As Bitcoin enthusiasts wonder why the digital asset has yet to reach the $150,000 mark despite massive ETF inflows, Jeff Park, Head of Alpha Strategies at Bitwise, provided a sobering look at the plumbing of the financial system.
Bitwise’s Jeff Park Says Bitcoin ETFs, Not Wall Street, Cap BTC Price
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According to Park, authorized participants (APs) operate within a “gray window” of the SHO regulation. While standard traders must locate stocks before selling short, APs are exempt due to their role in creating and redeeming ETF shares.
This allows them to maintain positions with a level of capital efficiency and duration “indistinguishable from regulatory arbitrage”.
The most critical revelation concerns how these institutions cover themselves. Typically, an arbitrageur would buy Bitcoin for spot to fill a price gap.
However, if an AP chooses to hedge using Bitcoin futures instead of the underlying asset, the “spot was never purchased.” This breaks the link between ETF demand and spot price appreciation.
Additionally, the recent transition to “in-kind” repurchases has removed the “structural governor” that previously mandated cash purchases. Hotspots can now source Bitcoin through private OTC desks with minimal market impact, bypassing public exchanges where price discovery occurs.
Park concludes that while no company explicitly “manipulates” the market, the current regulatory framework, designed for traditional assets, is fundamentally at odds with Bitcoin’s mission.
The result is a system in which the “middle” of commerce eludes categorization, potentially mitigating the explosive price growth expected by investors.