Author: BEN STRACK, blockworks Compiler: Golden Finance, Shan Oppa

VettaFi’s Dave Nadig predicts that investors could move $10 billion in assets from Grayscale Investments’ Bitcoin Trust (GBTC) to Bitcoin OTC within two weeks if a Bitcoin over-the-counter fund (ETF) is approved Exchange-traded funds (ETFs). Industry observers say that although the prospect of a Bitcoin over-the-counter fund (ETF) entering the U.S. market is uncertain, if the SEC approves the issuance, it could become one of the largest ETFs ever.

The Bitcoin OTC fund could prompt investors to reallocate billions of dollars from Grayscale Investments’ Bitcoin Trust (GBTC), the Canadian Bitcoin ETF, and other cryptocurrency products. Bloomberg Intelligence analyst James Seyffart said in the ETF Prime podcast on July 5 that the Bitcoin OTC fund “could be the largest launch ever, or at least one of the largest.”

Meanwhile, a physically-backed Bitcoin ETF may be more popular because it meets more due diligence requirements, provides bankruptcy protection for fund issuers, and closely tracks Bitcoin prices. James Butterfill, head of research at CoinShares, said he expects demand for a physically-backed Bitcoin ETF to be higher, especially if an asset management giant like BlackRock launches the product.

GBTC asset restructuring?

According to CoinShares, assets in crypto investment products reached $37 billion last week, the highest level since June 2022. Dave Nadig, a financial futurist at data firm VettaFi, pointed out in the ETF Prime podcast that if the Bitcoin OTC fund is approved, GBTC investors can sell their GBTC shares and reinvest the funds in the Bitcoin OTC fund.

All approved at once? Who wins the asset?

After the spot Bitcoin ETF is approved, funds are expected to be reallocated, including the transfer of funds from Grayscale Investments and GBTC. There are currently eight Bitcoin ETFs on record, and other companies such as Global X, First Trust and Charles Schwab may also launch similar products.

Industry observers suggest that the SEC should approve multiple proposals at the same time, rather than letting a single company launch first, to avoid adversely affecting the market. Factors such as brand influence, capital market depth and number of institutions may play an important role in which Bitcoin ETF can take the lead in the market.

Exchanges will also stand to gain more from listing winning products because they are paid primarily on trading volume rather than asset size. Even if a fund has just $1 billion in assets, it could still become one of the most traded ETFs ever.