Market Makers in Talks to Provide Liquidity for BlackRock’s Spot Bitcoin ETF

By 0xGorki 11/1/23 3:49 AM

In a significant development in the world of cryptocurrency investments, a consortium of market makers (MM) is reportedly in discussions to offer liquidity for BlackRock’s spot Bitcoin ETF following its approval by U.S. authorities. This move underscores the growing mainstream acceptance of cryptocurrencies and the demand for investment vehicles in this space.

Prominent players in the financial market, including Jane Street, Virtu Financial, Jump Trading, and Hudson River Trading, are believed to be engaging in talks with BlackRock regarding their potential role as market makers for the iShares Bitcoin Trust ETF. Market makers play a pivotal role in providing liquidity to financial markets. They maintain a certain quantity of shares and execute trades as necessary, thereby minimizing liquidity risks for investors.

BlackRock, Jane Street, Virtu, and Jump Trading have all declined to comment on the ongoing negotiations, while Hudson River Trading has not responded to inquiries from CoinDesk.

Several months ago, both Virtu and Jane Street expressed their support for a spot Bitcoin ETF. “The Bitcoin ecosystem is now robust enough for exchange-traded products (ETPs) to be listed in the U.S.,” Jane Street stated in a commentary on Grayscale Investments’ proposal for a Bitcoin ETF. Virtu also believed that U.S. investors would benefit if the U.S. Securities and Exchange Commission (SEC) allowed Grayscale to convert GBTC into a spot Bitcoin ETF. For years, GBTC shares consistently traded at a significant discount to the actual value of Bitcoin, with the discount reaching as high as 50% in December 2022. Unlike ETFs, shares of this trust cannot be converted into Bitcoin. However, since the beginning of this year, expectations of the SEC permitting the conversion of GBTC into a Bitcoin ETF have significantly narrowed the discount.

Grayscale’s initial conversion request was rejected by the SEC, but in August, a court dismissed the regulator’s reasoning. In October, the SEC announced it would not appeal that ruling, a move seen by many as a significant push toward making a Bitcoin ETF a reality in the U.S.

James Butterfill, Head of Research at CoinShares, remarked, “Several market makers had previously withdrawn and were cautious following the U.S. crackdown on numerous cryptocurrency exchanges. However, since the Grayscale ruling, we have seen a significant shift in the SEC’s stance.”

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