Most of spot bitcoin ETF customers’ bitcoins are held on Coinbase. While the crypto stock market has experienced turbulence, concerns are emerging.

The whole frenzy around spot bitcoin ETFs needs to be put into perspective. Some interesting figures fuel the debate on the rise in prices and the possibility of a speculative bubble on bitcoin. Indeed, despite the record flows on the bitcoin market thanks to these new financial products, all bitcoin spot ETFs currently only mobilize around 4% of the mass of bitcoin in circulation.

To date, Grayscale’s fund holds 388,000 bitcoins, compared to 203,000 for Blackrock and 127,000 for Fidelity. The 4% figure may seem both huge and very small, but it gives an idea of ​​the depth of the market. Likewise, this gives an idea of ​​the scarcity effect caused around bitcoin, which increased by more than 53% in the space of a month. This Wednesday, March 13, bitcoin exceeded $73,000, breaking a new historic record.

Concerns around Coinbase

But this figure of 4% also questions the market mechanics itself. Indeed, 9 out of 11 spot bitcoin ETFs have chosen the cryptocurrency exchange Coinbase to hold their clients’ bitcoins. Some experts point to the risk of the concentration of bitcoins in the hands of a main custodian: Coinbase. Among the questions: the crypto exchange could make mistakes and lose customers’ bitcoins, or the United States could knock on Coinbase’s door to seize the bitcoins… although this scenario is at this stage unlikely.

Over the past two weeks, Coinbase has put its customers in a cold sweat, between the flash crash of bitcoin and user balances showing zero.

As a reminder, on January 10, the American stock market watchdog (the SEC) authorized 11 spot bitcoin ETFs, offered in particular by asset managers like Blackrock and Fidelity. Before this date, the SEC only approved Bitcoin futures ETF (this was the case since 2021) but not spot (spot) bitcoin ETFs, considering that futures are more difficult to manipulate because the market is based on the futures prices of the Chicago Mercantile Exchange (CME), regulated by the Commodity Futures Trading Commission (CTFC).

As a reminder, an ETF (or Exchange Traded Funds) is an index fund trading on a stock exchange which follows the evolution of a stock index (or one or more financial or physical assets, such as gold) by replicating the increase as well as the fall in the price of this index (or these assets).

Antoine Larigaudrie with Pauline Armandet


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