Ultimate Resource For A Bitcoin ETF (#GotBitcoin?)
Following another delay on Bitcoin exchange-traded funds (ETFs), asset managers VanEck and SolidX plan to offer a limited version of their Bitcoin ETF to institutional investors. Ultimate Resource For A Bitcoin ETF (#GotBitcoin?)
VanEck Securities and SolidX Management want to start selling shares in a limited version of a Bitcoin ETF, using a rule that exempts the shares from securities registration, under which shares can be sold only to certain institutional investors, The Wall Street Journal reported on Sept. 3.
Vaneck, Solidx Bitcoin ETF Launching Sept. 5
According to the report, the investment management firms are planning to start selling on Sept. 5 under the United States Securities and Exchange Commission’s (SEC) Rule 144A, which allows the sale of privately placed securities to “qualified institutional buyers.”
By using the SEC’s exemption, VanEck and Solid will be able to offer shares of their VanEck SolidX Bitcoin Trust to institutions such as banks and hedge funds, but not retail investors, the report notes.
Since VanEck and SolidX Partners requested the SEC to list a Bitcoin ETF in 2018, the regulator has delayed the decision on the matter multiple times, having approved zero Bitcoin ETFs to date.
On Aug. 12, the SEC again delayed its decision on three Bitcoin ETFs, including VanEck SolidX, Bitwise Asset Management and Wilshire Phoenix.
VanEck’s New Bitcoin Trust Assets Total Just $41K In First Week
Investment management firm VanEck has issued just 4 Bitcoins (BTC) via its new trust focused on institutional investors.
VanEck: One Week, One Bitcoin Basket
Data from the company, spotted by economist and cryptocurrency commentator Alex Krüger on Sept. 10, showed that since its launch at the start of the month, VanEck SolidX Bitcoin Trust 144A Shares total net assets are only $41,400.
The product, which caused a buzz after VanEck described it as being akin to an exchange-traded fund (ETF), caters strictly to so-called qualified institutional buyers, or QIBs.
“VanEck SolidX Bitcoin Trust 144A Shares… looks and feels like a traditional ETF,” its official description reads.
Critics reacted coyly after news of the unveiling hit, with industry lawyer, Jake Chervinsky, arguing the product did not represent a legal ETF, something which remains outlawed by United States regulators.
“This is misleading. The VanEck SolidX Bitcoin Trust is *not* an ETF. It looks exactly like the Grayscale Bitcoin Trust, which was launched almost six years ago,” he warned Twitter followers at the time.
VanEck Had “A Bad Launch”
Now, the Trust’s slow progress at gaining traction has seen the lack of confidence continue. For Krüger, it has become proof that institutional investors do not want such limited Bitcoin-related instruments.
“This trust is just a bad launch of a product for which there’s not much demand,” he summarized.
October will see regulators deliver a final judgement on whether two ETFs can begin trading, one of which is sponsored by VanEck.
“I believe the Bitcoin ecosystem is slowly maturing toward supporting institutional quality products,” the company’s digital asset strategist and director, Gabor Gurbacs, said in comments on the events on Monday.
On Monday, institutional trading platform Bakkt announced its warehouse for physically-delivered Bitcoin futures was now active, having opened for deposits last week.
US SEC Rejects Bitwise Bitcoin ETF Proposal
The United States Securities and Exchange Commission (SEC) has rejected a proposal to list a Bitcoin (BTC) exchange-traded fund (ETF).
In an announcement on Oct. 9, the Commission stated that the ETF filing from Bitwise Asset Management and NYSE Arca did not meet the necessary requirements.
Specifically, regulators stated that the applicants did not meet the necessary requirements regarding possible market manipulation and illicit activities. The SEC wrote:
“Rather, theCommission is disapproving this proposed rule change because, as discussed below, NYSE Arcahas not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section6(b)(5), and, in particular, the requirement that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices.'”
Bitcoin ETF “closer than ever?”
Today’s decision by the SEC seems to fly in the face of recent comments from Matt Hougan, managing director and global head of research at Bitwise, who on CNBC on Oct. 7 said, “We’re closer than we’ve ever been before to getting a Bitcoin ETF approved.”
Hougan had been optimistic about the firm’s chances to land approval for a physically-held Bitcoin ETF. He noted the significant growth that has transpired in the crypto space in recent years, stating:
“Two years ago, there were no regulated, insured custodians in the Bitcoin market. Today, … there are big names like Fidelity and CoinBase [with] hundreds of millions of dollars of insurance from firms like Lloyd’s of London.”
The rejection of Bitwise’s proposal follows a circuitous series of delays and requests for comment from the SEC. In August, the regulator postponed its decision on the proposal — together with two other crypto ETF applications — until Oct. 13.
Bitwise initially filed its application for a rule change to U.S. securities laws in January.
Crypto Market Hardly Needs A Bitcoin ETF At This Time, Says BKCM CEO
Founder and CEO of crypto investment firm BKCM Brian Kelly has said that Bitcoin (BTC) exchange-traded funds (ETF) are hardly needed for the ecosystem’s development, given that the coin is already available on regulated platforms such as Fidelity and TD Ameritrade.
Kelly made his remarks during an interview with CNBC published on Oct. 11, explaining:
“You have companies like Fidelity and TD Ameritrade starting to push into this space.
So ultimately you’re going to be able to buy Bitcoin in a regular brokerage account, or it’s going to look like a regular brokerage account. So I’m less concerned that you need a bitcoin ETF at this point in time.”
He also pointed out that the United States Commodity Futures Trading Commission’s (CFTC) decision to define Ethereum as a commodity made a significant impact on the space, adding:
“The CFTC saying that Ethereum is a commodity is huge for the space. It gives us regulatory clarity. […] That opens the door for institutions to come in. […] Everybody is concerned, what if they ban it? […] The CFTC said ‘we’re not banning it yet, we’re gonna regulate it,’ and now investors can say ‘Put them in my commodity bucket.’”
General Hope For The Market
In May, Kelly has also said that the upcoming supply cut — brought by the next halving of the block reward — could help Bitcoin prices rise further in the coming months.
As Cointelegraph reported on Oct. 9, the United States Securities and Exchange Commission rejected Bitwise Asset Management’s proposal to list a Bitcoin ETF.
New Bitcoin ETF Proposal Filed With SEC by Gold Fund Veteran
Delaware-based asset manager Kryptoin Investment Advisors applied with the United States Securities and Exchange Commission (SEC) to launch a Bitcoin (BTC) Exchange Traded Fund (ETF) on Oct. 15.
A Bitcoin ETF On The New York Stock Exchange
According to the filing document published by the SEC, the Kryptoin Bitcoin ETF Trust is meant to be traded on the New York Stock Exchange Arca. Notably, the ETF product is designed:
“[…] To provide exposure to bitcoin at a price that is reflective of the actual bitcoin market where investors can purchase and sell Bitcoin, less the expenses of the Trust’s operations.”
The company plans to hold Bitcoin and value the shares of the trust according to the Chicago Mercantile Exchange Bitcoin Reference Rate. The cryptocurrency will be held at an unspecified third-party insured custodian that is also regulated under the Investment Advisers Act of 1940.
The SEC filing also details that the Trust will hold Bitcoin “in seeking to ensure that the price of the Trust’s shares is reflective of the actual bitcoin market.”
However, the Trust will not purchase or sell bitcoin directly but will acquire it via shares called “baskets.” The report continues:
“Instead, when it sells or redeems its Shares, it will do so in ‘in-kind’ transactions in blocks of 100,000 Shares called ‘Baskets’ at the Trust’s net asset value (‘NAV’). Only Authorized Purchasers may purchase or redeem Shares with the Trust, and they will do so by delivering bitcoin to the Trust in exchange for Shares when they purchase Shares.”
A Notable Executive
Another notable detail is that the head of exchange-traded product at Kryptoin is Jason Toussaint, former managing director at the World Gold Council and ex asset manager of SPDR Gold Shares, one of the largest Gold ETFs in the world.
Meanwhile, the race to launch the first regulated Bitcoin ETF is becoming increasingly competitive.
Earlier this month, documents revealed that the Wilshire Phoenix Fund has updated its own Bitcoin ETF proposal filed with the SEC. Also this month, asset manager Bitwise alongside NYSE Arca confirmed the intention to refile their application for a Bitcoin ETF after the latest SEC rejection.
The SEC Does Not Want Crypto ETFs — What Will It Take to Get Approval?
October has been a busy month in the race to register the first crypto exchange-traded fund compliant with the requirements of United States regulators. Following the Chicago Board Options Exchange withdrawing its proposal for VanEck/SolidX Bitcoin ETF earlier in September, the ETF filing from Bitwise Asset Management and NYSE Arca was turned down by the Securities and Exchange Commission on Oct. 9. The regulatory authority remained unconvinced of the applicants’ ability to prevent manipulative practices to the extent required by a national securities exchange.
For a brief moment, the only standing Bitcoin ETF application has been a bid by the investment management firm Wilshire Phoenix — a proposal that its sponsors amended in early October to include updated custody rules. It wasn’t too long, however, before a new contender entered the race.
Investment management firm Kryptoin Investment Advisors, with the former World Gold Council executive Jason Toussaint at the helm of the effort, turned in an initial registration statement to the SEC for a Bitcoin ETF. This latest submission may prove to be the latest in a series of fruitful attempts to convince the regulator to accept an ETF — or will it? What will it take for the commission to finally give the go-ahead for a crypto ETF, and is the new proposal up to par?
The New Gold
The new proposal’s sponsor, Kryptoin Investment Advisors LLC, is a Delaware-domiciled subsidiary of the fintech company Kryptoin ETF Systems, which is registered in the Cayman Islands. The firm specializes in developing AI-driven products for crypto financial markets.
Donnie Kim is the firm’s founder and CEO, while Toussaint — an industry veteran with more than 20 years of experience with exchange-traded instruments — holds the position of head of exchange-traded products at Kryptoin Investment Advisors.
As CEO of World Gold Trust Services, Toussaint was instrumental in the creation of one of the first commodity-based ETFs — the SPDR Gold Shares (GLD), which was first listed on the New York Stock Exchange in November 2004 and had once been the world’s largest ETF.
Toussaint’s involvement with gold-backed financial instruments is no coincidence as far as his new assignment goes. In serving as assets underlying ETFs, both Bitcoin (BTC) and gold differ from stocks of publicly traded companies, as they place additional regulatory scrutiny in terms of price discovery on the spot exchanges where they are traded. Indeed, the regulatory challenges faced by ETFs backed by gold and Bitcoin are in many ways similar: In both cases, the SEC first wants to get a solid grasp of what is going on in the underlying markets.
What The SEC Wants
One of the regulator’s major concerns when evaluating new commodity-based ETFs is establishing whether the underlying market is resistant to manipulation, in accordance with Section 6(b)(5) of the Securities Exchange Act. So far, no proposal filed with the SEC has been able to demonstrate such in regard to Bitcoin markets.
Yet, the act outlines an alternative route by which an ETF can win approval: Showing that the listing exchange has entered a “comprehensive surveillance-sharing agreement with a regulated market of significant size.”
Such agreements between exchanges and underlying markets — by facilitating the exchange of granular trading data — are supposed to provide additional transparency and enable regulators to investigate suspicious trading behavior should the need arise.
In the 122-page order disapproving the Bitwise application, the SEC commissioners deemed that the evidence brought by the proposal’s sponsor insufficiently supported the claim that the “real” spot market for Bitcoin, when “fake and/or non-economic data is removed,” is sufficiently resistant to manipulation.
Demonstrating that a “surveillance-sharing agreement with a regulated market of significant size” exists is a heavy burden as well. Even if there is an arrangement in place, the sponsor has to convince the regulator that the entity on the other side of it qualifies as a “significant, regulated market.”
In the Bitwise case, NYSE Arca — the proposal’s sponsor — tried to leverage the respectability of Bitcoin futures traded on the Chicago Mercantile Exchange, yet failed to show that the market was “significant.”
The Kryptoin Investment Advisors’ hope to clear this hurdle rests with using the CME CF Bitcoin Reference Rate, which captures transaction information from five major trading platforms: Bitstamp, Coinbase Pro, itBit, Kraken and Gemini. The applicants argue that this aggregated index “provides an accurate reference to the average spot price of Bitcoin,” and is more resistant to manipulation than other measurement strategies.
What Are The Odds?
Most of the crypto finance professionals who have spoken to Cointelegraph on the matter were skeptical that any of Bitcoin ETF’s short-term prospects would win the SEC’s approval. However, many sounded more optimistic when talking about medium to long-term prospects. Michael Ou, CEO of the fintech security firm CoolBitX, expects that the latest proposal will share the fate of its predecessors:
“It would seem that the cryptocurrency industry just doesn’t meet the SEC’s expectations of a well-behaved and well-regulated industry. This comes as no real surprise, as previously unregulated — and sometimes still unregulated —exchanges have been seen to be influential in manipulating market prices within the cryptocurrency sector.”
Charles Lu, CEO of the confidential ledger protocol Findora, also noted issues with price manipulation at the hands of exchange platforms:
“Though Bitwise is well known for analyzing ‘real’ exchange volume, the SEC noted that many of the exchanges used by the proposed Bitwise ETF are not regulated in the US. For instance, Binance, the largest platform identified by Bitwise as real, with 39% of the ‘real’ volume, is not registered with either FinCEN or NYSDFS.”
Christophe de Courson, co-founder and CEO of crypto investment firm Olymp Capital, mentioned unregulated exchanges as a major hurdle as well, adding insufficient liquidity to the list of concerns:
“Firstly, there is not enough liquidity on spot and derivative markets for institutional-grade investors to enter. This comes with a high level of volatility, making it difficult to manage in a portfolio. Secondly, operating in this market comes hand in hand with a lot of regulatory issues and unregulated cryptocurrency exchanges operating outside the US also play a crucial role in Bitcoin price movements.”
As such, it appears that there is no single most important component to ensuring a successful crypto ETF. In addition to the points already raised, experts note that custody is an important precursor for any of the regulated crypto-based financial instruments, as evidenced, for example, by the Bakkt futures saga. Tyler Gallagher, CEO of investment firm Regal Assets, observed that there are three key pieces that must be in place before the first ETF is approved:
“A regulated market for reliable pricing, proper market surveillance of exchanges to avoid market manipulation, and exceptional qualified custodians to ensure proper security and storage of the assets. The market has matured significantly over the past few years and is reaching a tipping point that should allow investors to see the approval of a Crypto ETF as early as next year.”
Others believe that the progress on the Bitcoin ETF front will be commensurate with general regulatory advancements of the crypto industry. Nick Cowan, Managing Director and Founder of the Gibraltar Stock Exchange Group, commented:
“Approval stems from a combination of two factors; time and understanding. Once the regulator has gotten to grips with the realities of this newly emerging asset class, only then will they become comfortable allowing such products into the market. This process will likely be a protracted one.”
Tara Bogard, senior vice president of business development at the independent qualified custodian Kingdom Trust, said that it can take some time for an ETF to be approved, since, “Before the SEC can or will approve a crypto ETF, the need to first focus on generalized cryptocurrency regulation is necessary.”
With regard to the realistic timeline for the first crypto ETF approval, Lu is doubtful that the process will be expeditious: “For a bitcoin ETF proposal to gain SEC approval, the sponsor will need to prove that real price discovery is happening as opposed to market manipulation.” Lu does not believe this will happen in the near future, adding:
“The SEC will require surveillance-sharing agreements with significant cryptocurrency exchanges — a requirement that few foreign-domiciled exchanges will agree to.”
The general sentiment among industry professionals seems to be that of reserved optimism: Hardly anyone expects a breakthrough to occur very soon, yet most admit that it is only a matter of time.
It could be the Kryptoin Investment Advisors’ proposal that will blaze the trail for crypto ETFs, or perhaps another one that is yet to be filed — at some point, the crypto industry will get its coveted prize, but not just yet.
The SEC Has Rejected Every Bitcoin ETF. This Firm Thinks It Has a Solution
One company thinks it knows how to get a bitcoin exchange-traded fund (ETF) approved by U.S. regulators.
Wilshire Phoenix, a relatively young financial firm in New York, filed to launch the United States Bitcoin & Treasury Investment Trust ETF in May with NYSE Arca. At that point, a dozen bitcoin ETF proposals had already been swatted down by the U.S. Securities and Exchange Commission (SEC) – including nine in one day. But unlike other ETF applications, Wilshire Phoenix’s ETF will invest in both bitcoin and U.S. Treasury securities, commonly referred to as T-bills.
The SEC is currently reviewing the application.
“Our proposed bitcoin-related ETF is quite different from those that have previously been submitted to the Commission for approval,” Wilshire Phoenix founder and managing partner William Herrmann said in a phone interview. “To name just a few distinctions, the composition of the Trust is very different. Our Trust is a multi-asset trust (bitcoin and T-Bills), as opposed to just bitcoin.”
The SEC has long been hesitant to approve an ETF with exposure to digital assets, citing the market’s relatively young age and the possible risks to investors. The agency has rejected a number of proposals, while other applicants have proactively withdrawn their filings.
Herrmann says the Wilshire ETF has several mechanisms to address these concerns.
The Trust itself will automatically rebalance itself monthly to address possible concerns about bitcoin’s price volatility, Herrmann explained. Essentially, if bitcoin’s price volatility increases, the index will reduce its exposure to the cryptocurrency and instead increase its exposure to Treasury bills. As bitcoin’s volatility falls, the opposite occurs.
The weighting will be transparent, with the index being shown on Bloomberg and Thomson Reuters portals, he said.
The CME’s Bitcoin Reference Rate will provide the data for bitcoin’s price in the Trust, rather than use an in-house price method “or one from any related party,” he added.
Wilshire Phoenix is also hoping to address SEC concerns about market manipulation by using a surveillance sharing agreement, one component the regulator stressed was needed when rejecting a recent bitcoin ETF application. Herrmann said:
“The CME has surveillance sharing agreements with both the CME futures market as well as the relevant portion of the spot market that forms the basis for the Trust’s bitcoin values. This addresses the SEC concerns about the lack of surveillance sharing agreements with the relevant spot market, which is something previous applicants have not been able to address.”
Most recently, the SEC denied Bitwise Asset Management’s fund. In a whopping 112-page order published Oct. 9, the regulator said surveillance-sharing agreements were necessary and market manipulation remains a real concern.
As recently as September, SEC Chairman Jay Clayton said that while progress has been made in the space, the market manipulation question had not been resolved.
For Wilshire Phoenix’s proposal, the SEC began accepting comments on the proposal in June, though a final decision is still months away. The agency is currently accepting comments on the proposal through Nov. 12, 2019.
Herrmann is optimistic about the ETF proposal’s chances, saying “we developed the ETF consistent with investor protection as well as fair, orderly and efficient markets.”
SEC Punts Decision On Wilshire Phoenix’s Bitcoin ETF Proposal To February
The Securities and Exchange Commission (SEC) has postponed making a decision on a bitcoin and U.S. Treasury bond exchange-traded fund (ETF) proposal filed by Wilshire Phoenix.
According to a document published Friday, the SEC will continue evaluating the proposal, which was first filed earlier this summer, setting Feb. 26, 2020 as its next decision date to approve or reject the ETF proposal.
The securities regulator has been loathe to approve any bitcoin ETF, rejecting more than a dozen in the last two years. The agency has pointed to concerns about market manipulation and surveillance sharing as two areas it would like to see bolstered before it would approve an ETF.
Wilshire Phoenix believes it has found a way to address these concerns. In an interview with CoinDesk in November, Wilshire founder and managing partner William Herrmann said the fact that his company’s proposal, filed with NYSE Arca, is a multi-asset trust protects it against bitcoin’s price volatility.
Should volatility increase, the trust will automatically rebalance itself to decrease its bitcoin exposure and increase its exposure to the Treasury bills. As volatility falls, so too does the Treasury bill exposure.
The company filed a comment letter on Dec. 18 in an attempt to further assuage these concerns. Herrmann told CoinDesk Friday that the letter “addresses how the [exchange-traded product] is structurally and fundamentally different from prior bitcoin-related ETP applications.”
“The comment goes on to show how the two markets that are relevant to the Trust – referred to by the Commission as the ‘regulated markets of significant size’ – are the CME bitcoin futures market and the spot market composed of the five constituent exchanges from which pricing for the CME CF BRR is determined,” he said.
The five exchanges include Coinbase, Kraken, itBit, Bitstamp and Gemini, and they represent the majority of the bitcoin-U.S. dollar market, he said. The exchanges also have surveillance-sharing agreements with the CME and CF Benchmarks, the reference rate’s administrator.
It remains unclear whether the SEC will approve any bitcoin ETF in the near-term. The most recent rejection, when the SEC denied Bitwise Asset Management’s latest bid, reiterated the agency’s concerns.
The SEC Commissioners are reviewing that rejection, though it is unclear when they might reach a decision.
VanEck Proposes ETF For Bitcoin, Once Again
As 2020 draws to a close, one of the prior proponents for an exchange-traded fund (ETF) based on bitcoin is trying again: VanEck has submitted an application to the U.S. Securities and Exchange Commission (SEC) for a “VanEck Bitcoin Trust.”
An ETF is seen as advantageous because it trades on the stock market in much the same way as shares in popular companies such as Apple and Microsoft.
VanEck has previously proposed ETFs, withdrawing its most recent application in September 2019. At the time the company said it remained committed to an exchange-traded product.
As it has in previous applications, VanEck said this ETF would trade on the Cboe BZX Exchange.
So far the SEC has considered many applications for bitcoin-based ETFs and rejected them all. In August 2018, it rejected nine such proposals on the same day.
In October, SEC Chairman Jay Clayton said the agency was still open to considering ETF proposals.
Chairman Clayton stepped down officially last week. Dalia Blass, the director of the division of investment management, will also end her tenure in January, according to the agency. Blass was the author of a 2018 letter within the SEC expressing concerns the bitcoin (BTC, +3.36%) market was not large enough or liquid enough to be ready for an exchange-traded product.
According to the application, the number of the outstanding shares will depend on how much BTC is delivered to the Trust and held by an as yet undesignated custodian.
VanEck Files With SEC For ETF That Tracks Crypto Companies’ Performance
VanEck has filed with the SEC to launch the Digital Assets ETF related to the performance of top cryptocurrency companies.
VanEck, a major American investment management firm, is making another attempt to launch a digital asset-related exchange-traded fund, or ETF.
According to a Jan. 21 filing with the United States Securities and Exchange Commission, VanEck’s new ETF is called the Digital Assets ETF. The new fund would track the price and performance of the Global Digital Assets Equity Index run by its subsidiary MV Index Solutions.
According to the document, the new Digital Assets ETF “normally invests” at least 80% of its total assets in securities that comprise the Fund’s benchmark index. The index tracks the performance of the digital assets segment.
VanEck elaborated that digital asset companies refer to companies that operate digital asset exchanges, payment gateways, mining operations, software, equipment and technology or services to the digital asset industry, and others.
In order to be initially eligible for inclusion in the index, a company must generate at least 50% of its revenues from digital assets projects or projects having the potential to generate such revenues, the filing reads.
“Companies with less than 50% of their revenues from the global digital assets segment, including semiconductor and online money transfer companies, may be added to the Index to reach a minimum component number,” VanEck noted.
VanEck is famous for being the first company to file for a Bitcoin (BTC) ETF in the United States. After several failed attempts, VanEck filed a new Bitcoin ETF application on Dec. 31, 2020. As reported by Cointelegraph, VanEck is facing a lawsuit from blockchain firm and former-partner SolidX over its latest BTC ETF for alleged plagiarism.
Five Reasons The SEC Should Approve Bitcoin ETFs
The evidence shows that investors would prefer to invest in cryptocurrencies through an exchange-traded fund.
If President Joe Biden’s nomination of Gary Gensler to lead the Securities and Exchange Commission is confirmed, Gensler should act swiftly to get the agency’s staff moving toward approving a Bitcoin exchange-traded fund, showing that the U.S. not only understands cryptocurrencies but is looking to protect investors and put the country on a level playing field with the rest of the world. This move is long past due.
The SEC is seen as dragging its feet unnecessarily on the issue of approving ETFs that focus on cryptocurrencies. An informal Twitter poll I recently conducted found that almost 80% of the 2,192 people who responded believe the SEC should approve a bitcoin ETF. About 50% would invest in one. I’ve been doing these polls for years and this is the highest by far in favor of approval.
My poll lines up nicely with a Bitwise survey of financial advisors. In that one, 63% of respondents said an ETF was the preferred vehicle to invest in Bitcoin, compared with 16% for directly owning the digital coin and 10% for a mutual fund. People say this not as crypto advocates but as fans and users of the very durable and efficient ETF structure. They would feel the same way if the SEC denied a gold ETF or a China A-share ETF, both of which are great examples of ETFs breaking new ground and successfully democratizing a unique asset class.
Here Are Five Reasons The Sec Should Approve An ETF:
The Premium in Grayscale Bitcoin Investment Trust is Dangerous: Those seeking a U.S.-based investment vehicle for the digital currency are generally left with a bunch of OTC-traded trusts similar to closed-end funds but without the crucial share creation or redemption process offered by an ETF – a feature that allows for arbitrage.
The most popular is the Grayscale Bitcoin Investment Trust, which has grown from $2 billion to more than $20 billion in assets over the last year. If Grayscale was an ETF, it would rank about 50th in size, putting it in the top 2% of all ETFs.
Those that bought shares of the trust over the last year paid an average premium of about 18% more than the value of Bitcoin — and that’s on the low side of where it has traded historically. The premium has been as high as 132% and as low as 3% in recent years.
In an ETF, investors know they are getting a price that is going to be very close to the underlying asset.
Of course, a Bitcoin ETF would also likely trade at premium, but it would be microscopic compared with where Grayscale trades. It also would not be subject to artificial forces that tend to push the price of Grayscale’s shares lower even if the price of Bitcoin is rising and vice-versa. History shows us that the premium in an ETF would steadily shrink as more and more professional market-makers get involved.
They’ve Worked Fine in Europe: More than 20 cryptocurrency ETFs already exist outside the U.S., mostly in Europe. Exchange-traded notes such as the Bitcoin Tracker EUR introduced in Sweden over five years ago have typically trade at miniscule premiums thanks to the arbitrage allowed by the share creation/redemption process.
Although a U.S. Bitcoin ETF would be a much bigger deal in terms of volume and assets, it would effectively work the same.
And although the premiums and discounts to net asset values are wider than most equity ETFs, they are pretty tight all around and much tighter than Grayscale and the like.
The steep run up – and then down – in Bitcoin prices provided a case study in how a U.S. Bitcoin ETF would react to such sharp moves. Looking at the lot of ETFs and ETNs in Europe, most ended Jan. 11 (following a two-day 17.6% plunge in Bitcoin) at a 3% to 4% discount to net asset value. Clearly, the “arbitrage band” was stretched but it didn’t break. Those who wanted to exit, could. Put that in the U.S. with the biggest and best market makers and my guess is that the discount would have been half as much.
There Are Plenty More Volatile ETFs: Although there’s no precedent for an ETF tracking a digital asset, the SEC has approved vehicles that are arguably more dangerous in terms of volatility. There are about 70 ETFs that are more volatile than Bitcoin.
For example, an ETF approved and launched less than a year ago, the Direxion Daily S&P 500 High Beta Bear 3X Shares ETF, has a 60-day standard deviation between 100% and 200% – depending on the month – while the Swedish Bitcoin ETN is between 25% and 100%.
It Would Be Obvious What It Is: The risks of a Bitcoin ETF are obvious to average investors, as most have at least some knowledge of cryptocurrencies as being new, alternative and volatile. That suggests it would be less apt to result in a nasty surprise for unknowing investors, which has happened in the past with certain ETFs.
One example is the United States Oil ETF, which is akin to a wolf in sheep’s clothing: It has a vanilla name and looks pretty innocent, but it holds futures contracts and most don’t understand how big the costs of “rolling” those contracts can get.
Second, the broader Bitcoin market, which the SEC has said is prone to manipulation and fraud, is becoming more efficient with bigger institutions participating. If anything, having an ETF will speed this along and further help transparency and foster better surveillance of crypto exchanges as they’d compete to attract professional market makers.
No Worries About Remembering Password : One reason why investors love ETFs is because they are convenient. Any individual investor could replicate any ETF — they literally tell you what they hold every day – and save the expense ratio, but most investors want the convenience.
As an added bonus, investors don’t have to worry about losing passwords to digital wallets; they just need to be able to log into a brokerage account.
And please don’t ask me about the 4.6% that don’t think the SEC should approve a bitcoin ETF but would invest in one if they did. That’s a special kind of person
The Race Is On Yet Again For Crypto ETFS As Valkyrie Files Registration
Multiple institutions are yet again lining up to offer crypto ETFs, but will the SEC overcome its historical reticence?
In a move that may give seasoned investors flashbacks to 2018, Valkyrie Digital Assets is the latest asset management firm to file a registration with the SEC to form a Bitcoin ETF — a bid that joins a crowded field of prospective fund managers looking to capitalize on renewed retail interest in cryptocurrencies.
Filed on Friday, the Texas-based family investment fund proposed listing the Valkyrie Bitcoin Trust on the New York Stock Exchange. The application did not include a possible trading ticker.
If history is any indication, however, the filing’s chances of leading to a tradable fund are slim. During the last Bitcoin bull run, multiple firms attempted to throw their hat into the ring as at least nine entities filed proposals for a Bitcoin ETF with the SEC, including ETF giants VanEck and Direxion, as well as Gemini, the crypto services firm formed by Cameron and Tyler Winklevoss.
In a previous interview with Cointelegraph, Kryptoin CEO Donnie Kim, whose firm filed for an ETF in October of 2019, says that the SEC has long been hesitant to move forward with proposals.
“At this moment in time the commission is listening and learning about this new asset class and they are in a holding pattern, partly to understand the consequences of the existing products on the market and partly to look for further guidance under the current political landscape,” said Kim.
Despite the commission’s historical reticence, as retail interest in cryptocurrency booms fund managers are once again clamoring to be the first to offer an ETF product.
On Thursday, Jan. 21 gold ETF giant VanEck — which was the first company to ever file for a Bitcoin fund — filed to form a Digital Assets ETF, which would track the performance of the Global Digital Assets Equity Index made up of crypto service companies.
While American ETFs have been hard to come by, other exchange-traded products are flourishing. Options for traders include a Swiss Bitcoin ETP, a bevvy of Grayscale products that may be expanding to include Chainlink in the coming months, and an Ethereum ETF in Canada that proved so popular trading had to be halted in its debut.
Crypto Hedge Fund Refutes JPMorgan’s Claim That Bitcoin ETF Is Short-Term Negative For BTC
Research from Tyr Capital Arbitrage SP refutes JPMorgan’s claim that a Bitcoin ETF holds negative connotations for BTC’s price.
Strategists at JPMorgan Chase caused quite the stir in January when they informed clients that the approval of a Bitcoin (BTC) exchange-traded fund, or ETF, would be a short-term headwind for the digital asset. A United Kingdom-based cryptocurrency hedge fund manager is attempting to pour cold water on those claims, asserting that JPMorgan’s analysis isn’t based on quantitative analysis or in-depth research.
The crux of JPMorgan’s argument is that a new institutional-grade ETF would introduce competition for Grayscale Bitcoin Trust, or GBTC, which has amassed over $22 billion in assets under management. The bank’s strategists say that the new ETF could lead to a cascade of GBTC outflows and cut into the premium.
GBTC boasts a large premium over Bitcoin largely because of its dominant position in the market. Institutional investors that want exposure to the digital asset without having to buy it outright have few options outside of GBTC.
Tyr Capital Arbitrage SP has completed a detailed refutation to JPMorgan’s claims. The fund manager told Cointelegraph: “We disagree with the JPM assessment” on grounds that there is no evidence suggesting that a decrease in the GBTC premium will lead to negative short-term returns for BTC.
“Instead we found evidence of the opposite, namely a decrease in the GBTC Premium tends to be followed by short term gains in Bitcoin,” Tyr says in its yet-to-be-released report.
The Report Continues:
“We found no evidence that supply originating from the ‘new’ shareholders affects the premium in any meaningful way. […] We found, instead, evidence that supply originating from existing or ‘old’ shareholders is negatively affecting the premium (effectively ‘front running’ or discounting the effect the ‘new’ shareholders will eventually have).”
Nick Metzidakis, Tyr Capital’s research lead, told Cointelegraph that his analysis of GBTC’s premium history over the past five years suggests that a “decrease in the premium has a positive impact on Bitcoin.”
As for Grayscale Bitcoin Trust, Metzidakis said that increased competition may affect its market share but that its assets under management will likely continue to rise as more investors allocate to Bitcoin.
Despite rumblings to the contrary, Metzidakis doesn’t believe the United States Securities and Exchange Commission will greenlight a Bitcoin ETF this year. That being said, the growth of crypto as an asset class “may encourage regulators to fast track their acceptance of a Bitcoin ETF as they are motivated to provide a safe and controlled point of access” to the new asset class.
“Institutional adoption of Bitcoin can only be positive for the price of Bitcoin in the long run yet it may increase its correlation to other asset classes. That would especially be the case in times of crisis.”
Bitwise Files Intent With SEC To Launch ‘Crypto Innovators ETF’
A recent SEC filing by Bitwise reveals plans to launch a new crypto innovators fund.
Bitwise, one of the world’s largest cryptocurrency fund managers, has filed a new prospectus with the United States Securities and Exchange Commission, or SEC, to launch an exchange-traded fund for so-called “crypto innovators.”
The fund manager filed Form N-1A with the securities regulator on Feb. 5, where it outlined its intent to offer the Bitwise Crypto Innovators ETF. The proposed ETF will track the performance of the Bitwise Crypto Innovators Index.
The proposed Index will be comprised primarily of companies that derive more than 75% of their revenue from the crypto sector or that have more than 75% of their net assets held in cryptocurrency. The remainder includes large-cap companies that have a “dedicated business initiative” focused on crypto.
According to the prospectus, crypto innovators include digital trading platforms, custodians and wallets; financial service providers leveraging crypto assets or blockchain technology; financial institutions serving clients involved in the digital asset space; and blockchain infrastructure service providers.
The Document States:
“The term “Crypto Innovators” generally refers to companies that service and transact in the segment of the economy dealing with crypto assets and distributed ledger technology.”
Notably, the proposed ETF will not invest in crypto assets directly or through derivatives. The fund will also avoid any dealings with initial coin offerings.
For years, Bitwise has been at the forefront of the crypto ETF debate. In Jan 2020, the fund manager shelved its long-standing Bitcoin ETF application, following a similar move from VanEck. At the time, Bitwise told Cointelegraph that it plans to re-file the application “at an appropriate time.”
That time could be approaching as more institutions hop on board the Bitcoin bandwagon. The digital asset has been in rally mode for months thanks to a new wave of corporate and institutional buyers. On Monday, Tesla confirmed that it had allocated a large portion of its balance sheet to BTC, becoming perhaps the most high-profile buyer in history.
Why A U.S. Bitcoin ETF Could Be A Real Thing In 2021
Looking for the adrenaline rush of investing in Bitcoin but without the bother of crypto-exchanges and digital wallets? An exchange-traded fund might appeal, except an investor won’t find one tracking Bitcoin in the $5.8 trillion U.S. ETF universe — at least not yet.
While exchange-traded crypto-tracking products exist in Europe, U.S. regulators have repeatedly batted down attempts to introduce them citing concerns about potential manipulation and thin liquidity. Yet with the world’s largest digital coin rallying to new heights and a change of leadership at the Securities and Exchange Commission, the prospect of a first U.S. Bitcoin ETF appears to be rising.
1. What Would A Bitcoin ETF Look Like?
ETFs are part of a broader family known as exchange-traded products, though people frequently use “ETFs” to refer to all of them since they are by far the largest and most popular contingent. ETPs trade like stocks and can track (almost) any asset class by directly acquiring the securities or replicating the performance through derivatives. Niche ETPs track everything from cannabis stocks and uranium miners to space-related investments and regular currencies.
The largest Bitcoin ETP — the $1.7 billion Bitcoin Tracker EUR, listed on the Stockholm Stock Exchange — invests in swap contracts to mirror the cryptocurrency’s returns. Meanwhile, several U.S. investment trusts follow Bitcoin and are similar to ETFs but with certain restrictions. The Grayscale Bitcoin Trust (ticker GBTC) is physically backed, meaning that it holds Bitcoin. An ETF planned by VanEck Associates Corp. also intends to physically hold the cryptocurrency.
2. Is There Demand For An ETF?
There’s good reason to think so. GBTC has swelled in size during Bitcoin’s bull run into early 2021, with total assets soaring to more than $27 billion from $2.8 billion a year earlier. Demand for crypto-related products has been so relentless that investors piled into the trust even as its market value soared to 40% more than the value of Bitcoin it held. The recently launched Bitwise 10 Crypto Index Fund (ticker BITW) swelled to a valuation of more than $700 million in early February following its December debut, meaning it was valued 63% above its net asset value.
3. Why Would Investors Pay Such Premiums?
Because buying investment trusts is easier than purchasing the coins themselves. Shares can be bought and sold on brokerage platforms, without the need to set up digital wallets or move money to a crypto exchange. Industry experts argue that the premiums on trust products would dwindle if a Bitcoin ETF were approved. The problem with trusts is, unlike ETFs, new shares can’t be quickly created. For example, only accredited investors can create BITW shares with a minimum initial stake of $25,000. A lockup period bars the sale of new shares for 12 months. The supply constraints helped contribute to those soaring premiums.
4. Why Have Regulators Shunned A Bitcoin ETF?
As well as worries that prices can be manipulated and liquidity is insufficient, there’s also concern that Bitcoin’s famous volatility may be too much for regular investors. Bitcoin’s last three full-year returns were a 74% loss followed by gains of 95% and 306%. The regulator also questioned whether funds would have the information necessary to adequately value cryptocurrencies or related products. There have also been questions about validating ownership of the coins held by funds and the threat from hackers.
5. Who Is Interested In Launching One?
As of early February, the only active filing with the SEC was the request for the VanEck Bitcoin Trust made in December. That fund would value its shares based on prices contributed by what the index provider judges to be the top five exchanges for the cryptocurrency. Bitwise Asset Management is also seeking to launch a broader cryptocurrency ETF. It’s one of numerous issuers who have already tried to start a Bitcoin ETF, beginning with the Winklevoss twins in 2013. Other attempts were made by Direxion, ProShares, First Trust, Grayscale, WisdomTree and GraniteShares, all without success.
6. What Are The Current Hurdles To Approval?
The wild price swings — in the early weeks of 2021 Bitcoin rose more than 40% then fell 24% before surging more than 50% — have reignited worries about exposing ETF investors to such volatility. Furthermore, Treasury Secretary Janet Yellen noted that Bitcoin is an area of concern for terrorist and criminal financing. Critics also say the issues involving industry manipulation have yet to be effectively addressed. Because the amount of Bitcoin is finite, the fear is large holders would be able to move the market.
7. So What Are The Chances Of An ETF This Year?
Market watchers say they’re improving as Wall Street heavyweights such as Paul Tudor Jones and Stan Druckenmiller adopt the cryptocurrency and the likes of Robinhood and PayPal make it it easier to use and trade Bitcoin. Some crypto fans were encouraged by President Joe Biden’s nomination of Gary Gensler as SEC chairman; Gensler once taught a class at MIT’s Sloan School of Management called “Blockchain and Money.” But he has also acknowledged industry issues with fraud and light regulation. Don’t expect a decision until the new chairman is in place between now and July.
First Bitcoin ETF Approved In Canada
The approval makes it the first North American Bitcoin ETF.
A Bitcoin exchange traded fund for investment firm Accelerate Financial has been approved in Canada.
This makes it the first officially approved Bitcoin ETF in North America after the Ontario Securities Commission gave the green light for the institutional product.
The decision document was approved on Thursday, Feb. 11, and covers the following territories; British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.
Accelerate Financial Technologies had filed and obtained a receipt for a preliminary prospectus with Canadian securities regulators for the Accelerate Bitcoin ETF (ABTC) on Feb. 2.
It stated that the fund will offer units denominated in both United States and Canadian dollars with a 0.7% management fee, adding that it had applied to list ABTC units on the Toronto Stock Exchange.
At the time, founder and CEO of Accelerate, Julian Klymochko, said;
“Bitcoin has been one of the best performing asset classes on a 1-year, 3-year, 5-year and 10-year basis, both absolute and risk-adjusted. Given Bitcoin’s historical track record and future potential, along with its portfolio diversification properties, we are looking forward to offering investors exposure to the asset class in an easy-to-use, low-cost ETF.”
The firm offers a suite of other ETFs, including the recently launched OneChoice Alternative Portfolio ETF which is the country’s first fund to provide single-ticket exposure to multiple alternative asset classes and investment strategies including Bitcoin, gold, arbitrage, and private credit.
In mid-January, Canadian investment fund manager Arxnovum also filed a prospectus for a Bitcoin ETF with the Ontario Securities Commission.
Australian Regulators Open To Bitcoin ETF With ‘Rules In Place’
Securities regulators’ down under said that they are open to a Bitcoin ETF, so long as investors are protected by the proper rules.
The Australian Securities and Investments Commission has clarified its position regarding Bitcoin (BTC)-linked exchange-traded funds.
According to a Feb. 12 report by the Australian Financial Review, the commission addressed the subject after previously rejecting a Bitcoin ETF initiative by local company Cosmos Capital.
Per the report, Cosmos CEO James Manning claimed that ASIC “have a policy — which they have not released — which says they do not want an exchange traded product, an MIS, listed on an exchange.”
However, ASIC commissioner Cathie Armour told the Senate select committee on financial technology Friday that a Bitcoin ETF is possible, so long as there are appropriate rules in place in the market on which it is traded:
“For any products to be quoted on exchange markets in Australia, the particular market needs to have in place rules that facilitate the quoting of products […] Not all markets have rules in place that do that. […] These products can be made available to Australians through a managed investment scheme regime and Australians can invest in these products in that way.”
Armour said that a Bitcoin ETF could fall under Australian Securities Exchange’s AQUA Rules, which are specifically designed for investment schemes like managed funds, ETFs and other products.
Armour noted that the National Stock Exchange of Australia, on which Cosmos attempted to list its product, does not have such rules.
Australian Securities Exchange CEO Dominic Stevens said that the ASX has taken a cautious approach toward cryptocurrency-related products, but is considering them. “The world of bitcoin has changed since the last run, and my gut feel is this dominated by more corporate activity and institutions,” he said.
Steve Vallas, head of the Blockchain Association of Australia, told Cointelegraph that the shift in regulators’ attitudes represents a major signal for the crypto adoption in the country:
“The first step towards the adoption […] is open communication and a willingness by Government to discuss the opportunity, implications and risks associated with the listing of products like an ETF. The message being conveyed from ASIC is a very important signal to the sector and is welcome news for all involved in the sector.”
Cosmos Capital is now reportedly planning to list its Bitcoin ETF on ASX, which could potentially become Australia’s first ETF linked to Bitcoin. Cosmos did not immediately respond to Cointelegraph’s request for comment.
NYDIG Files For US-based Bitcoin ETF, With Morgan Stanley On Board
The crypto-focused financial services company has filed S-1 paperwork with the SEC, reigniting the debate over a Bitcoin ETF.
New York Digital Investment Group, or NYDIG, has submitted paperwork with the United States Securities and Exchange Commission to launch a new Bitcoin (BTC) exchange-traded fund.
NYDIG filed a Form S-1 registration statement for a Bitcoin ETF with the SEC on Tuesday. The submission lists NYDIG Trust Company LLC as the fund’s Bitcoin custodian and Morgan Stanley as an authorized participant.
As an authorized participant, Morgan Stanley is expected to sell shares to the public at prices that reflect the fund’s assets, supply and demand, and underlying market conditions. The shares will trade on the NYSE Arca exchange under a yet-to-be-determined ticker symbol.
According To The Prospectus Summary:
“The Trust’s investment objective is to reflect the performance of the price of bitcoin less the expenses of the Trust’s operations. The Trust will not seek to reflect the performance of any benchmark or index.”
“In seeking to achieve its investment objective, the Trust will hold bitcoin.”
NYDIG has been highly active in the crypto space, as it seeks to provide more institutional exposure to digital assets like Bitcoin. In November and December 2020, the company raised $150 million through two separate cryptocurrency investment funds. NYDIG was granted a BitLicense by the New York State Department of Financial Services in 2018.
Stone Ridge, NYDIG’s parent company, is one of the largest institutional holders of Bitcoin.
The quest for a Bitcoin ETF has been elusive, at least in the United States, where several fund issuers have tried unsuccessfully to get regulatory approval.
Canada recently approved the first publicly traded Bitcoin ETF in North America, allowing institutional investors to access BTC investments directly without derivatives.
Evolve Wins Second Canadian Bitcoin ETF As Ontario Regulator Approves Application
Evolve Funds Group Inc has received approval to list its Bitcoin ETF. The new asset will trade under the ticker symbols “EBIT” and “EBIT.U” and provide direct exposure to BTC.
North America’s second Bitcoin (BTC) exchange-traded fund received regulatory approval on Tuesday, offering another potential entry point for institutional investors to access digital assets.
Less than three weeks after filing a preliminary prospectus for a Bitcoin ETF, Evolve Funds Group Inc announced Tuesday that its fund has been approved by the Ontario Securities Commission, or OSC.
The ETF has two ticker symbols: EBIT for Canadian-denominated units and EBIT.U for U.S.-denominated units. EBIT is said to provide “unhedged exposure to the daily price movement” of Bitcoin in Canadian dollars, whereas EBIT.U provides exposure to the daily price movements in U.S. dollars.
Notably, the fund will track price data using CF Benchmarks’ Bitcoin Reference Rate, which aggregates data from several BTC/USD markets into a one-a-day benchmark index.
An Updated Prospectus Submitted To The OSC On Frida Outlines The Fund’s Investment Objective:
“The Evolve Fund’s investment objective is to provide holders of Units with exposure to the daily price movements of the U.S. dollar price of bitcoin while experiencing minimal tracking error by utilizing the benefits of the creation and redemption processes.”
To achieve this goal, the Evolve fund will invest in long-term holdings of BTC purchased through Gemini NuSTAR LLC and other platforms.
The prospectus was filed under a passport system, which allows the fund to be accessed in all of Canada’s 10 provinces and three territories.
Sui Chung, CEO of CF Benchmarks, told Cointelegraph that the Evolve ETF has “developed a true first — giving investors an easy-to-understand product that is available through their existing brokers and advisors that gives ownership of Bitcoin.”
“By using the regulated Bitcoin Reference Rate from CF Benchmarks, the ETF tracks the value of the Bitcoin and because its structure allows daily creation and redemption of ETF shares investors aren’t forced to pay soaring premiums in the secondary market.”
The Evolve fund is the second Bitcoin ETF to be approved by Canadian securities regulators this month. The Purpose Bitcoin ETF received approval last week, becoming the first physically settled North American ETF.
An ETF-style product from 3iQ was approved in Canada last year and is currently listed on the Toronto Stock Exchange. However, unlike the Evolve ETF, the EiQ fund doesn’t continually issue new shares.
Bitcoin ETF Approval More Likely Under New SEC leadership, Says Ark Invest CEO
“I think the probability of an ETF has gone up,” said Cathie Wood.
Ark Investment Management founder and CEO Cathie Wood said the likelihood that U.S. regulators will approve a Bitcoin exchange-traded fund has gone up under the Biden administration.
In an interview with CNBC’s Bob Pisani today, Wood said there were two signs that the Securities and Exchange Commission might be more open to greenlighting a Bitcoin (BTC) exchange-traded fund, or ETF. Under previous administrations, the regulatory body did not approve any Bitcoin ETFs, to the industry’s chagrin.
Specifically, the Ark Invest CEO said she was encouraged by Joe Biden’s pick for SEC chair, Gary Gensler. Gensler is known as someone who understands the underlying technology of digital assets and BTC itself. In addition, Wood saw FinHub leader Valerie Szczepanik, known as the “Crypto Czar,” reporting directly to the next chair as a bullish sign.
“I think the probability of an ETF has gone up,” said Wood. “[Gensler] understands the technology, and I think he understands the currency itself. […] I think we have individuals now involved who really understand the space.”
Wood recognized that institutional interest in the crypto space has surged recently but said she did not expect it to be driven by “broad-based substitution of Bitcoin for cash on corporate balance sheets.” She said this widescale investment may happen slowly as the market matures, but she was encouraged by the examples already set by Square and Tesla.
The payment company added 4,709 BTC to its balance sheet in October 2020, while the car manufacturer announced a $1.5-billion Bitcoin purchase earlier this month.
“If all corporations in the United States were to put 10% of their cash into Bitcoin, that alone would add $200,000 to the Bitcoin price,” she said.
Perhaps recognizing the potential opportunity in the new regulatory environment, some firms have already applied for a Bitcoin ETF with the SEC following Biden’s inauguration. Yesterday, New York Digital Investment Group filed the paperwork for a BTC exchange-traded fund, and on Jan. 22, Valkyrie Digital Assets proposed listing its Bitcoin trust on the New York Stock Exchange.
Bitcoin ETF Roars In Debut With $165 Million of Trading Volume
North America’s first Bitcoin ETF got off to a stellar start in its debut, with investors exchanging $165 million worth of shares.
After a relentless surge in the world’s largest digital currency, the first Bitcoin product that’s officially labeled an exchange-traded fund debuted Thursday in Toronto. It’s worth noting, though, that Europe has several crypto-tracking products that function like an ETF.
The new fund, called Purpose Bitcoin ETF (ticker BTCC), invests directly in “physical/digital Bitcoin,” issuer Purpose Investments Inc. said in a statement.
The cryptocurrency has captivated investors from billionaire Elon Musk to hedge-fund moguls including Alan Howard and Paul Tudor Jones. It may well be “the stimulus asset,” DoubleLine Capital LP chief Jeffrey Gundlach tweeted, in a reference to Bitcoin’s rally amid a wave of cash pumped into the financial system during the pandemic.
While the digital asset has already surged fivefold in the past year — spurring concern about a speculative froth in global markets –it’s grabbing more mainstream attention, especially after Tesla Inc.’s recent $1.5 billion purchase.
It’s unclear how much of the activity in BTCC will result in inflows for the fund, but the trading volumes were well above an ETF’s typical first day in Canada, according to Bloomberg Intelligence analyst James Seyffart. Although too early to tell, ETF proponents argue that such a fund will trade without the massive premiums plaguing many current Bitcoin trusts in the U.S.
“There’s sizable untapped interest for a Bitcoin investment that has the benefits of an ETF,” said Todd Rosenbluth, CFRA Research’s director of ETF research, adding it’s unlikely the fund will trade at a significant premium-to-net-asset-value. “While most ETFs come to market globally with an educational hurdle to overcome, many investors are familiar with what is inside BTCC,” he noted.
The U.S. currently has several active filings for a Bitcoin ETF, including the ones from VanEck Associates Corp. and Bitwise Asset Management, but the price swings notorious in cryptocurrenies and allegations of industry manipulation remain hurdles to regulator approval.
Still, with the world’s largest digital trading near all-time highs and a change of leadership at the Securities and Exchange Commission, analysts say the prospect of a first American Bitcoin ETF appears to be rising.
North America’s First Bitcoin ETF Hits $165M Trade Volume in First Day
The Canadian fund has experienced a flurry of demand but in the U.S. a bitcoin ETF is an unrealized desire.
North America’s First Bitcoin ETF Hits $165M Trade Volume in First Day: Report
The Canadian fund has experienced a flurry of demand but in the U.S. a bitcoin ETF is an unrealized desire.
A bitcoin ETF in the U.S. has been highly prized by the likes of VanEck and Valkyrie but is yet to make its debut stateside due to concerns from regulators over the nascent asset class’ volatility and industry manipulation.
Multiple close-ended bitcoin funds have been listed on the Toronto Stock Exchange, such as the ones listed by Canadian investment manager 3iQ. However, they differ from an ETF.
The fund seeks to replicate the performance of the price of the bellwether cryptocurrency while units of its shares are currently changing hands for around CAD$10.17 (US$8.00).
Canadian Bitcoin ETF Predicted To Hit $1B AUM By Friday: Bloomberg Analyst
Eric Balchunas said the Purpose Bitcoin fund could surpasses all other ETFs in Canada within two months, “barring a nasty selloff.”
With only two full days of trading under its belt, the first Bitcoin (BTC) exchange-traded fund in North America reached more than $400 million in volume and is expected to go even higher.
According to a tweet from Bloomberg analyst Eric Balchunas, the Bitcoin exchange-traded fund, or ETF, recently debuted by Canadian firm Purpose Investments is likely to hit $1 billion in assets under management by Feb. 26. His prediction came prior to Purpose reporting its Bitcoin ETF traded $421.8 million between the time when it was first listed on the Toronto Stock Exchange, or TSX, on Feb. 18 and when markets closed Friday. The ETF is listed under the ticker BTCC.
Balchunas compared the impressive debut of the Purpose Bitcoin fund to other ETFs currently trading on the TSX. At more than $4.6 billion in total assets, the JPMorgan BetaBuilders Canada ETF is one of the biggest in the country. The Bloomberg analyst said he “wouldn’t be surprised” if the Purpose Bitcoin ETF surpasses all others in Canada within two months, “barring a nasty selloff.”
The Purpose ETF is not the only Bitcoin exchange-traded fund in North America to share the wealth. Last week, Evolve Funds Group received approval from the Ontario Securities Commission to launch its own Bitcoin ETF, which started trading on Friday under the ticker EBIT. As of the close of markets on Friday, EBIT.U had traded 103,595 units priced at $21.54.
Though some investment managers have hinted that the Securities and Exchange Commission under U.S. President Joe Biden might be more open to approving a Bitcoin ETF, regulators in the United States have not yet given them the green light. Both New York Digital Investment Group applied and Dallas-based Valkyrie Digital Assets have filed the paperwork for a Bitcoin ETF since the new president took office.
According to the TSX, BTCC.B had traded 9,270,111 units priced at $10.55, and BTCC.U 2,065,855 units at $10.57 as of Friday.
Raging Success of First Bitcoin Fund Shows Who Leads ETF Market
The roaring success of the first-ever Bitcoin exchange-traded fund will have been no surprise to cryptocurrency fans. But if they don’t know about ETFs, the venue might have been startling.
The explosive debut of the Purpose Bitcoin ETF (ticker BTCC), whose trading volume approached $400 million worth of shares in two days, didn’t happen in the largest ETF market. Nor was it in Europe, where similar exchange-traded products have already garnered about $6.5 billion in assets, according to data compiled by Bloomberg.
It was actually in Canada — where the equity market is just 8% of the size of the U.S. and assets in ETFs total about $215 billion — less than the SPDR S&P 500 ETF Trust (SPY) on its own. It doesn’t register much beyond the ETF industry, but Canada has quietly built a reputation for this kind of coup.
“Canada has long been out in front with respect to ETF product development,” said Ben Johnson, Morningstar Inc.’s global director of ETF research. “From listing the first-ever ETF to more recently becoming home to the first-ever psychedelics ETF.”
BTCC launched on the Toronto Stock Exchange on Thursday, the first fund of its kind in North America and the first anywhere to carry the ETF label. A day later, Evolve Fund Group’s Bitcoin ETF (EBIT) debuted, but with a less impressive trading volume of about $14.5 million worth of shares.
As with many areas of innovation, deciding who or what was first in the financial world can come down to definition, but most agree that the Toronto 35 Index Participation fund, or TIPs, was the first iteration of a modern ETF in 1990. While it hasn’t enjoyed the astronomical growth of the U.S. industry — which kicked off with SPY’s launch in 1993 — Canada’s ETF market has frequently introduced products not tried anywhere else.
The reason comes down to a more nimble and liberal regulatory environment and a focus on innovation. The Evolve fund, for example, was approved less than a month after an application was initially filed.
“Canada has proven that it has a process that leads to innovation and the systems to allow for it,” said Som Seif, chief executive officer of Purpose Investments.
In the U.S., the Securities and Exchange Commission has rejected multiple applications for a Bitcoin ETF, citing concerns that prices can be manipulated and liquidity is insufficient. That has left investors plowing cash into the Grayscale Bitcoin Trust (GBTC), a riskier and more costly structure that often trades at huge premiums to the value of its underlying assets.
“Canadian regulators seem much more willing to embrace innovation,” said Nate Geraci, president of the ETF Store, an advisory firm.
None of this is to say the ultra-rich, highly liquid U.S. market doesn’t innovate. The first of a new ETF format that hides its holdings against front-funning — called active non-transparent funds — debuted in the U.S. in April 2020.
“Canada has been ahead of us in certain instances, but there are instances where the U.S. is ahead,” said Ben Slavin, head of ETFs for BNY Mellon Asset Servicing. “I wouldn’t necessarily generalize the U.S. is always behind, it’s just Bitcoin is an incredibly hot topic and it might be a special case.”
Meanwhile, there are plenty of industry watchers who would argue Canada isn’t truly first to the Bitcoin ETF. In Europe, several ETPs exist that behave in almost exactly the same way, the biggest of which has been trading for more than five years. Regulatory differences just result in a different label.
While other markets have outpaced the U.S. in innovation, none can compete with the size and scale of the American market when it does finally enter the fray.
Canada may have launched the first-ever ETF, but the market in the U.S. is now about 27 times bigger. There is around $70 billion in Canadian bond ETFs — south of the border it’s $1.1 trillion and counting.
If and when a Bitcoin ETF finally arrives in the U.S., growth could be explosive. The closest alternative, the Grayscale Bitcoin Trust, has about $34 billion in assets. Investors are even willing to pay 7.5% premium currently to get in, and its average premium in its lifetime is 37%.
That’s yet another reason to approve an ETF, according to proponents.
“It boggles my mind we still don’t have a Bitcoin ETF in the U.S.,” said Geraci at the ETF Store. “It’s understandable that there can be a difficult balance between embracing innovation and ensuring proper investor protections. However, given the existing Bitcoin products available to U.S. investors, a Bitcoin ETF would seem to strike that balance.”
CI Global Files To Issue North America’s Third Bitcoin ETF
A subsidiary of a firm overseeing more than $230 billion in assets will work with Galaxy Digital on what could be the third bitcoin ETF in Canada.
There could soon be a third Canadian bitcoin exchange-traded fund (ETF). CI Global Asset Management, a subsidiary of a firm overseeing more than $230 billion in assets, filed a preliminary prospectus for the financial instrument, the company announced Friday.
* The so-called CI Galaxy Bitcoin ETF (BTCX) would be managed by CI and advised by merchant bank Galaxy Digital. The two firms have previously partnered on the CI Galaxy Bitcoin Fund, a closed-end investment product.
* Two bitcoin (BTC, +1.69%) ETFs went live this week, offering investors a way to gain exposure to bitcoin by buying stock, rather than the asset itself. ETF managers purchase an underlying asset on behalf of investors trading on the stock market, for a fee.
* The first bitcoin ETF in North America hoovered up $421.8 million worth of assets in its first two days trading, including over 6,000 BTC. BTCX will invest directly in bitcoin, with Galaxy handling that end of the trade and Gemini acting as custodian.
* Canadian firm 3iQ also filed a preliminary prospectus for a bitcoin ETF last week.
Novogratz Positions Firm At Center Of Hoped-for Crypto ETF Boom
Mike Novogratz is seeking to position his Galaxy Digital Holdings at the center of what could turn out to be a boom in cryptocurrency exchange-traded funds.
Galaxy’s trading desk is one of several that are providing Bitcoins for the Purpose Bitcoin ETF, the first-ever approved. The Toronto Stock Exchange-listed fund debuted Thursday. CI Global Asset Management filed this week in Canada to offer the CI Galaxy Bitcoin ETF. Galaxy Digital will act as the Bitcoin sub-advisor, and execute trades on behalf of the proposed ETF. None have been approved in the U.S.
“Crypto is being institutionalized at an accelerating rate,” Novogratz said in an interview. “And now an ETF product is showing up in Canada first, it will show up in the U.S. next. It’s all part of this accelerating evolution of being a store of value.”
While high-profile Bitcoin purchases by Tesla Inc. and MicroStrategy Corp. are generating headlines, many more companies and pension funds are seeking to follow suit, Novogratz said.
“All of these stories — and there’s a story every day — really point to a sustainable bull market in crypto,” the billionaire former hedge fund manager said. Galaxy Digital is registered in Canada, though Novogratz is based in New York.
Bitcoin rose to a record of more than $56,000 Friday, increasing the cryptocurrency’s market value to more than $1 trillion for the first time.
ETFs have long been seen by many crypto advocates as a path toward greater mainstream acceptance. There are already a number of ETF-like products in Europe and exchange-traded trusts in the U.S.
The U.S. Securities and Exchange Commission has repeatedly shot down attempts to offer crypto ETFs in America, citing concerns such as market concentration and manipulation. The approval of the Purpose fund is seen as beneficial for the pending funds, said James Seyffart, an analyst at Bloomberg Intelligence.
“Its been wildly successful as far as volume goes,” Seyffart said. “And we expect to see that show up in flows in the coming days. If you look at it compared to other Canadian ETFs, it is by far the most traded fund. It is already more liquid than every Bitcoin ETP in Europe.”
The U.S. currently has several active filings for a Bitcoin ETF as well, including from VanEck Associates Corp. and Bitwise Asset Management. Recently imposed regulations and the new Biden administration are “potentially adding momentum to similar efforts in the U.S.,” according to Bloomberg Intelligence. A U.S. Bitcoin ETF would likely dwarf any ETF from Canada, Seyffart said.
“We want Galaxy to be seen as the smartest guys in the room when it comes to crypto,” Novogratz said. “We want to be in the center of the action.”
The First Canadian Bitcoin ETF Is Absolutely Soaring
Canada’s CI Global Files For What Would Be World’s First Ether ETF
If approved, the ETF would trade on the Toronto Stock Exchange under the ticker “ETHX.”
The world’s first ether exchange-traded fund (ETF) may be on the way, after CI Global Asset Management filed a preliminary prospectus in Canada on Thursday.
* In an announcement, the firm said its proposed “CI Galaxy Ethereum ETF” would be the first ETF in the world to invest directly in ether (ETH, -3.34%), the native cryptocurrency of the Ethereum network.
* If approved, the ETF would trade on the Toronto Stock Exchange (TSX) under the ticker “ETHX.”
* Galaxy Digital Capital Management LP will act as the ether sub-adviser and execute trading on behalf of the ETF.
* ETHX will invest directly in ether with its holdings priced using the Bloomberg Galaxy Ethereum Index, owned by Bloomberg Index Services.
* “Ethereum is the leading candidate to be the base layer of Web 3.0, and ether is a growth asset that provides investors exposure to the explosion of decentralized applications,” said Mike Novogratz, chairman and CEO of Galaxy Digital, in the announcement.
* The ether ETF may have a reasonable chance of being approved. Last week, two bitcoin ETFs were listed in Canada.
* CI Global also recently filed a preliminary prospectus for a bitcoin (BTC, -0.57%) ETF, which would also be in in partnership with Galaxy Digital.
Bitcoin’s Second North American ETF Just Started A Price War
Just a week after the first Bitcoin exchange-traded funds in North American started trading, the underdog firm just kicked off a fee war.
Evolve Fund Group in Canada lowered the price on its Bitcoin ETF, ticker EBIT, to O.75% from 1%, according to a statement. That’s now cheaper than the 1% expense ratio of its competitor the Purpose Bitcoin ETF (BTCC), which starting trading just a day before Evolve’s offering but has already attracted far greater interest.
The rapid price cut underscores the benefits of being first to market in the ETF space, especially amid the fervent demand for products tracking anything related to crypto. As U.S. regulators continue to deny approval for a Bitcoin ETF, the Canadian products are capturing investor attention.
“BTCC illustrates the importance of first mover advantage in ETFs,” said Ben Slavin, head of ETFs for BNY Mellon Asset Servicing. “A one-day head start was all that was required to establish a clear lead for Bitcoin ETFs in Canada.”
Since its debut on Feb. 18, BTCC has gained $448 million in assets compared to only $28 million for EBIT, according to the firms. In its first day of trading alone, more than $165 million worth of shares in the Purpose product changed hands. Only a day later, that number for EBIT was just $14.6 million.
The fee is still relatively expensive in the ETF space, even among the more complicated products. The median fee for passive equity products is 0.49%, while their active counterparts charge an average 0.72%, according to data from Bloomberg Intelligence.
Bitcoin’s sharp climb on Wednesday, following support from Ark Investment Management’s Cathie Wood and news that Square Inc. has boosted its stake in the cryptocurrency, could generate even more interest in the ETFs.
Huge demand for the Canadian funds also ramps up the battle in the U.S. for issuers to gain first approval in launching a Bitcoin ETF, although the Securities and Exchange Commission has so far rejected applications due to concerns about price manipulation and insufficient liquidity.
“Prospective Bitcoin ETF issuers in the U.S. must be salivating after witnessing the debut of BTCC, but they’re also likely feeling much more pressure now,” said Nate Geraci, president of the ETF Store, an advisory firm. “It’s reasonable to assume the winner of the U.S. Bitcoin ETF race stands to benefit significantly.”
Here’s How The Purpose Bitcoin ETF Differs From Grayscale’s GBTC Trust
The newly launched Purpose Bitcoin ETF surpassed even the most bullish expectations but how does it differ from Grayscale’s GBTC Trust?
Since 2017, investors have been anxiously awaiting a Bitcoin ETF approval as the existence of such a fund was an important symbol of mass adoption and acceptance from the realm of traditional finance.
On Feb. 18, the Toronto Stock Exchange hosted the official launch of the Purpose Bitcoin ETF and the fund quickly absorbed more than $333 million in market capitalization in just two days.
Now that the long-awaited Bitcoin ETF is here, investors are curious about how it will compete with Grayscale Investments GBTC fund. On Feb. 17, Ark Investment Management founder and CEO Cathie Wood said the likelihood that U.S. regulators will approve a Bitcoin exchange-traded fund has gone up.
Although exchange-traded funds (ETF) and exchange-traded notes (ETN) sound quite similar, there are fundamental differences in trading, risks, and taxation.
What Is An Exchange-Traded Fund?
An ETF is a security type that holds underlying investments such as commodities, stocks, or bonds. It often resembles a mutual fund, as it is pooled and managed by its issuer.
ETFs have become a $7.7 trillion industry, growing by 65% in the last two years alone.
The most recognizable example is the SPY, a fund that tracks the S&P 500 index, currently managed by State Street. Invesco’s QQQ is another EFT that tracks U.S.-based large-capitalization technology companies.
More exotic structures are available, such as the ProShares UltraShort Bloomberg Crude Oil ($SCO). Using derivatives products, this fund aims to offer two times the daily short leverage on oil prices.
What Is An Exchange-Traded Note?
Exchange-traded notes (ETN) are similar to an ETF in that trading occurs using traditional brokers. Still, the difference is an ETN is a debt instrument issued by a financial institution. Even if the fund has a redemption program, the credit risk relies entirely on its issuer.
For example, after Lehman Brothers imploded in 2008, it took ETN investors more than a decade to recoup the investment.
On the other hand, buying an ETF gives one direct ownership of its contents, creating different taxation events when holding futures contracts and leveraging positions. Meanwhile, ETNs are taxed exclusively upon sale.
GBTC Does Not Offer Conversion Or Redemption
Grayscale’s Bitcoin Trust Fund (GBTC) is the absolute leader in the cryptocurrency market, with $35 billion in assets under management.
Investment trusts are structured as companies — at least in regulatory form — and are ‘closed-end funds.’ Thus, the number of shares available is limited and the supply and demand for them largely determines their price.
Investment trust funds are regulated by the U.S. Office of the Comptroller of the Currency (OCC), therefore outside the Securities and Exchange Commission (SEC) authority.
GBTC shares cannot easily be created, neither is there an active redemption program in place. This tends to generate significant price discrepancies from its Net Asset Value, which is the underlying BTC fraction represented.
An ETF, on the other hand, allows the market maker to create and redeem shares at will. Therefore, a premium or discount is usually unlikely if enough liquidity is in place.
An ETF instrument is far more acceptable to mutual fund managers and pension funds as it carries much less risk than a closed-ended trust like GBTC. Retail investors may not have been aware of the possibility that GBTC trades below net assets value. Thus the recent event might further pressure investors to move their position to the Canadian ETF.
To sum up, an ETF product carries a significantly less risk due to greater transparency and the possibility to redeem shares in the case of shares trading at a discount.
Nevertheless, the impressive GBTC market capitalization clearly states that institutional investors are already on board.
CBOE Files To List Van Eck’s Proposed Bitcoin ETF
CBOE is looking to reenter the crypto sector, filing to list a Bitcoin ETF proposed by asset manager Van Eck.
The globally leading exchange holding company Chicago Board Options Exchange, or CBOE, has filed to list the Bitcoin (BTC) exchange-traded fund proposed by asset manager Van Eck.
CBOE filed a Form 19b-4 requesting permission to list the ETF from the United States Securities and Exchange Commission on Jan. 3. On the form, CBOE emphasizes the benefits an ETF would offer to retail investors over the spot Bitcoin markets, including custody:
“Exposure to bitcoin through an ETP also presents certain advantages for retail investors compared to buying spot bitcoin directly. The most notable advantage is the use of the Custodian to custody the Trust’s bitcoin assets.”
While CBOE did not reveal who its custodian is, the document notes its custodian is “a trust company chartered and regulated by [the New York Department of Financial Services].”
Once the SEC has formally acknowledged it is reviewing the application, the regulator has 45 days to deliver its verdict or extend the assessment deadline. The SEC can extend its deliberation period for up to 240 days before finalizing its decision.
If approved, the ETF would be the first crypto product offered by CBOE since February 2019, with CBOE having then ceased offering Bitcoin futures contracts. In December 2017, CBOE became the first regulated financial institution in the United States to offer Bitcoin futures contracts, beating out the Chicago Mercantile Exchange by just a couple of weeks.
In January, Van Eck filed for SEC approval of a Bitcoin ETF. While Van Eck had previously filed for a BItcoin ETF in 2017, the firm also teamed up with SolidX — a blockchain firm that had been attempting to bring a Bitcoin ETF to market since 2015 — to file for a jointly issued ETF in 2018. The joint application was withdrawn in September 2019, with the two firms parting ways shortly after.
However, Van Eck’s latest filing has become the subject of a lawsuit from SolidX, which alleges Van Eck plagiarized it product.
Van Eck also filed for an ETF tracking the performance of prominent crypto firms on Jan. 21. The product would seek the price and performance of the Global Digital Asset Equity Index, which is run by its subsidiary MV Index Solutions.
As of the time of writing, the SEC has yet to approve any crypto ETF product.
Evolve Files For Ether ETF With Canadian Regulators
Evolve Funds Group Inc has filed a preliminary prospectus for an Ether ETF in Canada.
Less than a month after becoming the second firm to secure approval from Canadian regulators to list a Bitcoin (BTC) exchange-traded fund, Evolve is looking to debut an Ether (ETH) ETF product in Canada.
According to a Tuesday press release, the company has filed a preliminary prospectus with Canadian regulators for approval to begin trading an Ether ETF product.
According to the communique, if the Ether ETF is approved, it will trade under the ticker “ETHR” and will track the Ether-Dollar Reference Rate (ETHUSD_RR) provided by CF Benchmarks. The CME ETH futures contract also utilizes the same benchmark price.
The announcement also reveals that the proposed Ether ETF will offer denominated unhedged units for both the U.S. dollar and Canadian dollar units.
Commenting on the preliminary filing, Evolve CEO Raj Lala remarked that the company is looking forward to providing Canadian investors with exposure to another cryptocurrency via the ETF market.
For Elliot Johnson, the firm’s chief operating officer and chief investment officer, the company decided to move forward with an Ether ETF due to the prominence of the second-largest crypto by market capitalization. He added:
“Ether is the building block for a revolution in digital finance which is still in its infancy. […] Ethereum is the most actively used blockchain with Ether being used to pay for transaction fees and computational services.”
If approved, the ETHR will be the second crypto ETF from Evolve’s stables, following its “EBIT” Bitcoin ETF product launched back in February.
As previously reported by Cointelegraph, Bitcoin ETF trading saw an explosive debut in Canada. The Purpose Bitcoin ETF reached over half a billion dollars in assets under management less than a week after its launch.
However, there has been a noticeable decline in trading volume amid significant BTC price volatility over the last few days.
Meanwhile, Grayscale Investment’s Graysacele Bitcoin Trust product has seen its premium decline to record lows, while trading on Canada’s Bitcoin ETFs has surged.
According to JPMorgan Chase analysts, there is a direct link between the explosive trading of Canadian Bitcoin ETFs and the decline in the GBTC premium.
Canadian Firm Planning To Convert Its Bitcoin Trust To An ETF
The Toronto-based investment firm will put the matter to a vote in April.
Less than two months after launching trading for shares of its Bitcoin trust, Canada-based investment manager Ninepoint Partners is planning to change its offering to an exchange-traded fund.
In an announcement on March 3, Ninepoint said it would be holding a vote for unitholders to decide on whether to convert its existing Bitcoin (BTC) trust to an exchange-traded fund, or ETF, on the Toronto Stock Exchange. The firm said the move is intended to provide a better trading price and increased trading liquidity. Investors will be able to vote on the matter on April 19.
“Ninepoint’s Bitcoin Trust IPO was the largest in Canadian history, raising $180 million, so we’ve already had plenty of success in this asset class,” said Ninepoint co-CEO James Fox. “As a firm, we not only have deep experience in ETF’s but also leading digital asset expertise and we intend to be a leader in this industry for years to come.”
The firm said that if successful, the Ninepoint Bitcoin ETF would continue to trade on the Toronto Stock Exchange under the ticker symbols used for its Bitcoin trust: BITC.U for U.S. dollars. However, Ninepoint would change the BITC.UN ticker for Canadian dollars to BITC.
Ninepoint’s decision to convert its existing BTC trust follows other investment firms capitalizing on the previously untapped ETF market for cryptocurrencies in Canada. After Purpose Investments launched its own Bitcoin ETF on Feb. 18, the fund reached more than $529 million in volume. Yesterday, Evolve Funds Group also announced it had filed a prospectus with Canadian regulators for approval to begin trading an Ether ETF.
Associated Press Auctions NFT In Spirit Of 2020 US Election
The NFT’s artwork depicts the electoral college map as it might be seen from space using AP’s election data.
The Associated Press (AP) is auctioning off a non-fungible token (NFT) artwork commemorating the first U.S. election recorded on a blockchain.
According to data from NFT Marketplace OpenSea, the artwork titled “The Associated Press calls the 2020 Presidential Election on Blockchain – A View from Outer Space” will be sold in the next eight days. As of press time, the top bid was for $928 in wrapped ether.
The artwork depicts a visual of the electoral college map from space using election data AP published on-chain at the time. The piece of digital art is considered one-of-a-kind and a 1/1 edition.
AP used an Ethereum address to declare the winner of the U.S. 2020 Presidential Election via Everipedia’s OraQle software. This marked the first time a U.S. election was called on a blockchain, according to the news agency.
AP’s address acted as a cryptographic signature providing authenticity via metadata that AP included of the “exact date and time that AP called the election,” according to a press release shared with CoinDesk on Thursday.
AP Director of Data Licensing Dwayne Desaulniers confirmed to CoinDesk that the auction is ongoing.
“As we continue to test blockchain for revenue models and journalistic use cases, we thought an original and creative NFT would be interesting to test on many levels,” he said via email.
Desaulniers added that the map in the image is based on the election data the AP published on chain in November. “We thought we would use the NFT to mark that milestone,” he said.
Bitcoin Tips Scales In Favor Of A U.S. ETF
The SEC has a list of legitimate concerns, but delaying approval only makes the decision more complicated.
Add my name to the list of those who say it’s time for the Securities and Exchange Commission to approve a Bitcoin exchange-traded fund.
U.S. investors are watching their neighbors to the north with envy. The first Bitcoin ETF in North America debuted in Canada on Feb. 18. To no one’s surprise, Purpose Bitcoin ETF has been a huge hit. If it traded in the U.S., it would rank among the top 20 most popular ETFs by trading volume.
Meanwhile, the wait continues for a U.S. Bitcoin ETF. The SEC has agonized for years about whether to allow them, and the answer so far is no.
The securities regulator has a long list of concerns that includes insufficient liquidity, enabling criminal financing, hacking, price manipulation and funds’ ability to validate ownership and value their coins. There’s also the ever-present worry about investor protection, in this case that Bitcoin’s wild swings will maul investors.
Those are all legitimate concerns, but delaying the inevitable — yes, Bitcoin ETFs are coming — has only made things more complicated. Bitcoin is gaining acceptance as an investment. Endorsements are piling up from money mavens such as Paul Tudor Jones and Stanley Druckenmiller.
Telsa Inc. just plunked $1.5 billion into Bitcoin, Square Inc. bought an additional $170 million, and other companies may follow. The cryptocurrency’s surging popularity all but guarantees that Bitcoin ETFs will be overrun with investors.
That enthusiasm is great for Bitcoin, but it raises the stakes for regulators. Bitcoin is hovering around $50,000 after a 16-fold price spike during the last two years. Each of the last two price surges were followed by a collapse of more than 80%. Regulators can’t relish the idea of handing investors an ETF just as Bitcoin may be poised for another wipeout, particularly in light of their hand-wringing over the continuing GameStop saga.
The demand for a Bitcoin ETF also puts regulators in the awkward position of kingmakers. Most ETFs launch without knowing whether they’ll fly or fail — indeed, the odds are long for any ETF whose name doesn’t start with iShares or Vanguard. But a Bitcoin ETF is a sure thing, and the ETF that launches first has a huge advantage over those that follow. So in effect, whoever receives the SEC’s blessing gets the crown.
A third Bitcoin bust might relieve some of those pressures, but short of an all-out collapse, a scenario only the most rabid Bitcoin naysayers envision, time isn’t on regulators’ side. Bitcoin isn’t going away, and demand is likely to grow.
Imagine how much more perilous a Bitcoin ETF will seem when the price climbs to $100,000 or more, and how much louder the clamor will be from investors ready to pile into an ETF when it’s finally available.
And if investor protection is the objective, regulators don’t gain much by blocking Bitcoin ETFs because plenty of other ways already exist to bet on the cryptocurrency. Anyone can buy Bitcoin now, for one.
Crypto fans will soon be able to invest in Coinbase Global Inc., the biggest U.S. cryptocurrency exchange, which filed to go public last week. Its shares are likely to move in close step with Bitcoin. And if more public companies put money into the cryptocurrency, it will be virtually unavoidable.
There’s also the unfortunate fact that “accredited” — read rich — investors can already invest in Bitcoin funds while retail investors are locked out. As the push to democratize markets continues to gain ground, regulators will be asked to explain why some investors have access to Bitcoin funds but not others.
It’s not even clear investors need protection. As I pointed out recently, the available data on Bitcoin flows suggests investors have been unusually savvy, exploiting its freakish volatility to sell when it moves higher and buy when it plunges.
Sure, some people have undoubtedly lost money on Bitcoin, but that hardly makes it unique. There’s no way to eliminate risk of loss without shutting down markets altogether.
I don’t envy the SEC’s decision. There are legitimate concerns around Bitcoin, and this feels like a particularly toppy time to give a go-ahead to Bitcoin ETFs. But those concerns won’t go away any time soon. The stakes will only get higher and continuing to single out cryptocurrencies will become harder to justify. All things considered, it’s time to clear the way for Bitcoin ETFs.
Cboe Seeks Approval To List Trailblazer Bitcoin ETF In U.S.
Cboe Global Markets Inc. is seeking approval to list and trade shares of what could be the first Bitcoin exchange-traded fund in the U.S.
Cboe in a Monday filing with the U.S. Securities and Exchange Commission sought the green light for the VanEck Bitcoin Trust. VanEck Associates Corp. in December applied to start an ETF tracking the largest cryptocurrency. It is at least the third time since 2018 that Cboe has teamed with VanEck to seek a fund approval.
Last month Canadian securities regulators cleared the launch of the Purpose Bitcoin ETF, making it the first to gain regulatory approval in North America. Cboe said in its filing the cryptocurrency ecosystem has “progressed significantly,” citing among other things products investing in Bitcoin futures as well as the emergence of regulated custodial services for digital assets.
U.S. regulators have so far refrained from approving a Bitcoin ETF, citing worries about everything from market volatility and industry manipulation to thin liquidity. That includes a prior attempt by Cboe that was withdrawn in January 2019.
However, the cryptocurrency market has gotten increasingly robust as big names and institutional players have piled in recently. Also, President Joe Biden’s nominee to lead the Securities and Exchange Commission, Gary Gensler, is seen as potentially more sympathetic to crypto than prior officials have been.
“This time around we’re much more optimistic than we have been in the past,” Cboe Global Head of Listings Laura Morrison said in an interview. “The market has really changed. There’s a tremendous amount of information relative to the depth and breadth.”
Cboe was the first U.S. regulated exchange to offer Bitcoin futures in December 2017. The exchange stopped listing the contracts in June 2019.
Bitcoin ETF May Come To US, But Not All Crypto Investors Think It’s Needed
As Bitcoin ETFs launch in Canada, an approval from U.S. authorities appears to be closer than ever before as naysayers start to run out of reasons to deny it.
The United States Securities and Exchange Commission’s floor is littered with failed crypto fund filings, but this year, following Canada’s lead, the U.S. might actually have an exchange-traded fund that tracks digital assets.
After all, the price of Bitcoin (BTC) is booming, the SEC has a new crypto-savvy chairman, and Canada, which is sometimes viewed as a beta test site by U.S. regulators, debuted a Bitcoin ETF in late February that by most accounts has been stunningly popular. But does a crypto ETF really matter anymore?
Clearly, a lot has changed in the past year — what with a global pandemic, a change in administrations in Washington and new price records being set regularly on the crypto front.
Whereas many predicted as recently as June 2020 that an SEC-sanctioned Bitcoin ETF would be a very “BIG Deal” and “open the flood gates” to BTC adoption, with a crypto ETF now on the brink, some observers aren’t so sure anymore.
“I used to think it would be a game-changer but now I think it would be just another step in the evolution of crypto,” Lee Reiners, executive director of the Global Financial Markets Center at Duke University School of Law, told Cointelegraph.
Eric Ervin, CEO of Blockforce Capital and Reality Shares and co-founder of Onramp Invest, told Cointelegraph: “I think a crypto ETF is less significant than we thought before because a lot of institutional investors finally got tired of waiting and figured it out.”
Ervin’s firm was one of nearly a dozen whose application was sideswiped by the SEC — the Reality Shares ETF Trust application was pulled in February 2019 “on SEC advice.” That said, Ervin acknowledged that there “are still a massive number of investors on the sidelines” who might welcome such an investment option.
Meanwhile, applications to the U.S. agency keep flowing. Most recently, the Chicago Board Options Exchange requested permission to list a Bitcoin ETF proposed by asset manager VanEck.
State Street Corporation — one of the world’s largest custodians, with $38.8 trillion in assets under custody and/or administration — will be servicing the VanEck ETF, if approved.
Nadine Chakar, head of State Street Global Markets, told Cointelegraph that the company is working to bring ETFs and exchange-traded notes to market in Europe and the Asia-Pacific region, adding that “Our clients have seen interest grow in Bitcoin and […] there is a feeling the market is maturing.” Indeed, in the three years since early 2018 when Bitcoin interest last peaked:
“They feel that the market has become more efficient, crypto custody solutions have evolved to offer better security that they are comfortable with, and regulatory clarity has increased such as we’ve seen with the OCC’s [Office of the Comptroller of the Currency] recent announcements.”
More Success In 2021?
Has the crypto ETF climate really changed in Washington though? Michael Venuto, co‑founder and chief investment officer of Toroso Investments, told Cointelegraph: “I believe the odds of a U.S. Bitcoin ETF being approved are higher than in previous years.” Improved crypto custody, reporting and transaction transparency have calmed many regulators’ concerns, he said, and “The fact that BNY Mellon announced its move towards crypto custody on the same day as a Bitcoin ETF was approved in Canada is not a coincidence.”
“Investors have been looking to the US as the next potential market for ETFs that track digital assets,” wrote FTSE Russell, a subsidiary of London Stock Exchange Group that produces stock market indices, in a recent blog post, adding: “And speculation has only increased in recent weeks with the first Bitcoin ETF launch in Canada joining crypto ETP listings in Germany and Switzerland, as well as the continued popularity of the Grayscale investment trusts tracking this market.”
Regarding Gary Gensler’s nomination as SEC chairman, “This goes a long way towards advancing innovation in the US financial markets,” added Ervin, who agreed that the likelihood that U.S. regulators will approve a Bitcoin ETF this year has improved. He added further:
“As a former Chair of the CFTC, Gensler understands the importance of financial innovation, but he also has a healthy respect for the potential damage that unchecked markets bring.”
Reiners observed that based on what the SEC had been saying recently ETFwise — which isn’t much — a U.S. crypto ETF seems to be no closer than a year ago. However, when taking a broader look at the maturation of the crypto market and the subsequent institutional interest, he believes “It’s getting harder for the SEC to continue to say no.”
Is In ETF Better Than A Trust?
But would an SEC-sanctioned ETF really be of major consequence now? What, for instance, does an ETF offer Bitcoin investors that current “trusts” like Grayscale Bitcoin Trust don’t?
GBTC and other trusts trade over the counter, not on major exchanges like the New York Stock Exchange, noted Reiners. By comparison, “An ETF is widely accessible to all,” including retail investors without access to OTC markets.
State Street’s Chakar noted that GBTC is essentially a closed-end fund open to qualified investors, and although shares of the trust are available on the secondary market to retail investors, those shares “are not tied directly to the price of Bitcoin. As such shares most times trade at a premium — or a discount — to the underlying price of Bitcoin.”
Venuto added further: “The ETF structure provides for intra-day creation and redemption to meet demand. This function removes the premium and discount issues which have impacted the pricing of GBTC” — though he opined that if regulators were to approve a Bitcoin ETF, “Then in short order they would allow GBTC to convert to a similar ETF like structure.”
Along these lines, Canada-based investment manager Ninepoint Partners, which launched a Bitcoin trust two months ago, this week announced plans to convert its trust to an ETF on the Toronto Stock Exchange — following other Canadian investment firms seeking to capitalize on the untapped crypto ETF market in the country.
If a U.S. crypto ETF comes to pass, how would it play out? Would it bring in more institutional investors, for example? “Many institutions can only invest in funds, so the ETF is a wonderful step in the right direction,” Ervin said.
Institutional interest will continue to build regardless of an ETF, opined Venuto: “In terms of institutional adoption, that ship has sailed. […] An ETF will be primarily used by individual investors and financial advisors.”
“An ETF is more attractive to both institutions and retail investors in that it does tend to carry much less liquidity risk and more transparency to the underlying price of the asset — and fees associated with it,” said Chakar.
But what about Bitcoin and cryptocurrency adoption in general? Would a U.S. crypto ETF transform that landscape? Reiners told Cointelegraph:
“There are now lots of ways for retail investors to get exposure to crypto, and the list keeps growing. Plus now we have Tesla and other public companies investing in Bitcoin. The barrier between the crypto sector and the traditional financial system has been eroding for several years now; a Bitcoin ETF would further blur this boundary.”
Regarding Tesla, MicroStrategy and other public companies that have purchased Bitcoin recently, Chakar told Cointelegraph that “Investing in a company that has publicly acknowledged that it’s buying Bitcoin is probably not what most institutional [investors] would do to gain exposure to the asset.”
She added that crypto has been around for 10-plus years now, “But it has never been packaged in a way that allows for integration into a portfolio that is seamless.”
By comparison, “ETFs have proven themselves to be a preferred and growing investment alternative thanks to the fact they offer a lower cost, liquidity and tax efficiency that direct investments may not, especially in nascent vehicles like Bitcoin.”
Ervin told Cointelegraph that he likes the idea of an ETF for things like gold or silver, but for him, “Wrapping bitcoin up into a fund seems silly to me.” He added:
“There is no doubt that it is a better vehicle than a closed-end product, and competition will bring better fees and price discovery, but I don’t think most investors realize that they can buy Bitcoin directly without worrying about the cumbersome burden and costs of a fund.”
“Bitcoin Doesn’t Need An ETF”?
All in all, it looks like a U.S. crypto ETF will eventually come. As Reiners noted: “Regardless of their [the SEC’s] view on the merits of an ETF, if they are the lone holdouts, you have to wonder how much longer before they cave to the immense pressure and interest for an ETF.”
Under present circumstances, a U.S. government-approved Bitcoin exchange-traded fund may not be the game changer that some once predicted. A year ago, most didn’t anticipate the current institutional absorption of digital assets.
As Macrae Sykes, portfolio manager and research analyst at Gabelli Funds — an investment management firm — told Cointelegraph, institutional interest in cryptocurrency continues to grow.
Coinbase’s initial public offering filing and Bank of New York Mellon’s recent announcement that it will support digital currencies offer further evidence of potential growing demand: “The ETF approval in Canada is just another step in the evolving regulatory process for accessing digital assets.”
“Bitcoin doesn’t need an ETF,” Venuto told Cointelegraph. Still, even if no longer a game changer, there is little for a crypto enthusiast not to like about an SEC-sanctioned crypto ETF: “Access is access and the more access to the asset class, the better,” said Ervin. After all, “Not everyone wants to own bitcoin directly.”
Galaxy Digital Bitcoin ETF To Launch This Week As Exec Eyes ‘Compelling Opportunities’
The latest Bitcoin ETF to hit the market comes as the United States has yet to approve any homegrown competitors.
Bitcoin (BTC) exchange-traded funds (ETFs) continue to multiply as a new entrant hits the Canadian market on March 9.
In a press release on Monday, Galaxy Digital Capital Management, a subsidiary of financial services and investment management company Galaxy Digital, confirmed that the CI Galaxy Bitcoin ETF would likely start trading this week.
Purpose ETF Gets A Major Competitor
The launch will see Galaxy join the TSX Purpose Bitcoin ETF as one of the pioneering ETF products in North America, with United States regulators yet to approve a single application.
As Cointelegraph reported, Purpose has seen huge interest and associated volumes since its ETF went live last month, around the same time that Galaxy filed with regulators.
“We believe the emerging digital asset class presents compelling growth and diversification opportunities,” Steve Kurz, partner and head of asset management at GDAM — which will provide executive trading for the Galaxy product — commented in the press release.
“The CI Galaxy Bitcoin ETF offers a simple and secure access point for traditional investors to gain exposure to bitcoin.”
GBTC Negative Premium Rebounds From Record
Institutional demand for Bitcoin exposure has been unfazed by price volatility and negative press, with a recent survey from Goldman Sachs showing that 40% of clients are already involved.
The ETF boom is meanwhile providing new competition for alternative market offerings, notably the Grayscale Bitcoin Trust, which continues to trade at a discount of around 2% to its net asset value.
Last week, the trust’s shares traded at a record discount of 13%, with new entrants currently not permitted to buy as a result of Grayscale’s periodic closure schedule. Analysts noted that if historical behavior repeats itself, the negative premium may foretell the next phase of the Bitcoin price bull run.
GBTC buyers are required to pay a 2% management fee, higher than the newcomer ETFs.
“I believe our ETF stands out based on its highly competitive price point and CI and Galaxy’s extensive capabilities and track record in managing alternative investments and digital assets,” Kurt MacAlpine, CEO of CI Financial — which will run the ETF — added about market fit.
Planned ETF Would Invest In Grayscale’s GBTC To Sidestep SEC’s Crypto Reluctance
Up to 15% of the fund would be invested in bitcoin, solely through the Grayscale Bitcoin Trust.
A new exchange-traded fund (ETF) proposal seeks a way to allow institutional investors to get involved in the world of cryptocurrency even though the U.S. has so far blocked all attempts to list a bitcoin ETF.
According to a prospectus filed with the U.S. Securities and Exchange Commission (SEC) on Tuesday, the Simplify U.S. Equity PLUS Bitcoin ETF would invest in cryptocurrency indirectly via the Grayscale Bitcoin Trust (OTCQX: GBTC), as well as equity securities of U.S. companies.
Up to 15% of the fund, from New York-based Simplify Exchange Traded Funds, would be invested in bitcoin, solely through the $35 billion Grayscale Bitcoin Trust, with the remainder in equities.
If approved, the ETF would trade on the Nasdaq under the ticker “SPBC,” and have a management fee of 0.5%. BNY Mellon would be the ETF’s administrator, transfer agent, asset custodian and accountant.
In Its Investment Strategy Section, The Simplify Prospectus States:
The Fund expects to gain exposure to cryptocurrencies indirectly by investing up to 15% of its total assets (measured at the time of investment) in a wholly-owned and controlled subsidiary, which is designed to enhance the ability of the Fund to obtain exposure to cryptocurrencies consistent with the limits of the U.S. federal tax law requirements applicable to regulated investment companies.
The Grayscale Bitcoin Trust is the world’s largest bitcoin fund, offering investors the opportunity to gain regulated exposure to the leading cryptocurrency without having to take direct control of assets.
The latest figures show Grayscale Investments – owned by CoinDesk’s parent firm, Digital Currency Group – currently has $42.1 billion in net assets under management across all its cryptocurrency trusts and funds.
The SEC has yet to approve a bitcoin ETF, having shot down a host of hopefuls in recent years. Most recently, VanEck made another attempt to persuade the SEC that now is at last is the time, with a filing in December.
Canada, on the other hand, recently approved three bitcoin ETFs, all of which listed on the Toronto Stock Exchange.
WisdomTree’s Bitcoin ETF Filing Joins Hopefuls Vying For Approval
New York’s WisdomTree is seeking approval from the SEC to launch a Bitcoin ETF.
New York-based asset manager WisdomTree has filed for a Bitcoin exchange-traded fund, or ETF, with the U.S. Securities and Exchange Commission.
The firm submitted its filing on March 11. It states the WisdomTree Bitcoin Trust would trade on Chicago Board Options Exchange’s BZX platform under the ticker BTCW. The trust would offer a regulated way for investors to gain exposure to the price of Bitcoin, and allow speculators to execute trades through their brokers.
Contracts would be settled according to CF Benchmarks’s “CF Bitcoin US Settlement Price,” a price index that tracks the price based on major BTC spot exchanges.
The proposed ETF is not WisdomTree’s first foray into crypto, with the firm currently managing a leading institutional ETH fund.
In June 2020, WisdomTree filed for an ETF that would invest up to 5% of capital into BTC futures contracts, despite the fund being primarily focused on energy, agriculture, and metals. In December 2019, the firm launched a physically-backed Bitcoin exchange-traded product that was listed on the SIX Swiss Exchange.
WisdomTree is not alone in seeking SEC approval for a Bitcoin ETF. Last month, crypto-focused financial services firm NYDIG filed for a Bitcoin ETF, with top U.S. investment bank Morgan Stanley among the proposed fund’s authorized participants.
Leading exchange-traded product-issuer VanEck filed for its own BTC fund in January, in addition to an ETF tracking the performance of leading crypto firms. Texas-based Valkyrie Digital Assets also filed for a Bitcoin ETF that same month.
However, VanEck’s bid for ETF approval may be impacted by an ongoing lawsuit from its former partner, blockchain tech firm SolidX — with the company accusing VanEck of plagiarizing a product the two firms worked on together during 2018 and 2019.
Wall Street Steps Up Crypto ETF Push As SEC Verdict Unknown
Issuers across the $5.9 trillion U.S. ETF industry are racing to win approval for the first Bitcoin fund, with one big hurdle standing before them: A regulator whose position right now is anyone’s guess.
At least four firms now have live applications for an exchange-traded fund tracking the largest cryptocurrency, with WisdomTree Investments joining their ranks late last week. VanEck Associates Corp., NYDIG Asset Management and Valkyrie Digital Assets were the names already in the running.
Their odds of approval are a complete unknown. The U.S. Securities and Exchange Commission has rejected all previous filings, but since then two Bitcoin ETFs launched in Canada, institutional acceptance of cryptocurrencies has snowballed and — perhaps most importantly — the regulator’s leadership has changed.
Gary Gensler, the nominee to be next SEC chairman, is known for having a more open stance toward cryptocurrencies. That means hopes are riding high, and applications are piling up even before he’s in place and despite the regulator being unlikely to make big policy changes in his absence.
“These funds are getting their ducks in a row,” said Todd Rosenbluth, director of ETF research for CFRA Research. “They’re getting their paperwork filed, so if or when the SEC does OK a Bitcoin ETF, these asset managers will be ready.”
Despite the shifting landscape, the early applications still look ambitious. U.S. regulators have raised concerns about Bitcoin’s infamous volatility and how that could whipsaw unsuspecting retail investors. There remain worries about manipulation and criminal activity, with the likes of Treasury Secretary Janet Yellen pointing to the threat of terrorist financing.
One particular issue involves last-minute rules proposed by the outgoing Trump administration that would create new requirements for financial services firms to record the identities of cryptocurrency holders. These could have far-reaching consequences for an industry that prizes anonymity, and it remains unclear how the Biden administration will deal with them.
Issuers are pushing on regardless because of the stakes involved, with a potential bonanza on offer for the first to get an ETF over the line.
The Purpose Bitcoin ETF (ticker BTCC) in Canada, the first of its kind in North America, saw more than $165 million worth of shares change hands at its launch. One day later, just $14.6 million of shares traded in Evolve Fund Group’s Bitcoin ETF (EBIT) in its debut.
“The difference between being first and second in this two-ETF race hasn’t been so much gold versus silver as gold versus a participation trophy,” said Ben Johnson, Morningstar Inc.’s global director of ETF research. ‘Optimism Abounds’
With Gensler not due to take his position until later in the year, plenty in the industry still think approval is a long way off.
Yet in the past two years the SEC has shown its willingness to work with crypto companies “through guidance, requests for comment, statements and engagement through its innovation arm Finhub,” according to Jackson Mueller, director of policy and government relations at Securrency, a developer of Blockchain-based financial and regulatory technology.
The SEC declined a request for comment from Bloomberg News as the filings are pending.
In addition to the four pending applications for a crypto ETF, there are other filings that appear to be seeking to sidestep SEC reticence by combining Bitcoin with other assets.
For example, Simplify Asset Management is working to launch an “equity plus Bitcoin” ETF that will invest up to 15% of its assets in cryptocurrencies indirectly through the Grayscale Bitcoin Trust (GBTC). Bitwise Asset Management filed for a fund filled with companies considered to be crypto innovators.
“With Canada recently approving Bitcoin ETFs and Gary Gensler poised to serve as SEC Chairman, optimism abounds,” said Nate Geraci, president of the ETF Store, an advisory firm. “Every issuer with any hope of having a meaningful Bitcoin ETF presence should be throwing their hat in the ring at this point.”
One of those is arguably Grayscale Investments, the firm behind GBTC. That’s an investment trust as opposed to an ETF, meaning there are different rules around share creation and trading.
Nonetheless, it’s been a smash hit, ballooning in size to more than $37 billion, up from only $1.9 billion a year ago. Now Gray scale is recruiting an entire ETF team, apparently in anticipation that the first American exchange-traded crypto products will eventually be approved.
Bitcoin’s price has skyrocketed around 10-fold in the past 12 months. The digital asset climbed above $60,000 for the first time this weekend before dropping to below $56,000 by Tuesday morning in New York.
With so much potential cash involved, the SEC should consider approving multiple filings at once to “avoid giving any issuer a significant first-mover advantage,” James Seyffart, ETF analyst for Bloomberg Intelligence, wrote in a recent note.
If that happens, the funds currently trying their luck with applications could be richly rewarded.
“All of these firms want to be at the starting line with their feet on the blocks if and when the SEC pulls the trigger,” said Johnson at Morningstar.
SEC Has 45 Days To Respond To Vaneck Bitcoin ETF Filing
It is Bitcoin ETF decision season once again for America’s securities regulator amid a changing of the guard at the commission.
The United States Securities and Exchange Commission now has 45 days to deliver an initial decision on the VanEck Bitcoin (BTC) exchange-traded fund filing having officially published the company’s submission on its website on March 15.
Now, the SEC has to approve, decline or extend the review period for the Bitcoin ETF filing within the 45-day window. The SEC can extend the deliberation window up to 249 days before delivering a final decision. The public also has a three-week period to submit comments on the SEC website.
As previously reported by Cointelegraph, the Chicago Board Options Exchange, or CBOE, filed to list the VanEck Bitcoin ETF back in January. VanEck was one of the BTC ETF hopefuls back in 2017 when several companies were looking to gain SEC approval for a Bitcoin ETF.
At the time, the asset management outfit partnered with blockchain startup SolidX to file a joint Bitcoin ETF. However, the VanEck/SolidX BTC ETF was withdrawn before the SEC delivered a decision on the filing.
Back in January, SolidX filed a lawsuit against VanEck, accusing the latter of plagiarizing its Bitcoin ETF. According to the details of the complaint, SolidX said VanEck acted in bad faith by going ahead to file a Bitcoin ETF based on its work.
With the change in leadership at the commission following Jay Clayton’s departure back in December 2020, firms in the U.S. are trying once again for a Bitcoin ETF. Clayton’s SEC tenure saw the commission reject nine Bitcoin ETFs.
The unregulated nature of the Bitcoin spot market was a popular refrain attached to each rejection. During the period, the SEC routinely pointed to this issue as a cause for concern stating that price manipulation was not difficult to achieve, hence a BTC ETF approval was off the table.
Earlier in March, New York-based asset management firm WisdonTree submitted a Bitcoin ETF filing with the SEC. Meanwhile, some market commentators say BTC ETF approvals in Canada may spur the commission to reconsider its previous reticence.
Indeed, the month of February saw Canadian securities regulators approve a couple of Bitcoin ETFs, becoming the first of such investment products in North America. Following the initial success of these ETFs, some firms are now looking to expand their catalog by launching Ether (ETH) ETFs.
First Advisor, Scaramucci-Led SkyBridge Team Up To File For Bitcoin ETF
The two companies are just the latest to file for an ETF, following in the footsteps of WisdomTree, Valkyrie, NYDIG and VanEck.
First Trust Advisors and SkyBridge Capital, the hedge fund run by former White House Communications Director and recent bitcoin (BTC, -1.21%) convert Anthony Scaramucci, have become the latest firms to seek to offer a bitcoin exchange-traded fund (ETF).
* In an S-1 filing with U.S. Securities and Exchange Commission (SEC), the companies applied to be able to offer the “First Trust SkyBridge Bitcoin ETF Trust.” First Advisor would be the advisor to the ETF while SkyBridge would serve as the sub-advisor. Shares would trade on NYSE Arca, the filing said.
* The two companies are just the latest to file for an ETF. This bull run’s regulatory rush has seen WisdomTree file for a bitcoin ETF in March, NYDIG in February, Valkyrie in January, and VanEck in December of last year.
* Grayscale appears to be gearing up for an ETF product of its own. The crypto asset manager might apply for a new one or convert its existing bitcoin Trust into an ETF. The digital asset investment firm is owned by CoinDesk parent company Digital Currency Group.
* The flood of applications comes as the SEC is widely expected to approve the first bitcoin ETF this year.
Brazil Becomes Second Country In The Americas To Approve A Bitcoin ETF
The Brazil Securities and Exchange Commission (CVM) has approved QR Capital’s bitcoin ETF which will trade on the Sao Paulo-based B3 exchange.
Brazil has become the second country in the Americas to approve a bitcoin (BTC, -2.87%) exchange-traded fund (ETF) following the three launched in Canada this year.
* The Brazil Securities and Exchange Commission (CVM) has approved blockchain investment firm QR Capital’s bitcoin ETF which will trade on the Sao Paulo-based B3 exchange.
* The fund will trade under the ticker QBTC11, QR capital tweeted Friday.
* “The QBTC11 will have as reference the CME Group index of bitcoin futures contracts,” QR said.
* Reuters reported Friday the ETF listing will take place by June.
* This will be the fourth ETF of its kind following the three funds that launched on the Toronto Stock Exchange (TSX) in February and March.
* The first of these, launched by Purpose Investments, saw inflows of $564 million in its first two days. (Purpose’s ETF uses index information from TradeBlock, a CoinDesk subsidiary.)
* The U.S. Securities and Exchanges Commission (SEC) yesterday acknowledged VanEck’s application to launch a bitcoin ETF, which, if approved, would be the first of its kind in the U.S.
Asset Management Giant Fidelity Files For Bitcoin ETF
Fidelity submitted paperwork for the Wise Origin Bitcoin Trust on Wednesday. If approved, the Trust would be the first Bitcoin ETF to launch in the United States.
Fidelity Investments, the $4.9 trillion asset manager, has filed paperwork with the United States Securities and Exchange Commission, or SEC, to list a new Bitcoin (BTC) exchange-traded fund.
The Wise Origin Bitocin Trust was filed with the SEC on Wednesday, according to a Form S-1 Registration Statement that appeared on the regulator’s website. The ETF aims to track the digital currency’s daily performance using the Fidelity Bitcoin Index PR, an index that’s derived from several price feeds.
From The Prospectus:
“The Trust provides direct exposure to bitcoin, and the Shares of the Trust are valued on a daily basis using the same methodology used to calculate the Index.”
The fund is incorporated in Delaware, with Fidelity Digital Asset Services listed as the custodian.
Fidelity says investors can access the fund through a traditional brokerage account without the “potential barriers to entry or risks involved with holding or transferring bitcoin directly.” Like other proposed Bitcoin ETFs, the Fidelity Trust is intended to provide more institutional pathways to cryptocurrencies.
Speculation about a U.S. Bitcoin ETF has been rampant since the 2017 bull market. So far, lawmakers at the SEC have struck down every proposal to securitize Bitcoin in an ETF over concerns of extreme volatility and price manipulation. Proponents of the flagship cryptocurrency believe the tide could be changing now that Bitcoin has matured as an asset class.
Last week, Goldman Sachs filed for a new ETF that includes the option to add BTC exposure. The Autocallable Contingent Coupon Coupon ETF-Linked Notes “may have exposure to cryptocurrency, such as bitcoin, indirectly through an investment in a grantor trust,” the prospectus read.
North of the border, Canadian regulators have so far approved two Bitcoin ETFs. The Purpose Bitcoin ETF, which was launched in mid-February, generated $100 million in volume during its first few hours of trading.
Fidelity was among the first major institutions to embrace cryptocurrencies. The firm began mining Bitcoin and Ethereum (ETH) in 2014, the same year Abigail Johnson became the company’s president and CEO.
Digital Asset Manager Behind Canada’s First BTC Fund Hopes To Launch Bitcoin ETF
CoinShares CEO Jean-Marie Mognetti said its proposed Bitcoin ETF aims to make “digital assets more accessible to investors of all types.”
Investment fund manager 3iQ has partnered with Coinshares to launch a Bitcoin exchange-traded fund in Canada.
According to an announcement from 3iQ, the firm has filed a final prospectus for a Bitcoin (BTC) exchange-traded fund, or ETF, with the securities regulatory authorities in each of the 10 provinces and 3 territories of Canada. Pending regulatory approval, trading for the ETF is expected to begin in early April on the Toronto Stock Exchange.
CoinShares CEO Jean-Marie Mognetti said the joint effort was aimed at “making digital assets more accessible to investors of all types.” The fund’s units will likely trade in U.S. dollars under the ticker “BTCQ.U” and Canadian dollars under the ticker “BTCQ.”
Canadian investment firms have largely taken the lead on launching crypto ETFs in North America given the U.S. Securities and Exchange Commission’s, or SEC’s, seeming reticence in approving a fund.
Toronto-based Purpose Investments launched a Bitcoin ETF in February, and Ninepoint Partners is reportedly planning to change its Bitcoin trust offering to an exchange-traded fund as well. Evolve Funds Group also announced in March that it had filed a prospectus with Canadian regulators for approval to begin trading an Ether ETF.
3iQ was behind the launch of Canada’s first Bitcoin fund in April 2020. The fund has since reached more than $1 billion, with Coinshares and 3iQ having a combined $7 billion of assets under management.
“We have followed 3iQ’s incredible growth closely since they received a landmark decision in Canada to allow listed Bitcoin vehicles,” said Mognetti.
Next Up, Bitcoin ETF By Fidelity: Crypto Funds Batting .000 Against SEC
The SEC is pitching a shutout against Bitcoin-based ETFs, and not even Fidelity’s storied name may be enough to overcome the obstacles.
With more than 35 million customers, $21 billion in revenues and $3.8 trillion in discretionary managed assets, Fidelity Investments is one of the largest investment management companies in the world. It may need all its heft to break the losing streak of crypto-fund sponsors that have gone up against the United States Securities and Exchange Commission.
As reported, Fidelity filed with the SEC on March 24 a preliminary registration statement on behalf of its Wise Origin Bitcoin Trust — an exchange-traded fund that would track the performance of Bitcoin as measured by its Fidelity Bitcoin Index.
This followed similar SEC filings this year from WisdomTree, CBOE/VanEck, NYDIG Asset Management, Valkyrie Digital Assets and SkyBridge Capital.
A Fidelity Bitcoin fund would be an event of some historic importance. According to Nik Bhatia, author of the book Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies and adjunct professor of finance and business economics at the University of Southern California, this would be bigger than Elon Musk buying $1.5 billion in Bitcoin (BTC) for Tesla’s corporate treasury, more significant than PayPal allowing its users to buy, sell and hold cryptocurrency, and greater than Coinbase’s upcoming initial public offering.
“It would bring the final stamp of legitimacy to Bitcoin,” Bhatia told Cointelegraph, and it could happen relatively soon. “I imagine that [CEO] Abby Johnson and Fidelity have filed, knowing they will get approved, and I now think it’s probably less than 12 months away.”
Nigel Green, founder and CEO of deVere Group — an independent financial advisory organization — told Cointelegraph, that if the SEC approves Fidelity’s BTC plans, it would mean “another major step into the mainstream for cryptocurrencies. It will also, inevitably, prompt more institutional investors into the already burgeoning cryptoverse.”
Not all are sure, though. “The Fidelity name is important, but it may not be big enough to overcome the other hurdles,” Georges Ugeux, adjunct lecturer in law at Columbia University Law School, told Cointelegraph. Among those hindrances are the crypto funds’ lack of diversification, illiquidity and, at least in the short term, the fact that the agency still doesn’t have a confirmed chairman.
Lennard Neo, head of research at Stack Funds — a crypto index fund provider — told Cointelegraph: “We have seen many ETFs being rejected by the SEC citing manipulation and market size as concerns.” Still, the cryptocurrency space has grown significantly over recent years and matured into an emerging new asset class. “If one keeps knocking on the door, it will eventually open.”
There are reasons, however, why approval of Bitcoin ETFs are unlikely in the immediate future, Michael Venuto, co-founder and chief investment officer of Toroso Investments, told Cointelegraph. “The SEC role is investor protection.
Approving an ETF of Bitcoin could be seen as an endorsement that may run counter to more powerful forces within our government.” More clarity is still needed “at the federal, fiscal, tax and other regulatory levels” before the agency will approve a BTC fund, he said.
Concentration And Liquidity Concerns
Regulators are worried about, among other things, concentration risk — i.e., the possibility of “amplified losses” because holdings aren’t sufficiently diversified — a risk that may be particularly pronounced with a Bitcoin fund. In its S-1 filing, Fidelity itself acknowledged that:
“Unlike other funds that may invest in diversified assets, the Trust’s investment strategy is concentrated in a single asset within a single asset class. This concentration maximizes the degree of the Trust’s exposure to a variety of market risks associated with bitcoin and digital assets.”
With equity funds, the SEC doesn’t want any single stock to comprise more than 25% of an ETF’s basket size as measured by market capitalization, Ugeux told Cointelegraph. Bitcoin isn’t an equity, of course — it’s more like a commodity, at least according to the Commodity Futures Trading Commission and recent statements by senior SEC officials — but a Fidelity BTC would appear to really stretch the SEC’s concentration rules.
Another possible concern is liquidity, added Ugeux. ETF sponsors are supposed to be continuously purchasing and selling the fund’s underlying assets — to protect the sponsor so it isn’t holding too much itself — but here again, a Bitcoin fund can be problematic because its underlying assets are not (relatively) liquid securities.
Fidelity acknowledged in its filing its ability to sell Bitcoin could be affected by limited trading volume, lack of a market maker, or legal restrictions — indeed, a “governmental authority may suspend or restrict trading in Bitcoin altogether.”
The filing added: “Bitcoin is a new asset with a very limited trading history. Therefore, the markets for bitcoin may be less liquid and more volatile than other markets for more established products.”
Still, these problems could be surmountable. “It seems a question of when — not if — the SEC will approve a Bitcoin ETF,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA, in a public statement that he shared with Cointelegraph. Additionally, when approval does come, he said that:
“We expect multiple firms to receive the go ahead because the [regulatory] concerns were more with Bitcoin inside an ETF than anything specific to an individual proposal. Firms with an established ETF presence and broad distribution would have the advantages over others.”
As noted, some half dozen firms have filed with the U.S. SEC for crypto ETFs this year. Could any of them beat Fidelity to the punch, and if so, would they have anything close to the impact of a Fidelity ETF?
“I don’t think Fidelity has an advantage in getting approved,” Venuto told Cointelegraph. “The only one with a slight advantage is VanEck since they were the first of the current class to file for a 19b-4 rule change” — which made it easier to list ETFs.
Felix Shipkevich, an attorney specializing in cryptocurrency-related legal and regulatory matters at Shipkevich PLLC, told Cointelegraph: “All of the ETF Bitcoin applicants are game-changers” — i.e., not just Fidelity.
Even with the regulatory ambiguity in the cryptocurrency space, “I have yet to see an ETF application from anything less than a first-tier financial services firm.”
Even if approval is eventually given, it may not happen so fast. Hester Peirce, a commissioner at the SEC and sometimes referred to as “Crypto Mom” for her support of cryptocurrencies, addressed the matter of ETFs in a recent speech, and “she did not give the impression that one [i.e., approval] would come through immediately,” said Ugeux. Approval(s) may take additional time, too, because Gary Gensler still hasn’t officially been confirmed as SEC chairman almost two months after his nomination, he added.
From Peirce’s speech, one might even conclude that the SEC had dug itself into a bit of a hole because it had delayed BTC fund approval for so long.
Not only has the SEC’s “reluctance to permit traditional investment vehicles to hold Bitcoin or Bitcoin futures has contributed to investors seeking more expensive, less convenient, or less direct substitutes,” she said, “but it also has heightened the stakes of any regulatory approval for a mainstream retail product we might one day grant.”
The waiting has “magnified the first-approved advantage” for any Bitcoin ETF, and should the agency allow one now, investors might think the SEC is giving its “blessing” to that particular product — which would be the wrong inference to take, Peirce added.
Crypto Cynics Are “On The Wrong Side Of History”
Whatever the circumstances — whether alone or as part of a group, whether sooner or later — “an ETF launched by one of the biggest mutual funds in the world definitely makes a statement,” said Neo regarding the Fidelity filing.
He continued: “It emphasizes the maturity and acceptance in Bitcoin” and would bring more institutional investors to the cryptoverse but also retail investors “with a low-cost, flexible alternative to efficiently diversify their portfolio into digital assets.”
“Staggeringly,” Green told Cointelegraph, “there are still some ‘experts’ who claim that digital currencies are not the future of money. The move by this investment giant to launch a Bitcoin ETF further underscores that cryptocurrency cynics are on the wrong side of history.”
Canada’s Purpose Bitcoin ETF May Be Cutting Into Grayscale’s Market Share
Following the launch of Canada’s first Bitcoin ETF, shares in Grayscale’s Bitcoin Trust have spent an entire month trading at a discount compared to spot BTC for the first time.
For the first time, shares in Grayscale’s Bitcoin Trust traded at a discount compared to spot BTC for an entire month.
Rafael Schultze-Kraft, the CTO of on-chain analytics provider Glassnode, shared the observation to Twitter on April 1, noting shares in the institutional fund manager’s Bitcoin Trust had traded at a notional discount of -6% on average during March.
He noted the discount in Grayscale’s BTC shares has coincided with the launch of the Purpose Bitcoin ETF in Canada — which has accumulated 16,000 BTC worth roughly $940 million since launching in late February.
The ETF has accumulated more than 16k BTC in over a month. (Still dwarfed by Grayscale’s 654k BTC holdings).
— Rafael Schultze-Kraft (@n3ocortex) April 1, 2021
Glassnode’s CTO is not alone in speculating the launch of North America’s first Bitcoin ETF may be siphoning institution away from Grayscale, with Galaxy Digital’s Mike Novogratz tweeting:
“[Grayscale] used to be the only game in town. Now have an ETF in Canada that charges 40 bp. And there are many funds here in the USA with very low fee structures.”
Two Bitcoin and crypto ETFs were also approved by Brazil’s Securities and Exchange Commission earlier this month.
Schultze-Kraft noted the Trust’s Bitcoin holdings have been flat over recent weeks, stating this was: “Not surprising, as subscribing to create new $GBTC shares makes little sense as long as existing shares are trading at a discount.”
Grayscale allows accredited investors to create baskets of shares that represent BTC or other digital assets by depositing fiat. Grayscale then deposits a corresponding quantity of crypto into its trusts, with investors facing a six-month lock-up period after which they can sell their shares using over-the-counter, or OTC, markets.
With Grayscale’s shares historically trading at a premium over the spot crypto markets, many institutional investors have invested in the Trust as an arbitrage play, speculating the sizable spread would offset the 10% holding and interest fees associated with the six-month lock-up.
Grayscale currently boasts $45.6 billion in assets under management across its 13 Trusts, following the launch of five new Trusts last month. Its new Decentraland (MANA) Trust represents $17.4 million, followed by Livepeer (LPT) with $12.3 million, Filecoin (FIL) with $8.5 million, Basic Attention Token (BAT) with $3.7 million, and Chainlink (LINK) with $3.5 million.
While all of Grayscale’s newly supported assets have seen significant gains over recent weeks, Filecoin’s performance has topped the list with a 105% gain this past week according to CoinMarketCap.
SEC Likely To Approve Bitcoin ETF In 1-2 Years, Says Analyst
“We think we’re likely to see one in the coming year or two, but we don’t have a firm timeframe as to when the answer would be yes,” said Todd Rosenbluth.
According to an analyst at CFRA Research, VanEck, Fidelity Investments, and Valkyrie Digital Assets may not see their Bitcoin exchange-traded funds, or ETFs, approved by U.S. regulators for up to two years.
In an interview on CNBC’s ETF Edge Monday, Todd Rosenbluth, head of ETF and mutual fund research at CFRA, told host Bob Pisani that he believed the U.S. Securities and Exchange Commission, or SEC, would extend the timeline for considering the Bitcoin ETF first pitched by investment management firm VanEck in January.
The SEC officially acknowledged receipt of the Bitcoin ETF application on March 15, giving the regulatory body until April 29 to come to a decision or extend the deadline.
“We’ve got a number of firms that have either gone through the filing process or have previously filed but are waiting for more clarity,” said Rosenbluth. “The SEC is less likely we think to try to pick a winner, as to who comes first and I think we’re more likely to see them — if they do approve an ETF — to approve multiple Bitcoin-related ETFs.”
“We’ve got a number of firms that have entered. We think we’re likely to see one in the coming year or two, but we don’t have a firm timeframe as to when the answer would be yes.”
VanEck and Valkyrie both filed a registration with the SEC to form a Bitcoin ETF in January, with Fidelity following in March. The regulatory body has offered no indication as to what it will decide, but given its seeming reticence in previously approving a crypto ETF, many experts do not expect a decision soon.
The U.S. may not yet have approved a crypto ETF, but Canadian firms have been leading the way in North America. Toronto-based Purpose Investments launched a Bitcoin ETF in February, and Ninepoint Partners is reportedly planning to change its Bitcoin trust offering to an exchange-traded fund as well. Both investment fund manager 3iQ and Evolve Funds Group announced they had filed a prospectus with Canadian regulators for approval to begin trading crypto ETFs.
Following the Fidelity filing last month, Rosenbluth said it was “a question of when, not if, the SEC will approve a Bitcoin ETF.” He seemed to be implying on Monday that the approval of even one in the United States could potentially open the floodgates for firms looking to form crypto ETFs.
“If they approve someone, they’re gonna approve all of them,” said Pisani.
BNY Mellon Would Be Service Provider For First Trust, SkyBridge’s Proposed Bitcoin ETF
The custody bank would provide ETF basket operations, order taking, fund accounting, fund administration and transfer agency services.
BNY Mellon, the world’s largest custodian, would be the service provider for a proposed bitcoin (BTC, +3.08%) exchange-traded fund (ETF) that would be offered by First Trust Advisors and SkyBridge Capital.
If the ETF is approved, the custody bank would provide ETF basket operations, order taking, fund accounting, fund administration and transfer agency services, according to the firm’s press release.
First Trust and SkyBridge’s bitcoin ETF application is one of several made recently. WisdomTree, NYDIG, Valkyrie and VanEck have all filed but the U.S. Securities and Exchange Commission, which has historically rejected bitcoin ETF applications, hasn’t made a decision on any of the recent crop of filings.
Most recently, Grayscale, a CoinDesk sister company, announced its intention to convert the closed-end Grayscale Bitcoin Trust to an ETF when it is “permissible” to do so.
If bitcoin ETFs are approved this year, analysts believe that while they will primarily compete on fees and liquidity, they will also likely compete on custody and insurance options.
It’s Time For A Bitcoin ETF, Jan Van Eck And Som Seif Say
The SEC must decide not only whether a fund should be allowed, but which application to prioritize.
In April, MarketWatch and Barron’s are convening a group of crypto industry participants to discuss the landscape for the asset class (part one was April 7; part two will be held April 14). One session focused on “the illusive bitcoin ETF,” and featured Jan van Eck of VanEck and Som Seif of Purpose Investments.
VanEck has filed with the SEC to launch a bitcoin ETF in the U.S., and Purpose launched such a fund in Canada in February. It has already gathered $1.2 billion in assets.
Not surprisingly, both had strong views on the upsides a bitcoin ETF would bring for U.S. investors.
ETFs have proven to be the most efficient way for investors to get exposure to different assets, Seif noted — particularly those that have historically been less straightforward to access, like gold.
Van Eck agreed. ETFs bring price competition to markets, just as they did for gold, he said, as well as transparency, tax reporting and more efficiency in trading. Both panelists said they think bitcoin’s volatility will decline as access increases and as the industry passes more benchmarks, such as the Coinbase public offering.
Noting the rash of recent applications to launch funds, both acknowledged that it’s not clear how many different exchange-traded products the market could absorb.
Even if the SEC approves several different applications, investors will pick winners and losers, Seif said. Fees grab a lot of attention in the ETF space, he added, but “strategy is more important” — and strategy becomes extra important in a fund landscape that involves putting a digital asset into a “traditional finance” wrapper.
Van Eck agreed, calling bitcoin “revolutionary” for finance, in part because it involves instantaneous settlement and 24-7 trading. “The execution and mechanics is inside baseball but it’s important to get it right,” he said.
If gold has a $10 trillion market cap, he said, bitcoin might be expected to reach roughly half that amount – which would represent prices rising another six times.
As the asset continues to mature, VanEck is starting to see critical mass from other entities in the crypto ecosystem, whether miners or banks, that an ETF representing companies with such exposure may make sense, van Eck said.
He noted that companies with pure plays on crypto, such as Riot Blockchain Inc. and Silvergate Capital have outperformed the price of bitcoin, even as companies that include crypto access among other features, like Paypal and Square Inc., have underperformed.
“This is a sentiment asset,” Seim said. Even as supply and demand will play major role in pricing, what’s consistent is that volatility has declined every year since inception, he argued, and will continue to do so as bitcoin becomes more legitimatized as an institutional asset.
ETFs Could Rock The Bitcoin World
Potential arrival of the low-cost crypto vehicles is already being felt in the market.
What exchange-traded funds did to the traditional investment industry over decades might happen in a fraction of the time for the world of cryptocurrency players.
There is a growing sense that a bitcoin ETF might finally arrive in the U.S. in the not-too-distant future. The nominated chairman of the Securities and Exchange Commission, Gary Gensler, has taught courses on cryptocurrency. The bitcoin market has experienced huge growth in recent months and now has the involvement of some big institutions. VanEck, Fidelity and others are again seeking regulatory approval for bitcoin ETFs.
Already there are indicators of big potential demand. The first bitcoin ETF in North America, the Toronto-listed Purpose Bitcoin ETF, has amassed roughly $1 billion in assets since its February launch. Meanwhile, the Grayscale Bitcoin Trust last week reiterated its longstanding intention to seek to convert its publicly traded bitcoin fund to an ETF.
Many analysts have attributed the fund shares’ recent move to trading at a discount to the net asset value of its bitcoin holdings—after trading at a sizable premium for a long time—in part to the advent of an ETF.
One advantage of ETFs is that shares can be readily created and redeemed to arbitrage away any discount or premium, which could greatly broaden their appeal. ETFs are also cheaper, which will put pressure on fees across the bitcoin ecosystem.
“You have to think about fees today as almost payment for the frictions that exist between the legacy financial system and the crypto ecosystem,” said Grayscale Investments Chief Executive Michael Sonnenshein. “You’d expect as pipes gain greater connectivity…fees will come down.”
Should Grayscale convert, with some $34 billion in assets under management it would be the second-largest commodity U.S. ETF behind SPDR Gold Trust, and would move to lower its present fees.
Today many small investors also invest in bitcoin via digital wallets, like at Coinbase Global, whose largest revenue source is retail transactions.
For some crypto-savvy investors, ETFs might not be a very good substitute. For now ETFs are aimed at bitcoin, while many wallets offer a long and growing list of cryptocurrencies. Wallets also can enable activities like borrowing against, paying with, and generating income from crypto. But for many investors just seeking to participate in bitcoin’s upside at the lowest cost, these might be relatively niche concerns.
At this point, Coinbase’s growth shows no sign of slowing: Ahead of its public listing set for this week it reported adding some 13 million verified users in the first quarter of 2021 alone, to 56 million, more than it added in all of 2020.
A lot of growth could come through ETFs, were they approved. In addition to opening the door to average investors, ETFs will also likely make it easier for more financial advisers to provide bitcoin allocations to clients, says Matt Hougan, chief investment officer of Bitwise Asset Management, which manages more than $1 billion in crypto funds and has also sought to launch an ETF.
“ETFs might bring a whole new zone of capital into the market,” he said.
Investors buying into any crypto investment company today should be thinking about the potential for a very different landscape in the years to come.
Galaxy Digital Submits Bitcoin ETF Application With SEC
Mike Novogratz’s Galaxy Digital is the latest Bitcoin exchange-traded fund applicant in the United States.
Galaxy Digital has submitted a Bitcoin (BTC) exchange-traded fund filing with the United States Securities and Exchange Commission.
According to the form S-1 published by the SEC on Monday, the Galaxy Bitcoin ETF — if approved — will trade on the NYSE Arca exchange, with the Bloomberg Galaxy Bitcoin index tapped as the pricing mechanism.
Detailing the price mechanism for the prospective Bitcoin ETF, the filing reads:
“The end-of-day Index price is calculated using the Bloomberg Crypto Price Fixings (‘CFIX’) mid-price for bitcoin. CFIX is based on pricing provided by the Bloomberg Generic Price (‘BGN’) using Bloomberg’s data, technology and distribution platforms, and is made broadly available to the investment community with the objective of providing cryptocurrency fixings that are reliable, representative, and transparent.”
As previously reported by Cointelegraph, Galaxy Digital, via its financial services subsidiary, launched a Bitcoin ETF product in the Canadian market back in March.
Galaxy’s Bitcoin ETF filing did not list any custodian or administrator. The filing document also did not provide details of the trustee beyond the organization being a “Delaware trust company.”
The Bitcoin ETF filing by Galaxy Digital comes on the heels of a similar application by Fidelity back in March.
The SEC is yet to approve any Bitcoin ETF, with the previous leadership citing volatility and price manipulation concerns.
Meanwhile, the SEC has less than two weeks to deliver its initial response to VanEck’s Bitcoin ETF filing following the commission’s acknowledgment of the submission back in mid-March.
You Can Already Invest In Hundreds Of ETFs With Exposure To Bitcoin
Despite the lack of United States-based Bitcoin ETF, hundreds of funds have made significant investments into the blockchain and crypto industries.
Numerous U.S.-traded exchange-traded funds, or ETFs, are loading up on shares in the world’s top crypto firms.
According to ETF.com, hundreds of funds have invested in publicly-listed companies that are holding BTC on their balance sheets. As of this writing 88 ETFs hold MicroStrategy shares, while 144 ETFs hold Square, and 222 ETFs hold Tesla. Sixteen ETFs have direct exposure to Bitcoin mining stocks.
Almost 200 ETFs hold shares in BlackRock, which recently profited $360,457 after starting to “dabble a bit” in crypto.
Top-performing ETFs With Crypto Exposure
Nine funds are exposed to both crypto mining stocks and firms with BTC on their balance sheets.
As a share of its overall portfolio, the Amplify Transformational Data Sharing ETF (BLOK) has the greatest exposure to crypto. Seven of BLOK’s top 10 allocations are in leading crypto firms, including Galaxy Digital, Marathon Digital, Voyager Digital, Hut 8 Mining, Hive Blockchain, Riot Blockchain, and Argo Blockchain. These stocks represent one-third of BLOK’s capital.
The fund describes its investments as targeting “transformational data sharing technologies.”
BLOK is among the top-performing ETFs of 2021 so far, gaining 71.7% since the start of the year. So far in 2021 it’s recorded the eighth-highest returns among all ETFs — and it ranks second if you exclude leveraged and inverse products. Among ETFs, BLOK is the single-largest hodler of both MicroStrategy and Marathon’s stock.
The Nasdaq NexGen Economy ETF (BLCN) is the only other crypto-exposed ETF that ranks among the top 100 ETFs by YTD performance when excluding inverse and leveraged funds, coming in at 82nd with a YTD gain of 23.15%.
BLCN currently holds $5.63 million worth of Marathon stock, $5.4m in Microstrategy, and $5.24 million in Square.
Largest Holders By Total Value Of Assets
When measured by total value of assets, the Vanguard Total Stock Market ETF (VTI) is the ETF with the heaviest allocations to crypto-exposed firms. The VTI currently represents $2.77 billion worth of Tesla, $478 million of Square, $29.4 million of Microstrategy, and $11.38 million of Riot Blockchain. VTI also owns $516 million worth of Blackwater.
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is the second-largest fund by overall exposure to crypto, holding $450 million worth of Tesla, $4.4 million of Microstrategy, $3.86 million of Marathon, and $3.12 million in Riot.
The U.S. Securities and Exchange Commission is yet to issue a verdict on seven applications for Bitcoin ETFs, including Fidelity Investments, Skybridge Capital, WisdomTree, Morgan Stanley and NYDIG, VanEck, and Valkyrie Digital Assets.
The Purpose Bitcoin ETF began trading on the Toronto Stock Exchange in mid-February, and has accumulated roughly $1 billion worth of BTC since inception. Canada’s Ninepoint Partners and CI have also announced plans to convert their Bitcoin funds into ETFs.
Canadian Bitcoin ETFs Quickly Hit $1.3B In AUM While US Acceptance Lags
In less than two months, one Canadian Bitcoin ETF attracted $1.1 billion in assets under management, while two more funds are also growing their AUMs.
The Purpose Investments ETF, the first Bitcoin (BTC) exchange-traded fund to launch in North America, has seen its assets under management soar to $1.1 billion less than two months after launching. Two Bitcoin ETFs that launched shortly after Purpose’s in Canada have also seen their AUM’s swell to a combined $200 million in the same time period, taking Canada’s combined Bitcoin ETF net value to around $1.3 billion.
The Purpose Bitcoin ETF launched in late February and generated nearly $100 million in trading volume on its first day. The ETF accrued more than $500 million in assets under management in its first week as investors rushed to gain access to Bitcoin trading without having to own the underlying asset.
The acceptance by regulators and eventual launch of the purpose ETF acted as an opening of the floodgates for Canadian Bitcoin businesses, and two more ETFs were launched in the following weeks.
The success of Purpose’s ETF was a prime example of a first-mover advantage in full effect, as it continues to hog the lion’s share of Canada’s nascent ETF industry. Evolve Fund Group’s Bitcoin ETF commenced operations just two days earlier and has accrued just $106 million in AUM, according to its website, despite offering 25% lower management fees than Purpose.
Likewise, the CI Galaxy Bitcoin ETF, which launched just a few days later still, currently has just over $90 million in AUM, this time slashing management fees to 0.4%, reports Canada’s Globe and Mail. All ETFs, however, have seen their respective values rise in line with Bitcoin’s own meteoric ascent in recent times, with each unit priced higher now than at launch.
A plethora of American firms has registered applications for Bitcoin ETFs with the United States Securities and Exchange Commission. However, no fund has been approved on U.S. soil to date. Galaxy Digital, SkyBridge Capital and Fidelity all filed ETF applications in recent months, among many others. And while the general feeling is that one (or all) will be approved eventually, the timeline is still far from certain.
Some analysts believe the U.S. will see its first Bitcoin ETF launch within one to two years, while others hope Bitcoin’s recent ascension, combined with the example of other North American regulators, will fast-track the process.
Bitcoin ETF Drumbeat Gets Louder As Eight Issuers File With SEC
As Bitcoin hits records and Coinbase Global Inc. goes public, ETF issuers are betting en masse that U.S. regulators will green-light a fund tracking the largest cryptocurrency at long last.
No fewer than eight applications for a Bitcoin ETF have now been filed with the Securities and Exchange Commission since late December, after billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd. joined the list on Monday.
It is racing with the likes of Fidelity Investments for first-mover advantage as conviction grows that the SEC will relent after years of rejected applications. With the first North American Bitcoin ETF in Canada already at $1 billion in assets, industry-watchers are wagering the agency will follow its northern neighbor’s lead.
“Anyone who wants to launch a Bitcoin ETF and has been waiting wants to make sure their hat is in the ring if/when the SEC approves,” Bloomberg Intelligence analyst James Seyffart said. “So if they’re not first, they’re at least on the radar.”
Bitcoin rose for a seventh straight day on Wednesday morning, hitting the highest on record and trading at about $63,900 as of 6:12 a.m. in New York. The all-time high comes as Coinbase, the largest U.S. crypto exchange, prepares to list on the Nasdaq.
Whether Gary Gensler, the nominee to be next SEC chairman, will prove more open-minded toward a Bitcoin ETF than his predecessor Jay Clayton remains unclear. The agency has rejected every crypto ETF application since the first was filed in 2013 amid concerns about manipulation and criminal activity.
An SEC spokesperson declined to comment.
This time around, there’s more attention on the potential benefits of a Bitcoin ETF as a way to reduce market distortions.
The Grayscale Bitcoin Trust (ticker GBTC) is the largest crypto product. In its current structure as an investment trust, it lacks the share creation and redemption process that helps an ETF keeps its price in line with its holdings. That makes GBTC vulnerable to dislocations like its monster premium at the end of 2020 relative to the Bitcoin it held, or the record discount it swung to earlier this year.
In a report on Friday, JPMorgan Chase & Co. touted the benefits of a listed ETF over the closed-end trust to reduce tracking errors. Grayscale Investments LLC, the firm behind GBTC, has said it is “100% committed” to converting GBTC into an ETF.
That means the pipeline is even larger than the eight official applications.
“There’s a huge amount of pressure on the SEC to do something,” said Nic Carter, a partner at crypto-focused venture firm Castle Island Ventures. “The trust has way outgrown its structure and the lack of an arbitrage mechanism is causing a fair amount of harm to holders.”
Between events like the Reddit-fueled GameStop Corp. mania and the recent blowup of Bill Hwang’s Archegos Capital Management, the SEC may have bigger priorities. But the Bitcoin ETF clock is ticking.
The regulator has now acknowledged applications from VanEck Associates Corp. and WisdomTree Investments, meaning it has a limited period of time in which to approve or reject their proposals, though it can also extend its deliberations.
“They would have to either approve or deny both WisdomTree and VanEck in 2021,” Seyffart said. “Personally, I just can’t see the SEC denying both of them, unless something changes.”
Other ETF watchers are similarly bullish on a turning of the regulatory tide.
“At some point, if we’re not already there, the SEC runs out of reasons for not approving,” said Nate Geraci, president of advisory firm The ETF Store.
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