🔓🪙 Bitcoin ETF Coming Soon?
Happy Sunday,
It’s been a tumultuous week to start the New Year: a rocky stock market, an Alaska Airlines plane door blowing off mid-flight, a jet runway crash in Japan, and traders are revising their initial bets that the Federal Reserve would reduce interest rates six separate times this year, to just three.
In addition, we have a possible Bitcoin ETF approval coming up on January 10th - which has been met with a lot of speculation. Matrixport stated on Wednesday of this week that the Bitcoin ETF would not be approved, which caused Bitcoin’s price to dip 10-15% shortly thereafter.
I wanted to take this intro and quickly explain what a spot ETF does for Bitcoin, compared to the existing Grayscale Bitcoin Trust that already exists.
Broadly speaking, the point of a spot ETF is that it will track the price of Bitcoin, and it can easily create and redeem shares for Bitcoin. The Grayscale Bitcoin Trust does not have the flexibility to create or redeem shares, so it trades more like a closed-end fund which means that the price of GBTC often trades at a different price from Bitcoin itself. From 2020 to 2021, GBTC’s share price increased by approximately 220% in value while BTC surged by nearly 340%.
The main reason they don’t have this flexibility is because they lack SEC approval, and the reason for the difference in performance can also be attributed to GBTC’s high management fees of 2%.
A spot ETF would have to be backed by actual Bitcoin, so institutions would be more willing to invest in it. This should affect the overall demand for Bitcoin. Grayscale’s Bitcoin Trust on the other hand… simply put just tracks the price of Bitcoin / is tied to the price of Bitcoin.
I hope I did that explanation justice, if not, I’ll get better and perhaps make a video about it in the future.
Have a great week,
— Humphrey, Tim & Rickie
P.S. Discord community should be opening this week - be on the lookout for the invite in a future edition!
Market Report
In December, the U.S. labor market outperformed expectations, adding 216,000 jobs while maintaining an unemployment rate of 3.7%.
Despite this growth, the job gains were slower compared to the previous year, with notable increases in sectors like health care, government, and construction, but a decline in labor force participation and a rise in wage growth.
According to the Center for American Progress, 57% of workers are now earning more after adjusting for inflation compared to a year ago, with 41% experiencing a real wage increase of over 5%.
Although higher wages don't always offset the psychological impact of high prices, the decrease in inflation is leading to a reduction in dissatisfaction.
Bitcoin saw early gains in January, outperforming global markets and trading above $44,000, driven by expectations of the SEC approving the country's first spot Bitcoin ETF.
BlackRock, the world’s largest asset manager, expects the SEC to approve its application for a spot Bitcoin ETF this Wednesday.