The U.S. Securities and Exchange Commission’s (SEC) potential approval of spot Bitcoin ETFs could trigger an influx of investments into the cryptocurrency market. If approved, about a dozen firms including BlackRock, Grayscale, Fidelity, and Galaxy/Invesco will need to purchase billions of dollars’ worth of Bitcoin to meet the expected demand from individual investors. This raises questions about the market’s readiness, though leading Wall Street companies appear to be well-prepared.
The Grayscale Bitcoin Trust, currently the largest Bitcoin investment vehicle with $26 billion in assets, indicates a strong appetite for BTC. The industry is confident in its ability to handle such an influx of investors, and key market players assert that Bitcoin trading has sufficient liquidity to absorb significant purchases.
To facilitate the trading of large capital amounts, two key players will be involved: Authorized Participants (APs) and market makers. APs create and use ETF shares, ensuring the ETF price aligns with the underlying assets, while market makers operate in secondary markets, trading on exchanges to help stabilize ETF share prices.
Leading Wall Street firms like JPMorgan Chase, Jane Street, and Cantor Fitzgerald have agreed to serve as APs for spot Bitcoin ETFs. Trading firm DRW, a significant liquidity provider, is also actively preparing for spot Bitcoin ETFs by securing BTC to fulfill potential orders.
Despite concerns about handling large Bitcoin orders, investors trust the market’s efficiency. The average daily Bitcoin trading volume of $22 billion, which can reach $40 billion, is deemed sufficient to meet ETF demand. Spot Bitcoin ETFs, if approved, will offer accessibility similar to traditional stocks, with their price effects depending on ETF demand and pace.
