Some of the world’s largest market-making firms could provide liquidity for BlackRock’s highly anticipated Bitcoin ETF product if regulators approve the product, according to a person with knowledge of the matter.
“BlackRock, market maker network talks to the balls!”
According to the allegation, BlackRock is in talks with trading giants Jane Street, Virtu Financial, Jump Trading and Hudson River Trading for the Bitcoin ETF product. Meanwhile, BlackRock, Jane Street, Virtu, Jump and HRT did not make an official statement on the issue. The US regulatory crackdown on crypto this year, which appears to be a reaction to the FTX implosion and other 2022 scandals, has persuaded some US firms to reduce their activities in the field. Bloomberg reported in early May that Jane Street and Jump restricted crypto trading amid this crackdown.
Assuming the U.S. Securities and Exchange Commission approves some or all of the dozen or so applications for Bitcoin ETF products, it would open up a new avenue for U.S.-based firms to get some action in crypto in a way that plays to their traditional strengths. Becoming a market maker for ETFs traded on exchanges, just like stocks, requires a level of sophistication and automation that only relatively few companies can achieve.
Will the Bitcoin ETF journey have a happy ending?
Market makers are vital for ETFs. They are responsible for creating and redeeming new shares of an ETF. This is a role designed to keep the ETF price tied to the price implied by the value of the ETF’s assets. One of the best examples of why such a creation and redemption structure is important actually comes from crypto. Grayscale Investments offers a product called Grayscale Bitcoin Trust (GBTC). The price of this product has moved dramatically away from Bitcoin (BTC), which is worth billions of dollars over the last few years. Unlike a Bitcoin ETF product, shares of this trust cannot be redeemed for BTC. That’s why Grayscale filed to convert GBTC into a Bitcoin ETF.
cryptokoin.comAs you follow from , the SEC rejected Grayscale’s first application for conversion. But in August a court criticized the regulator’s reasoning. The SEC decided not to appeal this decision in October. Additionally, experts evaluate that this move increases the likelihood of Bitcoin ETF products becoming a reality in the United States. James Butterfill, research manager at CoinShares, a provider of products traded on the crypto exchange, says the following on the subject:
Many market makers were pulling back and being quite cautious. Because there was some heavy pressure on the stock markets. But since the Grayscale decision, we have seen a very real change in the SEC’s stance.
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