Spot BTC ETFs at $151B: Here is the Needed Catalyst to Hit $1 Trillion

The United States spot Bitcoin ETFs have seen record growth, reaching . However, the U.S. Securities and Exchange Commission (SEC) has still not approved “in-kind” creation and redemption for these funds, a key feature that would allow for a more seamless flow of liquidity.

Nearly two years after the inception of the spot BTC ETFs, the only mode of redemption remains in cash form. According to Nate Geraci, founder of The ETF Institute and the President of NovaDius Wealth Management, spot BTC ETF issuers were ready to handle in-kind creation and redemption from the beginning.

“The fact that in-kind creations and redemptions on spot BTC ETFs are still not approved 19 months after launch is absolutely ridiculous. The ETF issuers were ready to handle this from the jump. Still doing cash creates/redeems is completely unnecessary,” Geraci .

Even with a new, more crypto-friendly administration, the SEC has remained conservative on this issue. The agency’s hesitation appears to stem from several factors, including concerns about custody, operational risks, and potential gaps in Anti-Money Laundering (AML) compliance for in-kind transfers. The ongoing review process suggests the SEC is likely developing comprehensive guidelines before giving a green light.

Earlier this year, an amendment with the U.S. SEC to permit in-kind creations and redemptions for ARK 21Shares Bitcoin ETF (ARKB) and 21Shares Core Ethereum ETF (CETH). Additionally, the for the BlackRock iShares Bitcoin Trust (IBIT) to allow in-kind creation and redemption.

Currently, the U.S. SEC has been engaging with the public on the matter as Congress formulates clear crypto regulations. Furthermore, the SEC, even under Donald Trump’s administration, remains skeptical due to several factors including custody and operational risks, and Anti Money Laundering (AML) compliance gap.

The push for in-kind creation and redemption is critical for the market’s maturity.

This model is preferred because it offers reduced trading costs, greater tax efficiency for investors, and a lower risk of trading errors compared to the current cash-only system.

With Bitcoin’s price already experiencing a supply and demand shock, a new, more efficient capital flow via in-kind creation and redemption will trigger a parabolic super bull market.