The approval of another Bitcoin futures fund is not something new for the cryptocurrency market, but with Teucrium Fund, we potentially saw the first approval of the ETF under the Securities Act of 1933, which is the filling for spot-based ETPs, according to an SEC order.
A decision on Teucrium's funds should have been made back in January, when many funds were filing for registration of their own ETPs, but the regulator postponed the decision to April.
Alex DovbnyaThe approval of the new fund will put the SEC in a position where it would need stronger arguments and to avoid rules violations during the next hearing on a spot Bitcoin ETP since the commission denied all applications for such a product in the past.
It is not yet clear if we will see a drastic increase in the number of spot-based Bitcoin ETPs in the upcoming weeks or months, but companies now have legal grounds for a discussion with the commission if it denies another application.
Why are spot-backed ETPs superior to derivatives-backed products?
The main reason why investors tend to choose spot-backed products over derivatives is an additional loss that they face when entering a fund that tracks the derivation of the actual financial assets rather than its spot market pair.
Once futures reach their expiration periods, the fund has no other choice but to purchase the next month’s products at a significant premium, which lies on the shoulders of regular investors. We should also add management fees and additional costs for managing the ETF, and then we will have the approximately 12% that investors lose annually by receiving indirect exposure via futures-based ETPs—which could have been avoided with a spot-backed Bitcoin fund.
Alex Dovbnya
Vladislav Sopov
Dan Burgin