ADK ETF

Explanation of arbitrators (market makers) and designated participants (AP) that fill the price gap in ADK ETF

How to close the price difference between spot ADK and ETF

This article translated what I wrote in japanese into English. Although it may be unclear by the expression of English, if you read this article you can grasp the image of ADK(Aidos Kuneen)

neokichi
neokichi
This time, I will explain about ADK ETF arbitrators (market makers) and designated participants (AP).
myako
myako
Thank you
neokichi
neokichi
If you want to know the basics of ADK ETF, check out the following two articles.
The-first-ETF-in-cryptocurrency-is-not-bitcoin
What are cryptocurrency and bitcoin ETF? Explanation of listed investment trust!Cryptocurrency has considerable hurdles to be approved as an ETF for financial products. However, ADK(Aidos Kuneen) may be the first to be approved beyond this hurdle before Bitcoin. I would like to focus on future Bitcoin / ADK ETF trends....
ADK-is-the-first-ETF-among-cryptocurrencies!?
ADK becomes the first crypto currency ETF! ?ADK(Aidos kuneen) is scheduled to be listed on three African stock exchanges, including Kenya’s NSE (Nairobi Stock Exchange).Will ADK become the world’s first ETF among cryptocurrencies....

Price difference between ADK spot and ADK ETF

The initial price of ADK ETF was announced to be $ 45, but the current ADK price (as of October 3, 2019) is about $ 3. In other words, the price difference between ADK spot and ADK ETF is $ 42.

myako
myako
That’s … If you buy ADK normally, you can buy it for 3 dollars, but if you buy ETF, it costs 45 dollars! ? Won’t anyone buy it?
neokichi
neokichi
I agree. However, we can expect that the price of the actual ADK will rise between the announcement of the ADK ETF and the actual launch of the ADK ETF.

The first realization of an ETF among cryptocurrencies could lead to a considerable impact and increase in creditworthiness, so the ADK spot price can be expected to rise.

However, since it is the first time, I don’t know how much impact it has. Cryptocurrency news, Kenya and other African news, and economic news from there.

the delusion is up to here … If it seems so, the price will rise rapidly, but conversely, there is a pattern that even if the price rises temporarily, it goes through without becoming news at all maybe. . .

In any case, I personally think that if ADK ETF announcement news comes out, the price will rise to $ 20 to $ 40 temporarily.

In other words, it can be expected that the price difference between the ADK ETF and the ETF will be filled to some extent between the official announcement of the ADK ETF by the NSE (Nairobi Stock Exchange) and the start of listing and trading.

myako
myako
But even if the actual ADK is $ 30, the ETF is expensive at $ 45. Is there anyone who buys it?
neokichi
neokichi
In conclusion, I think there are people who buy ADK ETF even at $ 45.

In order to buy the actual ADK, you will need some knowledge and operation. Even if you purchase ADK, you must manage your wallet and SEED (secret key) yourself, and there is a risk of losing ADK if you make a mistake.

However, even if you are an analog person, you can easily purchase ETF at securities companies, and there is no need to worry about losing ADK due to your own mistakes.

So, we can expect that there are quite a few people who want to purchase ADK ETF more easily than buying ADK spot. Furthermore, since ETF have high credibility, large institutional investors who have not invested in cryptocurrency until now are highly likely to enter.

ETF-can-be-purchased-easily-there-is-compensation,-it-is-safe
myako
myako
Certainly, I’m afraid of losing ADK on my own mistake, and buying the actual ADK is difficult to operate and I had a hard time at first. . If it is an ETF, it is easy to buy and there is compensation, so you can expect many people to buy ETF!
neokichi
neokichi
Yeah. In addition, there will always be a price difference, but later, the price difference between the actual ADK and the ADK ETF will disappear. I will explain from the next item.

How to fill the price gap

There is a price difference between the actual ADK and the ADK ETF. The price difference can be expected to increase especially at the start of sales.

Appearance of designated participants (APs) and arbitrators (market makers) fills the gap.

What is an arbitrage trader (market maker)?

ETF market making is to make a profit by taking advantage of the difference between the ADK ETF price and the ADK ETF price on the exchange. This is called arbitrage (also called arbitrage or abitra).

The company that makes that market make is called the market maker.

neokichi
neokichi
The simple explanation of arbitrage is to use the price difference between the ADK spot and the ADK ETF to make a profit.

For example, let ’s say that the actual ADK was $ 30 and the ADK ETF was $ 45. That means there is a price difference of $ 15.

So, suppose you purchase for $ 30 in real ADK. Then sell for $ 45 on the ETF side. Because there is a price difference of 15 dollars, a profit of 15 dollars will be generated.

In order to gain profits, the spot ADK will be bought more and more, so the price of the spot will rise and the price difference with the ETF will disappear.

The-price-difference-will-eventually-disappear

On the other hand, for example, if the cash is $ 60 and the ETF is $ 45, if you buy the ETF for $ 45 and sell it as $ 60 on the spot, you will generate a profit of $ 15.

myako
myako
I want to do it too ♪
neokichi
neokichi
At this stage, it seems that market participants (holders) can’t exchange from ADK to ADK ETF.

In the future, it will be possible to convert the actual ADK into an ETF through the Bader Group.However, the exchange of ADK → ETF is not always 1: 1.

Summary

There will be a price difference between the actual ADK and the ETF, but the price difference will be filled because designated participants (AP) will arbitrate using the price difference.

Either way, the price will be determined by the impact of the world’s first ETF and expectations for future projects.