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Laurent Kssis, CEC Capital
Laurent Kssis, CEC Capital

Crypto fund update: Laurent Kssis

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Laurent Kssis, CEC Capital, and veteran of the crypto fund market, has written a note on the current momentum in the cryptocurrency markets and the push to launch a spot bitcoin ETP in the US.

The futures positioning on CME shows bitcoin could still move higher from its current price, what is unclear is whether we moved from a net short positioning from last week to a net long.

We interpret this as a signal that traditional finance institutions are slowly showing a renewed appetite for crypto products. You cannot exclude that these institutions are positioning themselves in advance of a sec decision: a spot ETF approval will result in a rapid short-term upward price tick for bitcoin which we are already witnessing but we are not convinced that the current move from 41 to 44k can hold as we could see huge profit taking take place and put downward pressure on btc back to 39k in the midterm – so far a trading range is witnesses of 43/44K.

I would not be surprised if a “sell the news” style event in the days and weeks following a regrouping of the 19b4 consent and green light, not approval of the S1 bitcoin ETF filing, will push bitcoin down. Either way, current signals are indicating a positioning at 43/4k and a trading range is currently seen before the next event. An S1 approval may take time to get the bitcoin ETF listed and we see this happening around April/May even if consent is given in January. (This may push bitcoin up as many arbitrageurs will position before the listing and may take profit when the ETF is live.)

With CME bitcoin open interest back at all-time high, many are betting that microeconomic sentiments are also improving and a cutting of rates is now well anticipated and a driver of price action in January 2024. Happy Christmas!

Here is now my ETF update with an admission of a crypto ETF:

Spot bitcoin ETFs 19b4 may be approved in January followed by an S1 approval and launch in March or April latest as stated above. The Ark 21Shares Bitcoin ETF’s (ARKB) final approval deadline with the SEC is January 10. It is unclear if the SEC will approve the S1 straight away!

We know the SEC has been in discussions with 21Shares, Hashdex and BlackRock as well as Grayscale (conversion – unlikely in my opinion) and there is optimism for a positive outcome. While this is a normal part of the filing process in the US as everything is public information, it is not the same in Europe, it shows there’s progress in working with issuers and maybe the SEC is open to finding a solution. However, there are huge concerns with the proposed cash creation and redemption model. The SEC has so far only pushed for a cash creation and redemption model as the Grantor Trust cannot accept crypto!!!. I strongly favour an in-kind model. The bottom line is that issuers will have to trade the underlying themselves which is a bigger risk as opposed to receiving the in-kind underlying asset ( here bitcoin) from the APs. This is a huge concern from a procedure and risk control process for the issuers. That means a crypto trading desk will be necessary. Liquidity providers will love this but also if there is a fixing process for the cash creation we are likely to see price manipulation during that period.

There are now 13 issuers applications for a spot bitcoin ETF.  I think Hashdex Bitcoin ETF (DEFI) is the most favoured in terms of ETF structure and could come with a clear winner.

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