantile Exchange (CME) or another regulated exchange. This will be done in an effort to imitate the largest cryptocurrency’s price performance rather than buying it.
If Wall Street shows these ETFs support, the spread between spot prices and futures prices would grow, increasing yields from a strategy known as ‘cash and carry.’ This involves selling futures contracts and buying the asset in the spot market at the same time.
Ilan Solot, global market strategist at Brown Brothers Harriman, told CoinDesk:
If the futures ETF comes out, there will be more inflows into buying futures. That would drive the futures curve further into contango [a situation where the futures contracts trade at a premium to the spot price], offering a strong incentive to carry traders. They would start the trade by buying BTC in the spot market, creating an initial push up in spot prices.
Possibility to lock in returns of more than 20% p.a.
As futures premium, or the spread between spot prices and futures prices, reached 20% on CME and other exchanges earlier this year, cash and carry trades became very popular with institutions. It may be possible to lock in annualized returns of over 20% by selling three month or front month futures contracts and purchasing coins in the spot market. However, FTX, Binance, and other exchanges reduced leverage after the big Bitcoin loss of value in May and premiums dropped to single digits.
Inflation concerns increase appetite for Bitcoin
Escalating global inflation concerns are contributing to the growing interest in Bitcoin, which is in limited supply. On that note, Makoto Sakumra of NLI Research Institute told Reuters:
Unlike its previous rallies, there doesn’t seem to be much of exuberance in the market. A growing number of investors started to think inflation may not be temporary and it is possible that bitcoin is getting chosen as a hedge against inflation.
ProShares to launch tomorrow?
The ProShares Bitcoin Strategy ETF filed an application exactly 75 days ago. Unless the U.S. Securities and Exchange Commission (SEC) explicitly objects, ProShares could begin trading on Tuesday, Reuters reports.
Bitcoin recorded the six-month high of $62,944 on Friday, which is not far from its all-time high of $64,895 in April. Ethereum was changing hands for around $3,866.