TL;DR
This paper analyzes the premium and discount behaviors of Bitcoin ETFs in early 2024, highlighting their unique risks compared to traditional ETFs and providing insights for better risk management in digital asset investments.
Contribution
It offers a novel analysis of Bitcoin ETF premium/discount patterns and identifies specific risk factors, enhancing understanding of liquidity risks in digital asset ETFs.
Findings
Bitcoin ETFs exhibit distinct premium/discount patterns from traditional ETFs.
Identified risk factors contribute to premium/discount deviations.
Provides insights for improved risk management in digital asset investments.
Abstract
The year 2024 witnessed a major development in the cryptocurrency industry with the long-awaited approval of spot Bitcoin exchange-traded funds (ETFs). This innovation provides investors with a new, regulated path to gain exposure to Bitcoin through a familiar investment vehicle (Kumar et al., 2024). However, unlike traditional ETFs that directly hold underlying assets, Bitcoin ETFs rely on a creation and redemption process managed by authorized participants (APs). This unique structure introduces distinct characteristics in terms of premium/discount behavior compared to traditional ETFs. This paper investigates the premium and discount patterns observed in Bitcoin ETFs during first four-month period (January 11th, 2024, to May 17th, 2024). Our analysis reveals that these patterns differ significantly from those observed in traditional index ETFs, potentially exposing investors to…
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Taxonomy
TopicsBlockchain Technology Applications and Security