SEC Approves In-Kind Redemptions for Bitcoin and Ether ETFs

The U.S. Securities and Exchange Commission (SEC) approved in-kind creations and redemptions for spot bitcoin and ether ETFs, aligning them with traditional exchange-traded funds. This change will enhance market efficiency and trading fluidity.

Key points include:

New system allows direct transactions in bitcoin or ether, replacing cash-based processes.
This aligns the U.S. with European practices, potentially reducing market volatility.
Institutional investors may be encouraged to engage more in the ETF market.
The previous cash-only model led to increased volatility during share redemptions and creations.
The in-kind mechanism promotes smoother trading by eliminating cash conversion steps.
NYDIG states the change could lower tracking errors, create tighter spreads to NAV, and offer tax benefits.
A 2024 study suggested cash redemptions can worsen market volatility during downturns.

The transition supports a more stable trading environment, minimizing adverse price impacts during high-volume trades.