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The DTCC, a financial services company, made an announcement stating that exchange-traded funds (ETFs) and similar investment products tied to Bitcoin or other cryptocurrencies won’t be given any collateral value.
The Depository Trust and Clearing Corporation (DTCC), which handles clearing and settlement services for financial markets, announced that it won’t offer collateral or extend loans to exchange-traded funds (ETFs) linked to Bitcoin or other cryptocurrencies.
DTCC Implements Changes to Collateral Values for Cryptocurrency ETFs
The Depository Trust and Clearing Corporation (DTCC) announced changes to collateral values for specific securities during its annual line-of-credit facility renewal, effective April 30, 2024. This update may impact position values in the collateral monitor.
According to the notice released on April 26, ETFs and similar investment instruments with Bitcoin (BTC) or other cryptocurrencies as underlying assets will not be assigned any collateral value. This decision results in a 100% reduction in their collateral value.
However, cryptocurrency enthusiast K.O. Kryptowaluty clarified in a post on X that this change applies solely to inter-entity settlement within the line of credit system.
Source: K.O Kryptowaluty
In lending and brokerage activities, cryptocurrency ETFs can still be utilized without disruption, depending on individual brokers’ risk tolerance. A line of credit allows borrowers to access funds up to a predetermined limit, paying interest only on the borrowed amount.
While DTCC’s stance affects crypto ETFs, traditional players like Goldman Sachs have seen clients reentering the crypto market in 2024. This renewed interest follows the approval of spot Bitcoin ETFs and demonstrates a diverse sentiment within the industry.
Spot Bitcoin ETFs Garner Institutional Interest
The introduction of spot Bitcoin ETFs in the United States has sparked growing institutional interest in this investment product. Within just three months of their launch, all U.S.-based Bitcoin ETFs have collectively amassed over $12.5 billion in assets under management.
Initial Surge in Investments: In February, approximately 75% of new Bitcoin investments originated from the 10 spot Bitcoin ETFs approved in the U.S. on Jan. 11. This surge reflected a significant uptick in institutional adoption of these ETFs.
Recent Slowdown in Inflows: However, recent data suggests a slowdown in net inflows to these ETFs. Multiple ETF issuers have reported notable outflows in recent days. According to Farside Investors, spot Bitcoin ETFs in the U.S. experienced a net outflow of $218 million on April 25, following a $120 million outflow the previous day.
Notable Outflows from GBTC ETF: Grayscale’s GBTC ETF witnessed a significant single-day outflow of $82.4197 million. Cumulatively, the total net outflows from GBTC amount to a substantial $17.185 billion, as per data from Farside.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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