- Bitcoin ETFs have opened up trading opportunities for sophisticated traders.
- Arbitrage strategies and market timing can also help investors accumulate returns.
- And consider the costs, as ETF management fees can affect long-term profits.
The launch of Bitcoin exchange-traded funds has opened up opportunities as seasoned professionals look to gain an edge in the cryptocurrency markets.
Several considerations are worth keeping in mind for the average investor looking to emulate professional traders and get the most out of their investment.
Here are several areas to focus on to trade like a pro.
Calculate the time of your operations
Bitcoin ETFs operate only during traditional stock market hours, unlike 24/7 cryptocurrency markets, which presents unique trading opportunities.
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Bitcoin futures have shown varying performance across different trading sessions; Over the past month, European trading sessions have offered the best returns.
DL News reported earlier this month that Bitcoin Futures Profitability on Binance, Bybit, OKX and Deribit during the European sessions they exceeded 18% since mid-January.
This is a big jump compared to those generated during trading hours in the United States and Asia, which were around 12% and 5%, respectively.
The reason for the European advantage?
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"Data on ETF net flows is released around the London open," said B2C2 chief risk officer Adam Farthing. DL News At the time. "That's been the main driver of the market."
Arbitration
Bitcoin ETFs Launch in US Opens New Arbitrage Fields for Savvy Professional Traders, BitMEX Co-Founder Arthur Hayes saying in January.
The Bitcoin market is now exposed to a "predictable and long-lasting arbitrage opportunity" thanks to the ETF's net asset value, linked daily to the price of the CF Benchmarks Bitcoin Index at 4 p.m. in New York, according to Hayes.
This index brings together the prices of six exchanges, but leaves out Binance, the Bitcoin trading volume giant.
This exclusion creates an "unnatural situation" where fund managers cannot take advantage of Binance's optimal price, Hayes said.
Instead, they limit themselves to trading on the six approved exchanges, potentially missing out on better deals elsewhere. For Hayes, this scenario is ready for arbitration.
It outlines a scenario in which traders can take advantage of the situation by anticipating whether ETF managers should create or redeem shares, depending on whether the ETF is trading above or below its intraday net asset value, or NAV.
The predictable nature of this valuation provides a clear arbitrage opportunity because traders know exactly when the ETF's NAV will be recalculated and what benchmark it will use.
If the market price of the ETF shares deviates significantly from its NAV, traders can take advantage of this difference.
This activity affects supply and demand, influencing the price of Bitcoin on restricted exchanges.
The arbitrage strategy involves comparing Bitcoin prices between a less liquid CF Benchmarks exchange and Binance.
Traders can buy low on one exchange and sell high on the other, potentially “getting ahead” of ETF share adjustments.
Consider your costs
The added benefit of having a variety of Bitcoin ETF providers to choose from means that there is greater competition between fee offerings, ultimately leading to a reduction in costs that affect total returns.
BlackRock, the world's largest asset manager with $10 trillion in assets under management, charges an annual fee of 0.25%.
Meanwhile, rivals Fidelity and Ark Invest, the third and fourth largest ETF providers by assets, charge 0.25% and 0.21%, respectively.
However, those fees may still be too high for traders who can trade cryptocurrencies directly on exchanges.
Savvy traders accustomed to the complexities of cryptocurrency trading may not opt for ETFs, said Jonathan de Wet, chief investment officer at Zerocap. DL News.
Traders who use Binance to execute spot purchases pay fees of up to 0.1% depending on the size of their trades. according to the exchange website.
Kraken, another major exchange, charges up to 0.16%.
Meanwhile, fees on Bitcoin ETFs could erode long-term net returns, he said.
“Even 25 basis points per year, over 10 years, can erode the long-term performance profile compared to cold custody of Bitcoin itself,” he said.
The Grayscale ETF is around 1.5% annually, he noted.
"This can really affect overall performance."
Sebastian Sinclair is a markets correspondent for DL News. Do you have any advice? Contact Seb at sebastian@dlnews.com.
