Grayscale Investments, known for its Grayscale Bitcoin Trust
(GBTC), is planning on filing an application to convert its
flagship fund into a spot ETF early next week. Grayscale, which has
been the dominant player in the digital asset space, is now looking
to revamp its fund due to competition.  First Bitcoin Futures
ETF Set to Trade Early Next Week, Adding More Competition for
Grayscale Last Friday, the Securities and Exchange Commission (SEC)
approved the first ever Bitcoin futures ETF, which is set to trade
on the New York Stock Exchange early next week. The move has been
hailed as a “watershed moment” by many, where Bitcoin is finally
solidifying its legitimacy as an asset class to Wall Street and
mainstream investors.  Related Reading | Bitcoin ETF Receives
Approval from SEC, Marking Historic Day for Crypto  The ETF,
managed by investment firm ProShares, will feature a low management
fee of 0.95%, compared to Grayscale’s 2%. Another benefit that the
new ETF provides is the lack of redemption periods – something
that has plagued GBTC’s investors since its very inception. 
Why Grayscale’s Potential Spot Bitcoin ETF May Outperform Futures
ETFs The Bitcoin-futures ETF is a step in the right direction in
making cryptocurrencies more accessible for the everyday investor;
however, many crypto investors have argued that the ETF’s
utilization of derivative contracts, which are traded on the
Chicago Mercantile Exchange (CME), would prove to be far inferior
compared to a spot ETF holding actual Bitcoin.  Related
Reading | Grayscale Looks to Bolster Investment Offerings with 13
more Cryptos, Including Polygon, Solana, and ICP  Contango,
which is a phenomenon that occurs when futures prices are above
expected future spot price, means that investors will lose out
potential gains due to the Bitcoin futures contracts expiring
higher than the cryptocurrency’s spot price. Joe Orsini, director
of research at Eagle Brook Advisors, explained the following
disadvantages in his Twitter thread:  Futures-based #bitcoin
ETFs? Buyer Beware. A thread on contango, using USO ETF (a
futures-based ETF on crude oil) to compare performance of Spot WTI
Crude, 1st-month Crude Futures, and a futures-based ETF. 1/n
pic.twitter.com/04Rv1m7NKB — Joe Orsini, CFA (@JoeOrsini_) October
15, 2021 If approved, Grayscale’s spot Bitcoin ETF would be backed
by actual Bitcoins, rather than derivatives that track the
cryptocurrency’s price. Grayscale already has a significant portion
of the world’s circulating Bitcoin supply.  Barry Silberts,
the founder of Digital Currency Group and Grayscale Investments,
took to Twitter to hint at upcoming changes for GBTC. He joked,
“[f]riends don’t let friends buy and hold futures-based ETFs.”
Though, there may be some truth behind the statement yet. 
Featured image from UnSplash

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