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11th April 2022 > > The ETF explosion.

Updated: Nov 19, 2022


New reference rates for a basket of cryptos suggests the industry is gearing up for ever-increasing institutional investments.

Market Snap (at time of writing)

Market Wrap

After selling off last week French govvies appear to have priced in all the Le Pen risk with scarcely a move overnight. Given the tightness of some polls, one would have to be very brave to go long French 10 years over the next fortnight.

US 10 years are now 12 points or so down for the year. If central banks really do intend to sell-off their bloated balance sheet, the realised losses – which are not recognised in banking books until date of sale – could technically make central banks bankrupt.

I wonder what happens then?

Curious Cryptos’ Commentary – The forthcoming exchange traded fund (ETF) explosion

The stance taken by Gary Gensler, Chair of the SEC, towards physical BTC ETFs has been much mulled over in previous CCCs, too many of them to mention by date. For the time being we have reached an impasse waiting for the SEC to adopt its own new rules potentially affecting the regulatory oversight of spot crypto exchanges.

Meanwhile, the industry is gearing up in expectation of a dramatic move towards physical ETFs in the US across many cryptos.

The Chicago Mercantile Exchange Group Inc. (CME) has been collating and publishing reference rates for BTC and ETH for some time now. On the back of that, there is a small but valid market in BTC and ETH futures, in addition to bespoke derivatives that are traded privately between investment banks and their institutional clients.

Reference rates for assets of any distinction are incredibly important in the financial world. Assuming they have credibility (the CME has a long and distinguished record in that department) and visibility, reference rates provide the most basic building block of all futures, derivatives, and ETF products.

Without reference rates, an asset is destined to only ever be tradeable in the spot market.

The CME has announced that from 25th April they will start publishing reference rates for ALGO, BCH, ADA, LINK, ATOM, LTC, DOT, MATIC, SOL, XLM and UNI. This is only happening because of institutional interest in financial products based on this wider selection of cryptos. Do not underestimate the importance of developments of this nature.

Tim McCourt, head of equity and FX products had this to say:

“These new benchmarks, which capture 90% of the total investable cryptocurrency market cap today, are designed to allow traders, institutions, and other users to confidently and more accurately manage cryptocurrency price risk, price portfolios or create structured products like ETFs.”


The choice of cryptos for the new reference rates is interesting on several levels.

The CCC portfolio includes all of them except for SOL and UNI. New financial products will be initially targeted at the long side, suggesting a new driver for buyers of these cryptos, which can only exert upward pressure on the price. I doubt we will see a great deal of institutional interest from the short side.

I am not sure why BCH is in there – crypto enthusiasts recall that this was an early hard fork of the BTC blockchain which still survives. Its success kicked off the hard fork extravaganza of 2017, a plethora of coins which are now mostly defunct, but if sold at the time of each hard fork added a nice little kicker to your BTC stack.

UNI is a surprising choice but is a nod to the potential of decentralised finance (DeFi).

There is one notable omission – XRP (Ripple).

The 7th largest crypto by market cap at $35bn, XRP has suffered and recovered from some regulatory concerns. XRP has its vocal proponents and vocal critics. A core supporter of the CCC has a great deal of faith in XRP, and I do value her opinion very highly. But I also understand why institutions might be reluctant to get involved given the potential reputational risk.

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