In the cryptocurrency market, Coinbase is one of the high-profile platforms. Once the Bitcoin spot ETF begins trading, the market may face huge challenges. First, we need to understand the risks that this change may bring. Let's dig deeper and see what the two key risks are.

The launch of the Bitcoin spot ETF may have a profound impact on the market. First, regulatory risks cannot be ignored. As regulators continue to pay attention to the digital asset market, the launch of the Bitcoin spot ETF may trigger stricter regulatory measures. For example, the SEC's review of ETF products may become more stringent to ensure that investors' rights and interests are fully protected. This increased regulation may bring more compliance challenges to trading platforms such as Coinbase, requiring them to increase their compliance efforts to adapt to the increased regulatory requirements.

Secondly, market volatility risk is also an issue that needs to be vigilant after the launch of the Bitcoin spot ETF. As a highly volatile asset, the price fluctuations of Bitcoin may have a chain effect on the entire market. Once the Bitcoin spot ETF goes online for trading, investors' demand for Bitcoin may increase dramatically, which in turn triggers violent price fluctuations. This volatility will not only affect investors' profitability, but also the stability of the entire digital asset market. Therefore, investors and trading platforms need to be fully prepared to prevent potential losses from market volatility risks.

In the face of these two key risks, investors and trading platforms can take some measures to reduce risks. First, it is crucial to strengthen compliance awareness. Trading platforms should strengthen communication with regulators, keep abreast of policy changes, and ensure their own compliance. Secondly, when participating in Bitcoin spot ETF transactions, investors need to carefully assess their own risk tolerance, make good asset allocation, and avoid over-investing in high-risk assets. In addition, trading platforms can strengthen risk management measures, establish a sound risk control system, and respond to the challenges brought by market volatility in a timely manner.

In general, the launch of Bitcoin spot ETF will undoubtedly bring new opportunities and challenges to the market. Regulatory risks and market volatility risks are issues that need to be focused on, and investors and trading platforms need to be fully prepared to meet the challenges brought by this change. Only on the basis of recognizing risks can we better seize opportunities and achieve long-term and steady investment growth. Let us look forward to the official launch of Bitcoin spot ETF and witness a new chapter in the cryptocurrency market!

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Coin Circle (120BtC.CoM): As the expectation that the Bitcoin spot ETF is expected to be passed in January next year increases, the price of BTC continues to rise. However, behind this optimism, there are still risks that the new financial product may face after it is officially approved and starts trading. Coinbase's head of research David Duong and senior sales trader Greg Sutton pointed out in a podcast on the 19th that once the Bitcoin spot ETF begins trading, the market may encounter two key risks. Risk of insufficient holdings by issuers under high demand The first is the issue of obtaining Bitcoin. When a Bitcoin spot ETF is issued, the issuer needs to purchase Bitcoin from a specific regulated institution to meet the ETF's holding requirements; however, if the demand for the ETF by institutional investors far exceeds expectations, it may cause the issuer to face difficulties in meeting these demands. David Duong pointed out: High demand is certainly a better situation because it reflects the market's strong interest in the product...but in the future, we need to pay attention to the risk of insufficient holdings by the issuer. This risk mainly depends on the liquidity of the Bitcoin market and the purchase restrictions of the regulated institution. In the case of high demand, if the market liquidity is insufficient or the supply is limited by the regulated institutions, this may cause ETF issuers to have difficulties in obtaining the required Bitcoin, resulting in increased market volatility.

The reduction in basis trading income may affect the liquidity of the Bitcoin market

Secondly, a popular institutional trading strategy - basis trading risks also need to be noted. The so-called "basis trading" is to use the price gap between Bitcoin spot and futures for arbitrage.

As more institutional investors invest directly in Bitcoin through spot ETFs instead of choosing futures or other derivatives, this will increase the demand for the Bitcoin spot market, which may lead to a narrowing of the gap between spot and futures prices (i.e., basis), making this trading strategy less profitable.

This situation may cause some institutional investors to reduce their trading activities in the Bitcoin market, which in turn affects the market demand and liquidity.

However, although the reduced profitability of basis trading may affect the behavior of some institutional investors, there are many other factors in the Bitcoin market that affect its demand and price, and it is not entirely dependent on a certain trading strategy, so this change is only one factor that potentially affects the market.

There are less than three weeks left until January 10, 2024, so let us continue to observe.