Bitcoin and Ethereum ETFs: The Wild Ride of In-Kind Transactions! 🚀💰

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Oh, what a jolly old time it is at the Cboe BZX Exchange! They’ve decided to tickle the fancy of the US Securities and Exchange Commission (SEC) with a cheeky little proposal to change the rules for the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH). Yes, indeed! They want to allow in-kind creations and redemptions, which sounds rather fancy, doesn’t it?

Now, this 19b-4 filing was sent off on January 27, and it’s only for the Authorized Participants (AP). You know, the special folks who get to play with the big toys! 🎩

Cboe’s Proposed Rule Change for Bitcoin, Ethereum ETFs

So, what on earth does “in-kind” mean? Well, it’s a rather delightful way of saying that instead of handing over cash like a boring old banker, these APs can swap their shiny Bitcoins or Ethereums for ETF shares. Imagine trading your marbles for a shiny new toy! If an AP wants to create new shares of a Bitcoin ETF, they simply deliver Bitcoin to the ETF issuer and voilà! They get ETF shares in return. Easy peasy, lemon squeezy! 🍋

And when it’s time to redeem those shares, they get Bitcoin back instead of cash. It’s like a magical game of musical chairs, but with digital coins! This clever little trick helps keep the ETF’s price in line with its assets, reduces transaction costs, and minimizes those pesky taxable events for investors. Who doesn’t love a good tax break? 😏

“Cboe BZX Exchange, Inc. (“BZX” or the “Exchange”) is filing with the Securities and Exchange Commission (“Commission” or “SEC”) a proposed rule change to amend the ARK 21Shares Bitcoin ETF (the “Bitcoin Trust”) and the 21Shares Core Ethereum ETF (the “ETH Trust” and, collectively with the Bitcoin Trust, the “Trusts”), shares of which have been approved by the Commission to list and trade on the Exchange pursuant to BZX Rule 14.11(e)(4), to permit in-kind creations and redemptions,” the filing read. Quite the mouthful, isn’t it?

But wait, there’s more! Just days before, Nasdaq was busy filing a similar application for BlackRock’s iShares Bitcoin Trust (IBIT). It’s like a race to see who can get the SEC’s attention first! 🏁

According to the ever-so-wise Bloomberg analyst James Seyffart, these in-kind creations and redemptions should make ETFs trade more efficiently. He believes they should have been allowed to do this from the very start. Well, better late than never, eh? 🎉

“The main point is that the In-kind model is way more streamlined with less steps and less parties involved (and it’s how the vast majority of ETFs operate),” the analyst posted on X. Sounds like a party I’d like to join!

Now, let’s not forget that the Bitcoin and Ethereum ETFs were given the thumbs up by the SEC in January and May 2024, respectively. And guess what? IBIT and Grayscale Ethereum Trust (ETHE) are the top performers, strutting their stuff like peacocks! 🦚

Meanwhile, our dear ARKB is still holding its ground as the fourth-largest Bitcoin ETF, with a whopping cumulative net inflow of $2.91 billion! It’s like a treasure chest overflowing with gold! As of January 27, it held $5.10 billion in total net assets and a cheeky 0.25% of the total Bitcoin market share. Not too shabby, eh?

On the flip side, CETH is the 8th largest Ethereum ETF, with a cumulative net inflow of $11.40 million and $16.77M in net assets as of January 27. It’s like the little engine that could, chugging along quite nicely!

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2025-01-28 11:08