The first week surpassed 10 billion, digging deep into the big winners behind Bitcoin ETF

Written by: Peng SUN, Foresight News

On January 17, Yahoo data showed that just one week after the U.S. Securities and Exchange Commission (SEC) officially approved Bitcoin spot ETFs, their cumulative trading volume has exceeded $10 billion. Among them, Grayscale, BlackRock, and Fidelity dominate, accounting for about 90% of the total trading volume. Bloomberg analyst Eric Balchunas also stated that Grayscale's spot Bitcoin ETF has lost $500 million, while BlackRock is most likely to surpass Grayscale to become the "king of liquidity."

So, with such a massive trading volume for Bitcoin spot ETFs, apart from the 11 issuers and their affiliates, which lesser-known institutions will benefit from this? Inspired by 1kx partner Diana Biggs' article "Understanding the Current Status and Potential of Crypto ETPs Before the Launch of Bitcoin Spot ETFs," I thoroughly reviewed 11 of the latest Bitcoin spot ETF filings submitted to the SEC and discovered that there are at least 24 ETF issuers and their affiliates, with at least 48 other stakeholders behind them. In other words, 72 beneficiaries have emerged, and top Wall Street capital represented by BNY Mellon, State Street, U.S. Bank, JPMorgan, Jane Street Capital, Macquarie Capital, and Virtu have also entered the fray.

Image source: 1kx

Custodians & Brokers & Lenders & Connected Trading Venues & Execution Agents

Coinbase

Coinbase is the largest cryptocurrency exchange in the United States and has won its lawsuit against the SEC.

Currently, Coinbase has become the Bitcoin custodian for 8 institutional ETFs, including ARK 21Shares, Bitwise, Grayscale, WisdomTree, Invesco/Galaxy, BlackRock, Franklin Templeton, and Valkyrie. At the same time, Coinbase also serves as the primary broker, trading credit lender, connected trading venue, or main execution agent for these 8 ETFs.

In addition, most of the connected trading venues for the ETFs also include Bitstamp, LMAX, Kraken, and four non-bank market makers whose names cannot be disclosed due to confidentiality restrictions.

Gemini Trust Company, LLC

Gemini Trust Company, LLC is the Bitcoin custodian for VanEck.

Gemini Trust Company is the cryptocurrency exchange owned by Tyler Winklevoss. In 2022 and 2023, the cryptocurrency trading company Genesis filed for bankruptcy due to the FTX collapse, and subsequently, Gemini became embroiled in debt disputes and legal lawsuits with Genesis and its parent company DCG, and was investigated and prosecuted by the U.S. government. On December 13, 2023, Gemini Trust sent an email to creditors outlining a proposed restructuring plan, which has now been submitted for voting.

On the other hand, in April 2023, Gemini launched a non-U.S. cryptocurrency derivatives platform, Gemini Foundation. On January 17, 2024, Gemini received approval from the French financial market regulator Autorité des marchés financiers (AMF) to launch its products in France, and the company stated that it would introduce its products to retail and institutional clients in France in the coming weeks.

Listing Exchanges

Cboe BZX Exchange

Among the 11 Bitcoin spot ETFs, 6, including ARK 21Shares, WisdomTree, Invesco/Galaxy, VanEck, Fidelity, and Franklin Templeton, chose to list on the Cboe BZX Exchange.

The parent company of Cboe BZX Exchange is Cboe Global Markets (formerly CBOE Holdings, Inc.). Cboe is the largest options exchange in the world and has been supporting cryptocurrency and digital asset businesses in recent years, having launched a regulated cryptocurrency exchange and note exchange, Cboe Digital. Before the SEC approved the listing of Bitcoin ETFs, Cboe Australia and Cboe Europe had already supported Bitcoin spot and Ethereum ETF products. On January 12 of this year, Cboe Digital also launched margin futures for Bitcoin and Ethereum.

NYSE Arca, Inc

Bitwise, Grayscale, and Hashdex chose to list their ETFs on NYSE Arca, Inc, a subsidiary of the New York Stock Exchange.

NYSE Arca, Inc is a fully electronic securities exchange under the New York Stock Exchange, formerly known as the Archipelago Exchange, established in November 1994 in Chicago and merged into the NYSE in 2006. It is a top exchange for listing and trading ETFs in the U.S., trading over 8,000 securities listed in the U.S. The New York Stock Exchange was founded in 1792 and is now the largest stock exchange in the world.

Previously, futures ETFs for Bitcoin and Ethereum had been listed on NYSE Arca, Inc. The NYSE has also applied for trademarks focused on virtual goods and NFTs, including an "online marketplace" for providing NFTs and virtual goods.

NASDAQ

BlackRock and Valkyrie chose to list their ETFs on NASDAQ.

NASDAQ is an electronic stock exchange in the U.S., founded in 1971, and is currently the second-largest stock exchange in the world, after the NYSE.

NASDAQ had previously canceled the launch of cryptocurrency custody services in July 2023, but in September, it jointly applied with Hashdex for a spot Ethereum ETF, the "Hashdex Nasdaq Ethereum ETF." Additionally, NASDAQ Ventures' investment portfolio includes blockchain and digital assets.

Robinhood

On January 12, 2024, Robinhood announced that 11 Bitcoin spot ETFs had been opened for trading to all U.S. customers through Robinhood Financial in retirement and brokerage accounts.

Robinhood is a U.S. stock and cryptocurrency trading platform that offers its online services completely free of charge. The company has received significant investments from top VCs such as Sequoia Capital, a16z, and Ribbit Capital.

Robinhood has now launched the cryptocurrency wallet Robinhood Wallet, and its subsidiary Robinhood Crypto was launched in Nevada in October last year.

Managers & Transfer Agents & Cash Custodians & Fund Accountants & Registrars

The Bank of New York Mellon

The Bank of New York Mellon was formed in 2007 by the merger of The Bank of New York and Mellon Financial, primarily providing securities services and asset management.

BNY Mellon has long been involved in cryptocurrency and digital asset businesses and has received approval from New York regulators to provide cryptocurrency custody services. It has a dedicated digital asset division and has participated in blockchain project investments, focusing on compliant digital currencies, tokenized securities, blockchain payments, and other areas. Caroline Butler, the global head of digital assets at BNY Mellon, is also the co-chair of the U.S. Commodity Futures Trading Commission (CFTC) Global Digital Asset Markets Advisory Committee.

In this Bitcoin spot ETF, BNY Mellon serves as the ETF manager, transfer agent, and cash custodian for ARK 21Shares, Bitwise, Grayscale, Invesco/Galaxy, BlackRock, and Franklin Templeton. Additionally, BNY Mellon is also an authorized participant for Hashdex, allowing it to participate in purchasing shares.

State Street Bank and Trust Company

State Street Bank and Trust Company, commonly referred to as State Street Global Services, is a subsidiary of State Street Corporation (founded in 1792, the second oldest bank in the U.S.). It is a trust company based in Massachusetts that provides services to mutual funds and their advisors, collective investment funds, corporations and public pension funds, insurance companies, operating companies, and non-profit organizations. As of June 30, 2018, State Street Bank surpassed BNY Mellon to become the largest custodian bank in the world.

In the crypto space, State Street has also been committed to "multi-faceted solutions for tokenized securities and native tokens," and has an independent digital asset business. It has partnered with crypto custody provider Copper to launch cryptocurrency custody services and serves as the manager for crypto asset management company Iconic Holding.

State Street's involvement in the Bitcoin spot ETFs issued by WisdomTree, VanEck, and Fidelity is shown in the table below:

U.S. Bancorp

U.S. Bancorp is an American bank holding company established in 1891, currently the fifth-largest bank in the U.S., with over 3,000 branches and more than $20 billion in assets. It ranks 117th in the Fortune 500 and is designated as a systemically important financial institution by the U.S. Financial Stability Oversight Council.

U.S. Bancorp is one of the few banks that provide customers with blockchain-based 24/7/365 digital payment solutions and launched its cryptocurrency custody services in 2021. It had previously invested in the securities tokenization infrastructure company Ownera.

U.S. Bancorp Fund Services, LLC is an investment advisory company that provides single-source solutions to support various investment strategies and products, including mutual funds, alternative investments, and ETFs. U.S. Bancorp Fund Services, LLC is the parent company of U.S. Bank N. A., and U.S. Bank Global Fund Services is a wholly-owned subsidiary of U.S. Bank N. A., providing custody, lending, funding, and banking services.

U.S. Bancorp Fund Services, LLC, U.S. Bank N. A., and U.S. Bank Global Fund Services are involved with the Valkyrie and Hashdex ETFs. U.S. Bank, N.A. is the custodian for the Hashdex ETF, while U.S. Bank Global Fund Services serves as the registrar, transfer agent, sub-advisor, and fund accountant for the Hashdex ETF. U.S. Bank, N.A. is the cash custodian for the Valkyrie ETF, and U.S. Bancorp Fund Services, LLC is the manager and transfer agent for the Valkyrie ETF.

Trustees

Delaware Trust Company

Delaware Trust Company is a corporate trust and agency service provider responsible for protecting assets and representing the interests of ETP holders or investors.

Cryptocurrency ETFs must choose a trustee to comply with Delaware statute § 3807(a), which states that "each statutory trust shall at all times have at least one trustee, and if the trustee is an individual, the trustee shall be a resident of the state, or in all other cases, the trustee's principal place of business shall be in the state."

Among the 11 Bitcoin spot ETFs, 9 have chosen Delaware Trust Company as their trustee, including ARK 21Shares, Bitwise, Grayscale, WisdomTree, Invesco/Galaxy, VanEck, Fidelity, Franklin Templeton, and Valkyrie.

Wilmington Trust, National Association

Wilmington Trust is a provider of international corporate and institutional services, investment management, and private banking, established in 1903, listed on the NYSE in 1999, and merged with M&T Bank in 2010. As of 2016, Wilmington Trust was one of the top ten institutions in the U.S. by trust assets.

Wilmington Trust had trialed blockchain for processing mortgage-backed data in 2020. Currently, Wilmington Trust also serves as the trustee for iShares in Delaware, as well as for Hashdex.

Index Providers

CF Benchmarks

CF Benchmarks is the world's first cryptocurrency index provider launched by Kraken, authorized and regulated by the UK's FCA. CF Benchmarks has partnered with CME Group to launch various cryptocurrency reference rates (denominated in USD) and real-time indices.

Currently, CF Benchmarks serves as the index provider for 6 Bitcoin spot ETFs: ARK 21Shares, Bitwise, WisdomTree, BlackRock, Franklin Templeton, and Valkyrie.

CoinDesk Indices

CoinDesk Indices is a digital asset index provider that offers crypto indices, Digital Asset Classification Standards (DACS), and news updates.

CoinDesk Indices is the index provider for Grayscale's Bitcoin spot ETF.

Lukka, Inc.

Lukka is the index provider for the Bitcoin spot ETF issued by Invesco/Galaxy.

Founded in 2014, Lukka is a provider of software and data for crypto assets, compiling data on over 14,000 crypto spot assets, 70,000 crypto derivatives, 300 exchanges, and about 30 decentralized exchanges. It serves traditional financial companies and cryptocurrency companies, including Arca, Circle, CPA.com, eToro, IHS Markit, S&P Dow Jones Indices, and State Street.

In January 2022, Lukka completed a $110 million Series E funding round, with a valuation exceeding $1.3 billion, led by hedge fund Marshall Wace, with participation from Miami International Holdings, Summer Capital, SiriusPoint, and previous investors in its Series D funding round, including Soros Fund Management, Liberty City Ventures, S&P Global, and CPA.com.

Coin Metrics

Coin Metrics is a crypto data company founded in 2017, which is an open-source project providing network data, market data, indices, and network risk solutions for crypto institutions.

In April 2022, Coin Metrics completed a $35 million Series C funding round, led by Acrew Capital and BNY Mellon, with participation from Cboe Global Markets, Brevan Howard Digital, Goldman Sachs, Fidelity Investments, and others. In October 2023, Coin Metrics completed approximately $6.73 million in funding, which included equity and options as well as other types of securities.

Coin Metrics is providing calculation agency services for Fidelity's Bitcoin spot ETF, the "Fidelity Wise Origin Bitcoin Fund."

Authorized Participants

Jane Street Capital

Jane Street Capital is an authorized participant for 10 Bitcoin spot ETFs, including ARK 21Shares, Bitwise, Grayscale, WisdomTree, Invesco/Galaxy, BlackRock, VanEck, Fidelity, Franklin Templeton, and Valkyrie.

Jane Street is an investment management company and major market maker based in New York City, founded around 1999. All of its software is written in the OCaml programming language, and its parent company is JSCT, LLC. In 2018, Jane Street traded an average of $13 billion in global equities daily, handling 7% of global ETF trading volume. By the end of 2020, Jane Street had traded $40 trillion in global equities, $14 trillion in bonds, and $3.9 trillion in ETFs. In 2021, Jane Street was the authorized participant for 2,600 ETFs and a leading market maker for 506 ETFs.

Jane Street is a deep participant in Crypto and Web3, investing in numerous Web3 projects, such as the DeFi lending protocol Bastion on Aurora, the foreign exchange market Vertex Protocol on the Terra ecosystem, the DEX Tonic in the NEAR ecosystem, the Web3 entertainment technology company Kaleidoco, the decentralized oracle Pragma Network based on StarkNet, the Layer 1 blockchain Shardeum, the DeFi yield platform Texture in the Solana ecosystem, the oracle-less perpetual options protocol Panoptic based on Uniswap, the cross-chain yield aggregator Astrolab, the perpetual contract exchange Vest Exchange on Arbitrum, the crypto exchange C3, the AI Web3 search engine Kaito, the decentralized trading platform Ambient Finance, the Layer 1 blockchain ZetaChain, and the cryptocurrency trading and lending platform Membrane Labs. When Luna collapsed, the Terra ecosystem non-profit organization Luna Foundation Guard (LFG) sought over $1 billion in financing to support UST, with Jump Trading, Celsius, and Jane Street committing approximately $700 million, but the deal ultimately fell through.

Notably, Jane Street had previously employed SBF and his ex-girlfriend Caroline Ellison, Xiaoyun "Lily" Zhang, and other Jane Street traders who also joined FTX (source: Protos).

Macquarie Capital USA Inc

According to the 11 ETF filings, Macquarie Capital (USA) Inc. is an authorized participant for 6 Bitcoin spot ETFs, including ARK 21Shares, Bitwise, Grayscale, WisdomTree, BlackRock, and Fidelity.

Macquarie Capital (USA) Inc. is an investment management company that provides consulting, capital and asset management, research, trading, and hedging services to global clients. Macquarie Group is a financial services giant based in Australia.

In August 2021, Macquarie Group CEO Shemara Wikramanayake stated that the bank was ready to adopt the latest blockchain technology once regulators approved it. In September, Macquarie Group partnered with Bitcoin infrastructure company Blockstream to pilot a mining facility powered by renewable energy. In July 2023, Esme Pau, head of digital transformation research at Macquarie Capital (USA) Inc., stated that the focus in the Crypto space is on AI + blockchain, increasing institutional adoption of digital assets, tokenization, and CBDCs.

Virtu Americas LLC

Virtu Americas LLC is an authorized participant for 10 Bitcoin spot ETFs, including ARK 21Shares, Bitwise, Grayscale, WisdomTree, Invesco/Galaxy, BlackRock, VanEck, Fidelity, Franklin Templeton, and Hashdex.

Virtu Americas LLC is an institutional brokerage firm that provides clearing, direct market access trading, electronic access, and trade execution services to global clients. Its parent company, Virtu Financial Inc., is a U.S. company that provides financial services, trading products, and market-making services, founded by former chairman of the New York Mercantile Exchange Vincent Viola, and went public on NASDAQ in 2015.

Virtu Financial has also participated in the crypto industry, having a dedicated Crypto trading team and collaborating with FairX, a derivatives exchange regulated by the CFTC, and launching the cryptocurrency exchange EDX Markets with financial giants Charles Schwab, Citadel Securities, Fidelity Digital Asset, Paradigm, and Sequoia Capital.

Cantor Fitzgerald & Co.

Cantor Fitzgerald & Co. is an authorized participant for the Bitcoin spot ETFs issued by Valkyrie and Hashdex.

Cantor Fitzgerald & Co. is a U.S. financial services company founded in 1945, focusing on institutional equity, fixed income sales and trading, and serving the middle market through investment banking services, wholesale brokerage, and commercial real estate financing, as well as providing consulting and asset management, gaming technology, and e-commerce services. Cantor has over 5,000 institutional clients and is one of 25 primary dealers authorized to trade U.S. government bonds with the New York Federal Reserve Bank, allowing direct transactions with the Federal Reserve.

*As a side note: Cantor Fitzgerald's tragic history is inextricably linked to September 11, 2001, when its headquarters in the World Trade Center in lower Manhattan was attacked.

In the crypto space, Cantor Fitzgerald is also deeply involved. In February 2023, insiders revealed that Cantor Fitzgerald helped Tether manage a $39 billion bond investment portfolio. On January 17, 2024, Cantor Fitzgerald CEO Howard Lutnick admitted that they indeed manage funds for Tether.

Marex Capital Markets Inc.

Marex Capital Markets Inc. is an authorized participant for the Invesco Galaxy Bitcoin ETF. It is a global financial services platform that provides market-making, execution and clearing, hedging and investment solutions, price discovery, and data and consulting services to financial market clients.

Marex has also ventured into the crypto industry; for instance, Marex serves as a counterparty for Ethereum derivatives trading for Goldman Sachs, and its derivatives division Marex Solutions has launched structured products linked to Coinbase stock.

JP Morgan Securities LLC

JP Morgan Securities LLC is an authorized participant for the Bitcoin spot ETFs issued by Invesco/Galaxy, BlackRock, Fidelity, and Hashdex.

JP Morgan Securities is an investment management company and a subsidiary of JPMorgan, providing wealth planning, education funding, research, securities, brokerage solutions, consulting programs, and portfolio management services to global clients.

JPMorgan has been deeply involved in the crypto space, maintaining a positive outlook on blockchain technology and denying that Bitcoin is a Ponzi scheme. Its focus includes cross-border payments, tokenization, Ethereum technology, and it has launched a blockchain-based fixed income market trading network called Onyx, a virtual payment wallet "JP Morgan Wallet," and a blockchain-based payment system JPM Coin.

ABN AMRO Bank & ABN AMRO Clearing USA LLC

ABN AMRO Bank is an authorized participant for the Hashdex ETF; ABN AMRO Clearing USA LLC is an authorized participant for the VanEck ETF.

ABN AMRO Bank is the third-largest bank in the Netherlands, headquartered in Amsterdam, and is directly regulated by the European Central Bank. In September 2023, ABN AMRO registered digital green bonds on a public blockchain using Tokeny and Fireblocks' digital wallet services; in November, it provided clearing for options trading conducted by Wintermute's cryptocurrency derivatives trading division Wintermute Asia on CME Group.

ABN AMRO Clearing USA LLC primarily engages in the clearing of listed stocks, options, and futures, with its U.S. headquarters in Chicago.

In addition, authorized participants for Hashdex also include Goldman Sachs & Co., BNP Paribas, Credit Suisse; Citadel Securities LLC; Jefferies Group LLC; Mirae Asset Financial Group; Royal Bank of Canada; UBS Group AG; Société Générale Group; Wells Fargo Bank, N.A., and others that will not be detailed here.

Market Makers

Cumberland DRW LLC

Cumberland DRW is a cryptocurrency market maker specializing in institutional-scale markets for Bitcoin and other cryptocurrencies, providing trading settlement, investment management, and intraday trading services to U.S. clients. Its parent company is the large trading firm DRW Holdings. Cumberland invests heavily in blockchain projects, and its on-chain activities have become a market barometer.

Cumberland DRW has served as a counterparty for Invesco/Galaxy and Fidelity's spot Bitcoin ETFs.

JSCT, LLC

JSCT, LLC is the parent company of Jane Street Capital, and although Jane Street Capital is an authorized participant for 10 ETFs, JSCT, LLC is also the market maker/counterparty for 4 ETFs: Grayscale, Invesco/Galaxy, Fidelity, and Franklin Templeton.

Flow Traders

Flow Traders is the market maker/counterparty for Grayscale and Invesco/Galaxy Bitcoin spot ETFs.

Flow Traders is a proprietary trading firm that provides liquidity to the securities market using high-frequency and quantitative trading strategies. Flow Traders was initially established in Amsterdam and has offices in New York, London, Milan, Paris, Cluj, Shanghai, Singapore, Chicago, and Hong Kong. Flow Traders is one of the largest ETP market makers globally, providing liquidity for over 13,000 ETP listings across North America, Europe, and Asia-Pacific. As of 2020, Flow Traders was the largest ETF market maker in Europe.

Flow Traders announced in 2019 that it had begun trading cryptocurrencies and invested in multiple Web3 projects, including Tonic, Ondo Finance, Elwood Technologies, Thalex, Pragma Network, Sei Labs and Sei Network, GoGoPool, Infinity Exchange, C3, Crossover Markets, Econia Labs, Membrane Labs, Rulematch, and others. Additionally, Flow Traders is one of five market makers for the Worldcoin token WLD.

Flowdesk

Flowdesk is the market maker for Grayscale. It is a French crypto financial services company that completed a $30 million Series A funding round in June 2022, with investments from Coinbase, Ledger, and others. Currently, Flowdesk has been appointed as the new market maker for the euro stablecoin EUR CoinVertible (EURCV) by Forge, a subsidiary of Société Générale.

StoneX Financial Inc. -- FCM

In the S-1 filing submitted to the SEC on December 29, 2023, Valkyrie designated StoneX Financial Inc. as its primary market maker (LMM), but in the S-1 filings submitted on January 8 and 9, 2024, Valkyrie did not mention StoneX Financial Inc. as its primary market maker.

Currently, Hashdex has appointed the FCM division of StoneX Financial Inc. as its clearing broker for its ETF.

StoneX Group is an institutional-grade financial services franchise that provides digital platforms, end-to-end clearing, and execution services to global clients, with over 300 OTC products and a trading volume of $4.4 trillion, operating in over 180 countries. StoneX Group was founded in 1924 and went public on NASDAQ in 1994.

StoneX Financial Inc. is a subsidiary of StoneX Group, and its FCM division is the agent for StoneX Financial Ltd. (authorized and regulated by the UK's Financial Conduct Authority) in the U.S., a clearing member of the New York Mercantile Exchange (COMEX) and the New York Stock Exchange (NYMEX), and a registered futures commission merchant (FCM) with the CFTC in the U.S.

Clearing Brokers

Phillip Capital Inc.

Phillip Capital Inc. is also the clearing broker for the Bitcoin spot ETF issued by Hashdex.

Phillip Capital Inc. is a futures commission merchant (FCM) and brokerage firm under Phillip Capital Group, headquartered in Chicago, established in 2010, and has full clearing membership with the Chicago Mercantile Exchange (CME), CBOT, COMEX, NYMEX, ICE US, NFX, and CFE. Phillip Capital Group was founded in 1975 in Singapore and is regulated by the Monetary Authority of Singapore.

In the crypto space, the CME Group's page shows that Phillip Capital Inc. provides cryptocurrency services. In 2022, Phillip Capital Group issued digital futures wine token, and its subsidiary Phillip Nova, established in 1983, provides cryptocurrency futures trading services.

Marketing Agents

Paralel Distributors LLC

Paralel Distributors LLC is the marketing agent for Valkyrie's Bitcoin spot ETF.

Paralel Distributors LLC is registered with the SEC as a broker-dealer and is a member of FINRA, with majority ownership held by Paral Technologies LLC. Prior to becoming Valkyrie's marketing agent, I have not found any involvement of Paralel Distributors LLC in the crypto space.

Foreside

Foreside (Foreside Financial Group, LLC) is a provider of distribution and compliance services for clients in the asset management industry, offering regulatory and compliance consulting, distribution, registration representative licensing, fund chief compliance officer, and financial officer services. Foreside Fund Services, LLC and Foreside Global Services, LLC are both wholly-owned subsidiaries of Foreside Financial Group, LLC.

Foreside Fund Services, LLC provides portfolio management, financial planning, investment consulting, and review/submission of marketing materials for regulatory review services.

Foreside Global Services, LLC provides brokerage services and is registered with the SEC as a broker-dealer, and is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). It provides custodial services for non-U.S. asset managers, including reviewing all marketing materials provided to U.S. institutional investors.

These three entities provide marketing agent services for the ETFs of ARK 21Shares, Bitwise, Grayscale, WisdomTree, and Hashdex.