Spot Bitcoin ETF Race Gets More Crowded
Pando Asset joins the race for a Spot Bitcoin ETF, filing with the SEC and selecting Coinbase as custodian. Grayscale amends trust agreement for Bitcoin Trust in preparation for ETF conversion
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Pando Asset became the latest company to seek approval for a Spot Bitcoin ETF. The Swiss firm filed an S-1 form with the Securities and Exchange Commission on Wednesday.
According to the filing, the Bank of New York Mellon would be the trust administrator, and Coinbase would serve as custodian. The use of Coinbase as a custodian is similar to what several other applicants have done to assuage the SEC's concerns about market manipulation.
The asset manager already offers several exchange-traded products tied to digital assets in Europe. With its application, Pando Asset becomes the 13th financial institution to apply for a spot in the Bitcoin ETF listing.
The high number of applicants contributes to the optimism that approval is imminent. However, even the firms recognize the intense competition that could result from the SEC approving several applications simultaneously. Pando Asset stated there is a risk of its own ETF failing to "acquire substantial assets, initially or at all" if the SEC approves all or several pending applications.
Grayscale Amends Trust Agreement
Meanwhile, Grayscale has updated the trust agreement for Grayscale Bitcoin Trust for the first time since 2018. The firm disclosed the changes in a filing on Wednesday and stated that shareholders have 20 days to vote on the proposal.
The two modifications will optimize the GBTC structure and are likely done in anticipation of the conversion into Spot Bitcoin ETF. This is especially important given the competition among multiple firms. Although Grayscale claimed that the changes are not essential for its planned conversion to ETF, it added that it is ready to convert from Trust to Spot ETF.
The first modifications to the agreement changed the period for paying fees to include daily payments. Before now, Grayscale has been collecting fees monthly. The second and more significant update allows the mixing of assets in omnibus accounts. This could facilitate easy creation and redemption of stocks.
One change GBTC Investors anticipate is the reduction in fees as the fund seeks to convert into an ETF. Currently, Grayscale charges a custody fee of 2%, significantly higher than the proposed average fee of 0.7% to 1% charged by other applicants for spot Bitcoin ETF. The high rate has been a concern for some time and poses a competitive risk to GBTC once it converts to ETF. However, Grayscale is considering reducing the fee, although a final decision has yet to be made.
Spot Bitcoin ETF Approvals Most Likely in This Cycle
Despite the recent delays by the SEC, Analysts put the odds of approval at 90% for this cycle. With the cycle ending by January 10, most debates surround whether SEC approval will come this year or early 2024.
Given the current conditions, most investors are betting on early 2024. Options data for December 1 shows that fewer investors are bullish on any short-term BTC price surge and expect any major increase with ETF approvals in January.
Meanwhile, the SEC is hard at work in the background. The regulator recently opened public comments for applications from Frank Templeton and Hashdex. Its staff also met with BlackRock and Invesco representatives recently.
The meeting resolved the SEC's questions about the in-kind model for the balance sheet and how it affects the market maker's broker/dealer entity (MM-BD). BlackRock submitted a revised model according to its presentation.
