The two spot bitcoin ETF applications currently on investors’ radar are those of
- The Bitwise Bitcoin ETP Trust, with a decision deadline of June 29,
- The Grayscale Bitcoin Trust (GBTC), with a deadline of July 6
Both investment issuers have had their current applications delayed multiple times by the SEC and the upcoming dates represent a final deadline for the SEC to make a decision.
A spot bitcoin ETF could lower costs and make the way American investors, especially institutions, access the bitcoin makrket more secure.
So, these ETF approval are considered one of big milestone of bitcoin and crptocurrency improvement and acceptance aligned with traditional finance and regulation.
What is ETF
An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund.
Typically, ETFs will track a particular index, sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.
An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.
The first ETF was the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index, and which remains an actively traded ETF today.
BTC ETF
While Bitcoin ETFs already exist in Canada, US regulators have yet to approve a Bitcoin ETF for the US markets.
Bitcoin and the cryptocurrency markets have come a long way.
Not more than just a decade ago, this technology was only used by a small community of enthusiasts, while the price was around 10,000 BTC for just a couple of pizzas.
What building blocks are smissing before Bitcoin can become a major asset in the global macroeconomic environment?
One of these could be a regulated way for institutions and more traditional players to get exposure to it.
This is by way of an ETF.
Simply an investment fund that tracks the price of an underlying asset.
The price of the ETF would follow the price of Bitcoin. ETFs are regulated financial products — as such, they trade on traditional markets like the NASDAQ or NYSE and not on a cryptocurrency exchange.
Bitcoin isn’t the easier asset to deal with compared with traditional financial products for many general investors.
Custody can cause some serious headaches for a large institution.
Large financial institutions do not operate in the same way as individual investors, and they need a complex regulatory framework and financial plumbing to be able to participate in this space.
This is why an ETF can go a long way to bring adoption and expand the potential investor base.
It can give price exposure for participants in the traditional markets without them having to worry about all the nitty-gritty of physically owning the coins.
A Bitcoin ETF could also hold assets other than Bitcoin.
A Bitcoin ETF could hold a basket of assets, like Bitcoin, Ethereum, Tesla stock, gold, and so on.
This could provide some diversification benefits to investors.
A brief overview of Bitcoin ETFs Generally, when people talk about Bitcoin ETFs, they’re usually talking about ETFs on the US markets. However, ETFs exist in many different markets.
Why does the SEC keep rejecting the applications?
They usually cite volatility, the unregulated nature of the Bitcoin markets, and their apparent liability to market manipulation as the reason for denying the ETF applications.
While these may be true to some extent, it’s probably also true for many other financial markets that already have ETFs.
Reference: Coindesk, Kolin DeShazo