Cboe BZX Proposes In-Kind Bitcoin, Ethereum ETF Transactions

Cboe BZX Exchange Proposes In-Kind Transactions for Bitcoin and Ethereum ETFs

The Cboe BZX Exchange has filed a proposed rule change with the US Securities and Exchange Commission (SEC) to amend the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH) to permit in-kind creations and redemptions. This change would allow Authorized Participants (APs) to exchange actual cryptocurrency rather than cash when creating or redeeming shares, enhancing operational efficiency.

In-kind creations and redemptions can help maintain the ETF's price in line with the value of its assets, reduce transaction costs, and minimize taxable events for investors. This mechanism is more streamlined and efficient, as highlighted by industry analyst James Seyffart, who believes that ETFs should have been permitted to use this model from the beginning.

The Bitcoin and Ethereum ETFs were approved by the SEC in January and May 2024, respectively. As of January 27, ARKB maintains its position as the fourth-largest Bitcoin ETF, with a cumulative net inflow of $2.91 billion and total net assets of $5.10 billion. CETH ranks as the 8th largest Ethereum ETF, with a cumulative net inflow of $11.40 million and $16.77M in net assets.

Matrixport: Bitcoin Spot ETF Could Reduce Volatility and Institutional Inflows Could Further Stabilize the Market

According to Matrixport's latest chart report, Bitcoin's 30-day realized volatility has averaged 58% over the past five years. However, recent volatility has been unusually low, which is noteworthy given Bitcoin's historical tendency to experience heightened fluctuations in dynamic market conditions.

The introduction of a Bitcoin spot ETF tailored for Wall Street investors has played a significant role in suppressing Bitcoin's volatility. This lower volatility environment allows institutional investors to take on more risk, coupled with Bitcoin's strong performance in 2023 and 2024. As institutional buy-side participants absorb market downturns, this trend is expected to further stabilize Bitcoin's price and suppress its overall volatility.