In a latest report from J.P. Morgan titled “Why Is The Bitcoin Futures Curve So Steep?”, the investment bank found that Bitcoin futures yields perform better than all major fiat currencies. However, the introduction of a Bitcoin ETF in the country will likely bring down the yields of Bitcoin futures.
Bitcoin Futures Market Outperforms All Major Fiat Currencies
Analysts at J.P. Morgan Chase have examined the growing futures and derivatives market of the world’s leading cryptocurrency Bitcoin.
In its latest report, the global investment bank found that Bitcoin’s futures market outperforms all major fiat currencies, including gold and silver. While most fiat currencies offer annual yields of about 5%, the Bitcoin futures market offers annual yields of 25%.
Bitcoin future contract yields offer such high as it’s difficult for futures markets to get a hold of Bitcoin’s price.
In addition to pricing errors, it’s difficult for institutional investors to get access to Bitcoin on regulated markets. At the same, it’s expensive for institutional investors to fund their positions.
Bitcoin ETFs Could Reduce Yields on Bitcoin Futures
The investment bank believes that the introduction of a bitcoin exchange-traded fund (ETF) will compress the yields offered by the trade.
“The listing of a Bitcoin ETF tracking spot exchange rates in the U.S. or other major jurisdiction would likely be a major catalyst.”
This is because a liquid investment vehicle that trades at net asset value (NAV) will give investors access to spot BTC in order to execute the arbitrage trade. This means it would be cheaper to bet on the future price of Bitcoin, reducing some of that premium but increasing demand.
Meanwhile, the U.S. Securities and Exchange Commission has rejected all applications for Bitcoin ETFs. However, with the new Joe Biden administration, SEC chairman, and renewed institutional interest, the regulatory agency is taking another look at them.