Ultimate Resource For A Spot And/or Futures 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 Spot And/or Futures 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.”
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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.
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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.
Updated: 10-9-2019
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.
Updated: 10-23-2019
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.
Updated: 11-5-2019
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.
Updated: 11-8-2019
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.”
Updated: 12-21-2019
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.
Updated: 12-30-2020
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.
Updated: 1-22-2021
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.
Updated: 1-22-2021
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.
Updated: 1-23-2021
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.
Updated: 2-3-2021
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.
He Continued:
“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.”
Updated: 2-8-2021
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.
Updated: 2-10-2021
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.
Updated: 2-11-2021
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.
Updated: 2-12-2021
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.
Updated: 2-16-2021
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.”
It Continues:
“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.
Updated: 2-16-2021
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.”
Chung Continued:
“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.
Updated: 2-17-2021
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.
Updated: 2-19-2021
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).
Updated: 2-21-2021
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.”
Updated: 2-23-2021
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.”
Updated: 3-1-2021
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.
Updated: 3-2-2021
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.
Updated: 3-2-2021
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.
Updated: 3-3-2021
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.
Updated: 3-3-2021
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.
Updated: 3-5-2021
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.
More Adoption?
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.”
Updated: 3-8-2021
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.
Updated: 3-12-2021
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.
Updated: 3-16-2021
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.
Updated: 3-18-2021
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.
Updated: 3-20-2021
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.
Updated: 3-21-2021
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.
Updated: 3-24-2021
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.
Updated: 4-1-2021
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.
Updated: 4-2-2021
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.
3/ The drop in $GTBC premium coincides with the launch of the Purpose #Bitcoin ETF – which could’ve drawn investment away from GBTC.
The ETF has accumulated more than 16k BTC in over a month. (Still dwarfed by Grayscale’s 654k BTC holdings).
Chart: https://t.co/o0AtdTEQsD pic.twitter.com/AGINo51TMy
— 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.
Updated: 4-7-2021
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.”
He Added:
“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.
Updated: 4-8-2021
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.
Updated: 4-9-2021
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.
Updated: 4-12-2021
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.
Updated: 4-14-2021
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.
Updated: 4-14-2021
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.
Updated: 4-14-2021
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.
Updated: 4-18-2021
Canada Approves Two Ethereum ETFs In One Day
The approval comes just over two months after Canada approved its first bitcoin ETF.
Purpose Investments and CI Global Asset Management both received approval to launch an exchange-traded fund (ETF) in Canada that offers exposure to ether.
Purpose is the manager of Purpose Ether ETF and Ether Capital Corporation will consult. The ETH will be kept in cold storage with Gemini acting as the sub-custodian and CIBC Mellon Global Securities acting as the fund administrator.
CI Global Asset management will launch CI Galaxy Ethereum ETF on April 20 on the Toronto Stock Exchange (TSX), subject to TSX approval. It will charge a 0.4% management. CI GAM is the manager of the ETF and Galaxy Digital Asset Management (“GDAM”) serves as the sub-advisor.
The approval comes a little over two months after Canada approved the Purpose Bitcoin ETF which held 10,064 BTC in the first week of trading. Meanwhile, in the U.S., bitcoin ETF approvals have been piling up in the hope that new Securities and Exchange Commission (SEC) Chief Gary Gensler could change the regulatory agency’s attitude to the novel investment product.
“While bitcoin tends to get a lot of attention as it was the first major cryptocurrency, what ether and the Ethereum ecosystem represent is one of the most exciting new technology visions today in society,” Som Seif, founder and CEO of Purpose Investments, said in a statement. “By launching the first ETF in the world that directly owns and provides exposure to ether, we are enabling every investor to have access to this unique opportunity and ecosystem.”
Purpose ETF is designed to provide investors with exposure to ether by investing directly in physically settled ether. The ETF will offer three classes of units: Canadian dollar currency hedged units (ETHH), Canadian dollar non-currency hedged units (ETHH.B) and U.S. dollar units with ticker units (ETHH.U). TradeBlock, a CoinDesk subsidiary, is the index provider for Purpose.
Updated: 4-22-2021
Bitcoin ETF From 3iQ And Coinshares Goes Live In Canada
The fund’s units began trading roughly three weeks after the investment manager filed a final prospectus with Canadian regulators.
Canada-based investment fund manager 3iQ’s Bitcoin exchange-traded fund created in partnership with Coinshares is now available for trading.
In an announcement from 3iQ today, trading for the 3iQ Coinshares Bitcoin exchange-traded fund, or ETF, began on the Toronto Stock Exchange today. The fund’s units are trading in U.S. dollars under the ticker “BTCQ.U” and Canadian dollars under the ticker “BTCQ.” Trading opened at $11.89 for BTCQ before dipping to $11.51 and recovering, while units of the Bitcoin ETF in U.S. dollars opened at $9.39 and have since risen 0.4% at the time of publication.
The investment fund manager said the ETF was aimed at providing investors exposure to Bitcoin (BTC) based on the movements of the cryptocurrency’s value in dollars, and the opportunity for long-term capital appreciation. The Bitcoin ETF’s management fee is 1%, but 3iQ said it would absorb any other expenses in excess of 0.25%.
Canada has seemingly taken the lead on launching crypto ETFs in North America given the U.S. Securities and Exchange Commission’s, or SEC’s, reticence in approving local funds — though many are hopeful given pro-crypto Gary Gensler’s recent confirmation as SEC chair. 3iQ was behind the launch of Canada’s first Bitcoin fund, and filed the final prospectus for the Bitcoin ETF earlier this month.
Including 3iQ’s and Coinshare’s fund, regulators in Canada have approved several crypto ETFs. Last week, they gave the green light for Ether (ETH) ETFs from Purpose Investments, Evolve Funds Group, and CI Global Asset Management to begin trading on local exchanges. Both Purpose and Evolve had previously launched Bitcoin ETFs, attracting roughly $1.3 billion and $100 million in assets under management, respectively.
Canada’s first Bitcoin fund, launched by 3iQ in April 2020, has grown to more than $1 billion. Together, Coinshares and 3iQ have $7 billion in assets under management.
Updated: 4-22-2021
First Mideast Bitcoin ETF Aims To Raise More Than $200 Million
Canada’s largest digital-asset investment fund manager 3iQ Corp. is hoping to raise more than $200 million by listing its Bitcoin exchange-traded fund in Dubai, according to its chief executive officer.
The intent of listing on the Nasdaq Dubai exchange is to get trading at all hours around the globe, said CEO Fred Pye. “We trade on the North American market times and Dubai is almost perfectly opposite of what our trading hours are,” he told Bloomberg TV.
3iQ was founded in 2012 and has about $1.5 billion in assets. Its 3iQ Coinshares Bitcoin ETF, which listed on the Toronto Stock Exchange last year, is now set to become the first cryptocurrency fund to go public in the Middle East.
Dubai-based Dalma Capital Management Ltd. is the syndicate manager for the offering.
The Canadian fund is also looking to work closely with lenders in the region. “Not only the banks in the UAE but also potential banks from other countries in the region,” Pye said.
Bitcoin surged past the $63,000 mark earlier this month, its highest ever, before paring gains. JPMorgan Chase & Co. strategists recently said if the largest cryptocurrency isn’t able to break back above $60,000 soon, momentum signals will collapse.
Pye is hopeful, though. Bitcoin could rise to $100,000 in the next three years because of supply scarcity, according to him.
“Right now, we’ve seen Bitcoin consolidate in the $50,000-$60,000 range, we expect that to continue,” he said.
Updated: 4-23-2021
Canada’s 4th Ether ETF, From 3iQ and CoinShares, Begins Trading On The TSX
This is the second 3iQ and CoinShares ETF to launch on the TSX this week.
Canadian digital asset manager 3iQ Corp and investment firm CoinShares have launched an ether (ETH, -7.46%) exchange-traded fund (ETF), now trading on the Toronto Stock Exchange (TSX).
* In an announcement Friday, 3iQ said the 3iQ CoinShares Ether ETF will trade in Canadian dollars under the ticker ETHQ and in U.S. dollars under the symbol ETHQ.U.
* Ether is the second-largest digital asset behind bitcoin (BTC, -5.15%) with a market capitalization of over $300 billion as of April 22.
* The ETF will give investors exposure to the daily price movements of ether and the opportunity for long-term capital appreciation, said the firm.
* 3iQ and CoinShares announced their intention to launch both ether and bitcoin ETFs on the TSX earlier this month.
* On Monday, they launched the 3iQ CoinShares Bitcoin ETF, the fourth such bitcoin ETF to trade in the nation of 38 million.
* As reported by CoinDesk, on April 16, three ether ETFs, launched by Purpose Investments, CI Global Asset Management and Evolve ETFs, all received approval and began trading on the TSX on April 20.
Updated: 4-25-2021
SEC Begins Official Review of Kryptoin Bitcoin ETF Application
The U.S. regulator is now weighing three different bitcoin ETF bids.
The U.S. Securities and Exchange Commission (SEC) has begun its formal review of Kryptoin’s bitcoin (BTC, +4.46%) exchange-traded fund application, starting the countdown clock for a decision on the proposal.
* The SEC published a public notice Thursday announcing it would begin evaluating the Kryptoin Bitcoin ETF Trust, which the investment advisory filed with Cboe BZX Exchange.
* Kryptoin previously tried and failed to get a bitcoin ETF green light in 2019.
* This is the third active bitcoin exchange-traded fund application the federal regulator is evaluating, after VanEck and WisdomTree. The regulator has up to 240 days to approve or deny each.
* At the moment, there are nine active ETF applications before the agency, and Grayscale (a CoinDesk sister company) has announced its intention to convert its GBTC trust to an ETF as well. It’s possible the agency may approve multiple ETFs at once to promote competition and to avoid favoring one company over another.
Updated: 4-28-2021
SEC Pushes Decision On VanEck Bitcoin ETF Until June
The commission said it was “appropriate to designate a longer period” for the proposed Bitcoin ETF.
The United States Securities and Exchange Commission has extended the original 45-day window to approve a Bitcoin (BTC) exchange-traded fund, or ETF, from asset manager VanEck.
According to a filing from SEC on Wednesday, the regulatory body will push the deadline for approving or disapproving VanEck’s Bitcoin ETF from May 3 to June 17, an additional 45 days.
“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received,” said SEC Assistant Secretary J. Matthew DeLesDernier in the filing.
VanEck submitted the paperwork to apply for a Bitcoin ETF with the SEC last month following the asset manager withdrawing a similar application it had filed in January in partnership with blockchain startup SolidX. Both Valkyrie Digital Assets and Fidelity Investments have already filed registrations with the commission to form Bitcoin ETFs in January and March, respectively.
The regulatory body has the ability to extend the deliberation window up to 240 days before delivering a final decision, with 45-, 45-, 90- and 60-day extensions announced separately. Should the SEC continue to delay its decision on VanEck, the company may not receive a definitive answer until mid-November.
No Bitcoin ETF has been approved by regulators in the United States, and given the SEC’s seeming reticence in doing so, many experts do not expect an approval soon. However, many crypto ETFs have been approved in Canada this year, including offerings from investment fund manager 3iQ, Purpose Investments, Evolve Funds Group and CI Global Asset Management.
Updated: 5-5-2021
VanEck And BetaShares Apply For Aussie Crypto ETFs As Family Offices Snap Up BTC
Numerous institutional crypto product applications have been lodged as Australians buy more Bitcoin.
Family offices in Australia are reportedly piling into digital assets as fund managers compete to list the country’s first cryptocurrency-backed exchange-traded fund.
VanEck and BetaShares have each lodged submissions with the Australian Securities Exchange (ASX) following a rejection of industry speculation in March that the exchange was opposed to such products. The ASX confirmed that had received formal applications from several other investment managers eager to launch their own Bitcoin ETFs.
Earlier this week VanEck Asia-Pacific chief executive Arian Neiron stated that the crypto asset movement had become more mainstream and thaa Bitcoin ETF on the ASX could democratize crypto assets for all types of investors.
Australian ETF provider BetaShares also confirmed an ASX application but did not specify whether it was planning a Bitcoin product or one more broadly backed by digital assets.
Managing director Alex Vynokur stated that there was significant demand for such products, adding:
“From our perspective, a regulated structure of an ETF is the more appropriate structure for a significant number of investors, rather [than] buying Bitcoin or other cryptocurrencies on unregulated exchanges.”
The ASX declined to speculate or comment on the applications but stated that it is closely monitoring developments in relation to listed investments involving Bitcoin and other cryptocurrencies.
The moves have been viewed as bullish by investors down under as Australia’s wealthiest families begin to diversify their portfolios with crypto assets.
According to a Business Insider Australia report, listed blockchain investment company DigitalX has been offering assistance to increasing numbers of family offices eager to invest in the maturing digital asset space. Executive director Leigh Travers said that investors are replacing their gold portions of portfolios with Bitcoin, adding:
“The biggest change has been around institutional interest which has helped evolve it from a speculative asset to an asset that is part of a diversified portfolio and has the strongest macro winds of any investment possible I think,”
Travers cited DeFi as being one factor that has made this bull run different from the previous one in 2017/18.
The report revealed that the average family office in Australia and New Zealand controls more than $600 million each and the moves into crypto assets signal just how ubiquitous the asset class is becoming.
As reported by Cointelegraph, Australia’s securities regulator (ASIC) wants crypto firms to engage with them to help them foster innovation in the region.
In late April, the U.S. SEC delayed the decision on VanEck’s Bitcoin ETF until June 17.
Updated: 5-9-2021
VanEck Fires Starting Gun In Race For First U.S. Ether ETF
VanEck Associates Corp. just kicked off a new push for an ETF tracking the cryptocurrency Ether.
If approved, the VanEck Ethereum Trust would hold Ether and value its shares daily based off the MVIS CryptoCompare Ethereum benchmark rate, according to a filing with the Securities and Exchange Commission.
The application comes after three Ether ETFs debuted in Canada last month, the first in North America to carry such an ETF label. The Canadian market is known for beating the U.S. in new ETF concepts, most recently with the launch of the first Bitcoin ETF.
“Canada approving Ethereum ETFs so quickly on the heels of Bitcoin ETFs is part of the reasoning for this filing,” said James Seyffart, ETF analyst for Bloomberg Intelligence. “I don’t see the SEC approving an Ethereum ETF until we have a Bitcoin ETF that has already begun trading. It’s possible that other issuers will follow suit because VanEck has been leading the charge with these filings in the last five months or so.”
U.S. regulators have yet to approve a crypto ETF though at least 11 companies are looking to launch one. Nine of them have filed since the end of 2020, according to a tally kept by Bloomberg Intelligence. VanEck renewed the push for a U.S. Bitcoin ETF with a filing in late December; the SEC has delayed a decision on this application until at least June.
A red-hot runup in crypto prices has seen Bitcoin, the largest digital asset, double year-to-date and Ether advance more than 350%. Ether rose to a record high of around $3,589 in Friday trading.
Its rally this year has pushed the coin, the second-largest behind Bitcoin, into the limelight. The token is used on Ethereum, the world’s most-actively utilized blockchain, the technology that verifies and records transactions.
Updated: 5-10-2021
Canadian Bitcoin ETF Issuer Seeks ‘Green BTC’
Ninepoint will allocate part of its management fees to even out the carbon footprint of Bitcoin in its exchange-traded fund product.
Ninepoint Partners LP, one of Canada’s Bitcoin (BTC) exchange-traded fund issuers, has announced plans to offset the carbon footprint of its BTC ETF product.
According to a release issued on Monday, Ninepoint has inked a partnership with carbon offsetting service provider CarbonX. As part of the partnership, Ninepoint will dedicate an undisclosed portion of its management fees to purchase carbon credits to neutralize the environmental impact of the Bitcoin mining process of the BTC held in its fund.
As previously reported by Cointelegraph, Ninepoint announced plans to convert its Bitcoin trust to an ETF back in March, with the fund’s prospectus filed with regulators the following month.
The partnership will also see the Crypto Carbon Ratings Institute providing scientific estimates on Bitcoin mining energy consumption. The purchased carbon credits will reportedly be channeled toward conservation efforts in the Amazon forest.
Commenting On The Reasoning Behind The Move, Alex Tapscott, Managing Director Of Digital Assets At Ninepoint, Told Bloomberg:
“For some investors who are concerned about the carbon footprint of mining, they may be wary of investing in a Bitcoin ETF. What we’re doing is creating what we hope is a solution to that problem and giving them the choice that they want and, frankly, that they need.”
Indeed, the “ocean boiling narrative” continues to be associated with Bitcoin mining with detractors pointing to the high energy consumption of mining establishments around the world. Earlier in May, a bill was introduced to the New York State Senate seeking to ban BTC mining in the state for three years over energy concerns.
From China to Iran, miners are facing increasingly stricter oversight from regulators over electricity consumption and environmental impact concerns. On the flip side of the argument, Bitcoin proponents say miners are becoming buyers of last resort for renewable energy producers.
Updated: 5-11-2021
CBOE Files Another Bitcoin ETF Application With The SEC
Two months after filing VanEck’s BitcoinETF, CBOE has submitted another application — one proposed by Fidelity — to the SEC.
The Chicago Board Options Exchange, or CBOE, has filed Fidelity’s Wise Origin Bitcoin (BTC) exchange-traded fund with the United States Securities and Exchange Commission.
CBOE filed a Form 19b-4 on Monday seeking to list Fidelity’s Wise Origin Bitcoin Trust Bitcoin ETF that was initially submitted to the SEC by the $4.9-trillion asset manager back in March.
Monday’s Form 19b-4, which puts CBOE as the exchange partner for Fidelity’s Bitcoin ETF filing, has triggered the SEC approval process.
The SEC’s first response window will close in 45 days, upon which the SEC will elect to extend or reject the application altogether. In total, the SEC has 240 days to evaluate Fidelity’s Bitcoin ETF application.
Back in April, the SEC postponed its decision on the VanEck Bitcoin ETF application until June.
CBOE’s filing also puts Fidelity’s application among a list of Bitcoin ETF hopefuls apart from VanEck that include WisdomTree and SkyBridge Capital.
Mike Novogratz’s Galaxy Digital has also submitted a Bitcoin ETF application with the SEC, with the NYSE Arca listed as the exchange partner.
The company, via its subsidiary, also launched a BTC ETF product in Canada back in March. Indeed, Canada has become a Bitcoin ETF trading hub in North America amid a raft of approval by securities regulators in the country.
Meanwhile, Bitcoin ETF hopefuls in the U.S. are keen to see the SEC under Gary Gensler’s charge approve an ETF product for the largest cryptocurrency by market capitalization.
However, recent comments by the SEC commissioner might indicate that such an outcome is not yet possible. Speaking earlier in May, Gensler called for greater investor protection in the crypto market.
Under Jay Clayton — the previous SEC chair — the commission regularly identified volatility, price manipulation and investor protection concerns as reasons for not approving any Bitcoin ETF application.
Updated: 5-12-2021
SEC Warns Of Bitcoin Futures Risks In Mutual Funds Prior To ETF Approval
The U.S. SEC will monitor the compliance of mutual funds with exposure to Bitcoin futures and look into whether the market can accommodate an ETF.
The United States Securities and Exchange Commission, or SEC, has issued an investor warning pointing out risks of mutual funds that have exposure to Bitcoin (BTC) futures.
In an official statement on Tuesday, the SEC strongly encouraged investors to thoroughly consider risks disclosure of a mutual fund on the Bitcoin futures market, stressing that Bitcoin is a “highly speculative investment.”
The authority emphasized that investors should take into account the volatility of both Bitcoin and the Bitcoin futures market, as well as the lack of regulation and potential fraud or manipulation in the underlying Bitcoin market.
“As with any fund investment, investors should focus on the level of risk they are taking on, and the level of risk they are comfortable taking on, prior to making an investment,” the SEC wrote.
The regulator noted that the Bitcoin futures market has significantly expanded after the first Bitcoin futures started trading in December 2017, with increased trading volumes and open-interest positions.
The SEC further stated that it will closely monitor and assess Bitcoin futures-exposed mutual funds’ compliance with the Investment Company Act and federal securities laws. “Investor protection and assessing the ongoing compliance of these funds is a top priority for the staff,” the authority stated.
Additionally, the SEC will also pay close attention to the impact of mutual funds’ investments in Bitcoin futures on investor protection, capital formation, and the fairness and efficiency of markets.
As part of this, the SEC will also consider whether the Bitcoin futures market could accommodate an exchange traded fund, or ETF. Unlike mutual funds, ETFs “cannot prevent additional investor assets from coming into the ETF if the ETF becomes too large or dominant in the market, or if the liquidity in the market starts to wane,” the SEC said.
The news comes weeks after the SEC delayed its decision on approving the VanEck Bitcoin ETF until June. As previously reported, some industry observers believe that the U.S. could finally see a Bitcoin ETF in 2021 thanks to the Senate’s confirmation of Gary Gensler as SEC chair.
Despite the U.S. government still deciding on whether to approve a Bitcoin ETF, some countries around the world have already approved or launched Bitcoin ETF trading, with 3iQ and CoinShares’ Bitcoin ETF going live on Toronto Stock Exchange last month. Other fund managers like Purpose Investments and Evolve Funds Group previously launched Bitcoin ETFs as well, attracting nearly $1.3 billion and $100 million in assets under management as of mid-April, respectively.
Previously, the Brazilian Securities and Exchange Commission approved two cryptocurrency ETFs in March, including a 100% Bitcoin ETF and the other composed of five cryptocurrencies.
Updated: 5-12-2021
Bitwise Launches US ‘Crypto ETF’… Sort Of
Bitwise has launched a new ETF offering exposure to the top publicly-listed firms operating in the blockchain and crypto industries.
Bitwise Asset Management has announced the launch of its Crypto Industry Innovators exchange-traded fund, or ETF.
Unlike the numerous proposals for Bitcoin and cryptocurrency ETFs offering direct exposure to digital assets that the U.S. Securities and Exchange Commission takes great delight in shooting down, Bitwise’s new fund, dubbed BITQ, offers exposure to the shares of leading “public companies that are participants in the growing Bitcoin and cryptocurrency sector.”
Announcing today’s launch of the Bitwise Crypto Industry Innovators ETF (NYSE: $BITQ)! $BITQ holds public companies backing bitcoin and crypto innovation. Available in brokerages now! (BITQ ETF Risk Disclosure: https://t.co/k76Eg2q5GM) pic.twitter.com/jUZHxF4UFz
— Bitwise (@BitwiseInvest) May 12, 2021
BITQ investments are based on Bitwise’s Crypto Industry Innovators 30 Index, which tracks top firms “engaged in actual, material activity in the crypto sector” that hold a minimum of “$100 million of liquid crypto assets on their balance sheet.”
A May 12 announcement notes that most companies included in the index derive “at least 75% of their revenue from directly servicing cryptocurrency markets or have at least 75% of their net assets accounted for by direct holding of liquid crypto assets.”
Hunter Horsley, Bitwise’s chief executive, noted that the absence of regulated financial products offering exposure to Bitcoin in the United States has resulted in many investors missing the “stellar cryptocurrency returns” produced during rallies of recent years.
“We’ve heard time and again from clients that the primary challenge has been finding a way to access the incredibly complex and fast-moving crypto space. With BITQ, our aim is to make crypto investment opportunities available through traditional investing platforms and a familiar, liquid, and cost-effective ETF.”
Inspired by Coinbase’s direct listing on the Nasdaq last month, Bitwise’s index recognizes crypto firms within 24 hours after they debut through an initial public offering or direct listing.
While BITQ may be the first ETF to have “crypto” in its title, it is not the first ETF offering exposure to the crypto sector’s leading firms. The crypto-heavy portfolio of the Amplify Transformational Data Sharing ETF (BLOK) has seen it rank among the 50 top-performing ETFs of 2021 so far when excluding leveraged and inverse products with a year-to-date gain of 36.4%.
While BLOK’s ticker is at best an oblique reference to blockchain, nearly every company allocation in its portfolio has direct connections to the crypto and digital asset sector. Its 10-largest positions — representing 41% of assets under management, includes industry leaders MicroStrategy (MSTR), Square (SQ), Galaxy Digital Holdings (GLXY), and Marathon Digital Holdings (MARA).
BLOK is the single-largest holder of Microstrategy by percentage allocation with 8% of its capital invested, and the largest MARA holder by number of shares held.
Updated: 5-23-2021
Agricultural Fund Provider Teucrium Files With SEC For Bitcoin ETF
Agriculture-focused fund provider Teucrium Trading filed an application with the SEC to launch a Bitcoin ETF tracking BTC futures.
Teucrium Trading, an agriculture-focused exchange-traded fund provider, is planning to expand its ETF suite with Bitcoin.
On Thursday, the company filed an application with the United States Securities and Exchange Commission to launch a Bitcoin (BTC) ETF that would track a benchmark of Bitcoin futures contracts.
Dubbed Teucrium Bitcoin Futures Fund, the planned ETF is designed to provide investors with a way to gain price exposure to the Bitcoin market. Should the SEC approve the new product, Teucrium will issue shares that trade on the NYSE Arca stock exchange under the symbol BCFU.
The contract would be settled in cash, “However, the Fund may from time to time trade in other exchange listed Bitcoin interests based on the spot price of Bitcoin,” the application reads. “Because the Fund’s investment objective is to track the price of the Benchmark Bitcoin Futures Contracts, changes in the price of the shares may vary from changes in the spot price of Bitcoin,” Teucrium noted.
Headquartered in Vermont, Teucrium currently provides several agricultural ETFs trading on NYSE Arca, including the Teucrium Corn Fund, the Teucrium Wheat Fund, the Teucrium Soybean Fund, the Teucrium Sugar Fund and the Teucrium Agricultural Fund.
The news comes shortly after the SEC issued an investor warning pointing out the risks of some mutual funds with exposure to Bitcoin futures. The commission stressed that Bitcoin is a “highly speculative investment,” stating that the market is not properly regulated and vulnerable to fraud or manipulation.
Updated: 5-26-2021
SEC Begins Formal Review Of Fidelity, SkyBridge Bitcoin ETF Applications
Fidelity’s Wise Origin Bitcoin Trust and the First Trust SkyBridge Bitcoin ETF are now under review by regulators, according to paperwork filed earlier this month.
A pair of Bitcoin (BTC) ETF applications submitted by Fidelity Investments and SkyBridge Capital are under official review by the United States Securities and Exchange Commission, or SEC, reigniting a long-standing debate about whether regulators will finally approve America’s first crypto-focused ETF.
The SEC’s formal review of Fidelity Investments’ application was documented in a May 25 filing that appeared on the regulator’s website. The formal review of the SkyBridge application was outlined in a May 21 filing.
Both ETF applications were submitted in March. As Cointelegraph reported at the time, Anthony Scaramucci’s SkyBridge Capital partnered with investment adviser First Trust Advisors to develop a product that seeks to list shares on the New York Stock Exchange Arca.
The Fidelity application describes an ETF product that tracks Bitcoin’s daily price movements using a proprietary index derived from several price feeds.
U.S. securities regulators now have six ETF applications on the docket for review. A decision on the VanEck application is expected next month.
The SEC has yet to approve a single Bitcoin ETF, citing concerns over price manipulation and volatility. Proponents of a Bitcoin ETF believe this time will be different given the growing maturity of the asset class. It’s believed that a Bitcoin ETF would provide easier institutional access points to the digital asset market, which could be a boon for price and adoption.
North of the border, Canadian lawmakers have approved multiple Bitcoin ETFs. The Purpose Bitcoin ETF, which trades under the ticker symbol BTCC, accumulated $1 billion in assets under management less than two months after launching.
6-9-2021
Invesco Plans Two Crypto-Focused ETFs
Atlanta-based Invesco is an investment management firm with $1.5 trillion in assets.
Invesco plans two cryptocurrency-focused exchange-traded funds (ETFs), becoming the latest entrant into the field while approval of an actual bitcoin ETF by the U.S. Securities and Exchange Commission remains elusive.
* Roughly 85% of the Invesco Galaxy Blockchain Economy ETF and the Invesco Galaxy Crypto Economy ETF will be in crypto-linked equities, according to a filing with the SEC. The rest of the portfolio will be in other trusts and funds that hold crypto.
* The Invesco Galaxy Crypto Economy ETF will track the investment results of the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Index while the Galaxy Blockchain ETF will track the results of the Alerian Galaxy Global Blockchain Index.
* The Invesco ETFs are just the latest ETFs set up by financial world to gain exposure to the world of cryptocurrencies while the companies wait for the SEC to approve an actual bitcoin ETF. Until recently this was viewed as likely this year but has become less so based on recent rhetoric out of Washington, D.C.
* Invesco’s funds may skirt the SEC’s bitcoin ETF blockade by only investing indirectly in cryptocurrencies.
* Atlanta-based Invesco is an investment management firm with $1.5 trillion in assets.
Updated: 6-13-2021
Canadian Bitcoin ETF Adds To Its Holdings Despite Steep Market Correction
The Purpose Bitcoin exchange-traded fund has been reaccumulating BTC since mid-May, a sign that investors are keen to buy the dip.
Demand for Bitcoin (BTC) among Canadian investors has not wavered amid the latest price correction, offering further evidence that market participants are capitalizing on heavily discounted prices.
The Purpose Bitcoin ETF, which launched in February, has now accumulated 19,692.149 BTC as of June 13, according to Bybt data. The ETF has added 284.51 BTC over the past seven days and nearly 2,000 BTC since May 15.
In fact, the ETF added to its holdings during the May 19 flash crash that saw Bitcoin wick down below $30,000 before quickly recovering.
At a current BTC price of around $36,000, the Purpose Bitcoin ETF has a value of over $709 million. Assets swelled to over $1.3 billion in less than two months of operations.
According to technician Byzantine General, inflows into the Purpose ETF suggest Canadians aren’t concerned about Bitcoin’s short-term price action.
Indeed, on a shorter time scale, Bitcoin’s price action has been a source of concern for the bulls. The flagship cryptocurrency has been languishing below $40,000 for the past month, with each attempt to reclaim that level being firmly rejected. A confluence of technical breakdowns, weakening sentiment and negative headlines have contributed to the bearish price action.
Analysts remain divided on the trajectory of Bitcoin’s market cycle. Some believe we are still on track to break triple-digit levels this year, while others believe we are heading for a bear market. Inflows into the Purpose fund suggest many investors are ignoring short-term fluctuations in favor of a longer-term view.
Fund managers in the United States hope to replicate the success of their Canadian counterparts by launching a Bitcoin ETF of their own. As Cointelegraph reported, the United States Securities and Exchange Commission has begun a formal review of three ETF proposals, with the first decision expected later this month.
Wannabe Bitcoin ETFs Are Mushrooming And Getting More Creative
With at least nine applications for Bitcoins ETFs collecting dust in the Securities and Exchange Commission’s in-box and clients baying to buy crypto funds, U.S. issuers in the $6.4 trillion industry are cobbling together a growing number of workarounds.
A slate of companies are releasing or planning “Bitcoin adjacent” products that skirt U.S. regulators’ refusal to allow the largest cryptocurrency to be put in an exchange-traded fund wrapper. Invesco became the latest on Wednesday, announcing a pair of funds packed with crypto-linked equities.
It’s the only way U.S. firms can cash in on the unrelenting clamor for digital coins, and it may stay that way for a while. The SEC has already delayed its decision to approve or deny a Bitcoin ETF once this year and is expected to punt again at its next deadline on June 17.
“There’s clearly strong demand from investors for exposure to the price of Bitcoin, and ETF issuers are simply looking to meet that demand,” said Nate Geraci, president of the ETF Store, an advisory firm. “The SEC is essentially forcing ETF issuers into the laboratory to create these Frankenstein products.”
The Frankenfunds’ creators are being rewarded for their efforts. For instance, the Bitwise Crypto Industry Innovators ETF (ticker BITQ) has already drawn about $45 million in assets less than a month after its launch. That fund holds crypto-heavy companies like MicroStrategy Inc., Coinbase Global Inc., and Galaxy Digital Holdings Ltd.
Then there’s a slate of older products finding new life amid the coin craze. The Amplify Transformational Data Sharing ETF (BLOK), an actively-managed fund with stocks like MicroStrategy and PayPal Holdings Inc., attracted more than $711 million this year already, as its price has risen 30%.
A peer fund called the First Trust Indxx Innovative Transaction & Process ETF (LEGR), which invests in companies using or developing blockchain technology, is on pace for its best year of inflows yet.
“There is a high demand for a Bitcoin product that has all the features that people love about ETFs — that they trade on an exchange, that they’re liquid,” said Ross Mayfield, investment strategy analyst at Robert W. Baird & Co.
Biggest Player Yet
Invesco is the largest fund manager yet to try the workaround tactic, with its Invesco Galaxy Blockchain Economy ETF and Invesco Galaxy Crypto Economy ETF, each holding about 85% of their assets in crypto-linked equities and the rest in trusts and funds that hold cryptocurrencies.
Two days before the Invesco filing, there was an application for the Volt Bitcoin Revolution ETF, which would include companies with Bitcoin exposure. At least 80% of its assets will be in firms that either have Bitcoin on their balance sheet or are developing or using products within the crypto ecosystem, as well as options on those firms and ETFs that have exposure to them.
More funds tracking the crypto industry — instead of actual Bitcoin — may debut in the coming months, as the SEC continues to voice concerns about the market. Recently, SEC Chairman Gary Gensler said the crypto sector could benefit from greater investor protection and has urged Congress to give the regulatory agency authority over trading venues.
“My optimism on Bitcoin ETF approval has waned recently,” ETF Store’s Geraci said. “It’s hard to view Gensler’s comments on the current state of the Bitcoin and crypto ecosystem and feel optimistic about the prospects of a Bitcoin ETF anytime soon.”
Even after a true Bitcoin ETF finally launches in U.S. markets, these crypto-flavored funds could still have appeal, especially in a world obsessed with all things involving blockchain and digital tokens.
“These Bitcoin-adjacent vehicles make sense for people who don’t want to deal with all the volatility of Bitcoin but want exposure,” said Amrita Nandakumar, president of Vident Investment Advisory. “It’s a solution that has popped up in response to the pent-up demand.”
Updated: 6-16-2021
SEC Opens To Comments On Whether To Approve VanEck Bitcoin ETF
The filing came before the commission’s June 17 deadline to approve or disapprove of the Bitcoin ETF following an extension in April.
The U.S. Securities and Exchange Commission has issued an order allowing the public to comment on the proposed rule change surrounding the Bitcoin exchange-traded fund from asset manager VanEck.
According to a Wednesday filing from the SEC, the regulatory body has not yet reached a decision on whether to approve or disapprove of VanEck’s Bitcoin exchange-traded fund, or ETF, but “seeks and encourages interested persons to provide comments” on the proposal.
Specifically, the commission is asking the public to consider whether they believe the Bitcoin ETF would be susceptible to manipulation and designed to prevent fraudulent and manipulative acts and practices.
The SEC also asked people to weigh in on “the suitability of Bitcoin as an underlying asset for an exchange-traded product,” and the liquidity and transparency of the Bitcoin (BTC) market. Existing rules require that national securities exchanges are aimed to “protect investors and the public interest.”
Anyone interested in commenting on the proposed Bitcoin ETF will have until 21 days after the order is published in the Federal Register, and 35 days after publication in the same register for rebuttals. Members of public can submit comments through the SEC website, via email, or snail mail.
VanEck submitted the paperwork to apply for a Bitcoin ETF with the SEC in March following the asset manager withdrawing a similar application it had filed in January in partnership with blockchain startup SolidX. The commission has already extended the deliberation window once, from May 3 to June 17.
The SEC has the ability to extend the deadline in 45-, 45-, 90- and 60-day increments — up to 240 days — before delivering a final decision. However, under Section 19(b)(2)(B) of the Securities Exchange Act of 1934, the commission also has the right “to determine whether the proposed rule change should be disapproved” prior to any deadline, as is the case in the request for public comment.
No Bitcoin ETF has been approved by regulators in the United States. Given the SEC’s continued delays in the case of VanEck’s, Valkyrie Digital Assets’ and Fidelity Investments’ proposed BTC exchange-traded funds, many do not expect an approval soon.
However, Canadian officials have given the green light for many crypto ETFs this year, including offerings from investment fund manager 3iQ, Purpose Investments, Evolve Funds Group and CI Global Asset Management.
Updated: 6-22-2021
VanEck Files For A New Bitcoin Futures Mutual Fund With US SEC
VanEck’s new “Bitcoin Strategy Fund” will invest in BTC futures, pooled investment vehicles and exchange-traded products providing exposure to Bitcoin.
United States investment management firm VanEck has filed for a new Bitcoin (BTC) futures mutual fund with the Securities and Exchange Commission.
According to a prospectus filed Monday, the new “Bitcoin Strategy Fund” will invest in Bitcoin futures contracts as well as pooled investment vehicles and exchange-traded products that provide exposure to Bitcoin. The fund will not invest in Bitcoin or other cryptocurrencies directly.
The fund will have exposure to certain Bitcoin futures through its fully owned subsidiary operating in the Cayman Islands. “The subsidiary has the same investment objective as the fund and will follow the same general investment policies and restrictions, except that unlike the fund, it may invest without limit in Bitcoin futures,” the prospectus notes.
The fund’s portfolio will be managed by Gregory Krenzer, deputy portfolio manager for the VanEck Commodity Index Strategy and head of active trading with extensive experience in commodities, natural resource equities and emerging markets. Krenzer has been with the Van Eck Associates Corporation since 1994 and has over 25 years of experience in the international and financial markets.
The latest filing comes just a few days after the SEC delayed approval of VanEck’s Bitcoin exchange-traded fund (ETF), VanEck Bitcoin Trust, for the second time this year. The SEC is seeking additional public comments, extending the review period by 45 days.
Since Cameron and Tyler Winklevoss first attempted to get SEC approval for a Bitcoin ETF back in 2017, the securities regulator has rejected numerous efforts to launch such a product and has yet to approve a BTC ETF. Meanwhile, other countries like Canada have been moving forward with Bitcoin ETFs, with 3iQ and CoinShares’ Bitcoin ETF going live on the Toronto Stock Exchange in April 2020.
Updated: 6-23-2021
SEC Delays Decision On Valkyrie Bitcoin ETF
Valkyrie Digital Assets filed with the SEC for listing its Bitcoin ETF on the New York Stock Exchange in January.
The United States Securities and Exchange Commission has postponed its decision on whether to approve a Bitcoin (BTC) exchange-traded fund.
The SEC has delayed its decision on a Bitcoin ETF filing by Texas-based family investment fund Valkyrie Digital Assets after receiving comments on the proposed rule change regarding the new fund.
According to an official Tuesday filing by the SEC, the commission has found that it was appropriate to designate a longer period to take action on the proposed rule change regarding the Bitcoin ETF. Valkyrie initially filed its application for the Valkyrie Bitcoin Trust on the New York Stock Exchange this January.
The SEC noted that it has received comments on the fund that were published in May 2021. The authority said that it is extending the review period for the ETF by 45 days, rescheduling the decision for Aug. 10.
The new regulatory delay comes shortly after the SEC delayed approval for another major Bitcoin ETF, extending last week the review period for VanEck’s Bitcoin Trust for the second time this year. The regulator said that the SEC was seeking additional public comments over a 45-day period.
VanEck Associates CEO Jan van Eck has stated that approval may only be a matter of time given the huge demand for a Bitcoin ETF in the United States. The exec also suggested that the latest delay could not be the last. “They don’t need to really make a decision in August. It’s sort of an artificial deadline, as was the one last week. The SEC is just not moving fast on this,” he said.
3iQ’s Bitcoin ETF Rises On First Day Of Trading On Nasdaq Dubai
The ETF, trading under the ticker symbol “QBTC,” is the first cryptocurrency fund to go public in the Middle East.
Canadian digital-asset manager 3iQ’s bitcoin (BTC, +9.14%) exchange-traded fund (ETF) started trading on Nasdaq Dubai on Wednesday. The shares rose 10%.
* 3iQ Corp received regulatory clearance for the listing in April.
* The Bitcoin ETF is trading under the ticker symbol “QBTC.”
* It was launched in 2020 and is the first cryptocurrency fund to go public in the Middle East.
* 3iQ appointed Dubai-based Dalma Capital Management as the syndicate manager to help facilitate the listing and plans to work closely with banks in the United Arab Emirates and other lenders from the region.
* In April, 3iQ and investment firm CoinShares launched a bitcoin and ether (ETH, +8.2%) ETF now trading on the Toronto Stock Exchange.
Updated: 6-24-2021
Asset Manager QR Launches Bitcoin ETF On Brazilian Stock Exchange
Brazilian asset manager QR Asset Management started trading its Bitcoin exchange-traded product on B3.
The Brazil Stock Exchange, or B3, has launched the trading of another Bitcoin (BTC) exchange-traded fund, marking the growing acceptance of the crypto industry in the country.
Brazilian asset manager QR Asset Management started trading its Bitcoin ETF with the ticker QBTC11 on the Sao Paulo-based B3 exchange on Wednesday, Cointelegraph Brasil reported.
The listing comes several months after the Brazilian Securities and Exchange Commission approved QR’s Bitcoin ETF in March alongside another crypto-based ETF by Latin American crypto investment firm Hashdex. In contrast to Hashdex’s crypto ETF product, which offers a diversified portfolio to several cryptocurrencies, QR’s ETF product provides exposure exclusively to Bitcoin.
QR Capital founder and CEO Fernando Carvalho said that the acceptance of a crypto ETF is a symbol of security, as it enables investors to gain exposure to Bitcoin directly on the B3 without relying on unregulated platforms:
“The QBTC11 is a milestone both in the conventional financial market and in the digital asset industry as it is a point of convergence between the two. Investors now have a regulated, low-cost and robust option to expose themselves directly to the most important crypto asset on the market, Bitcoin.”
QR’s Bitcoin ETF is not the only cryptocurrency ETF listed on the B3. In April, the Brazilian stock exchange rolled out trading for the country’s first crypto-based ETF index, Hashdex’s HASH11. HASH11 replicates the Nasdaq Crypto Index that consists of multiple cryptocurrencies, such as Bitcoin, Ether (ETH), Stellar (XLM), Litecoin (LTC), Bitcoin Cash (BCH) and Chainlink’s LINK, and is rebalanced quarterly.
Bitcoin ETFs are gaining traction in multiple jurisdictions. Canadian asset manager 3iQ rolled out its Bitcoin Fund ETF on Nasdaq Dubai on Wednesday. Canada is another major country that has been moving forward with BTC ETFs, with 3iQ and CoinShares’ Bitcoin ETF going live on the Toronto Stock Exchange in April 2020. Despite growing global acceptance, the United States regulators are yet to approve a Bitcoin ETF, having delayed multiple regulatory decisions on such products in the past weeks.
Updated: 6-25-2021
World’s First Bitcoin ETF Adds $3M Per Day Throughout BTC Price Dip
The Purpose Bitcoin ETF now has over 21,000 BTC under management as the United States continues regulatory scrutiny.
The world’s first regulated Bitcoin (BTC) exchange-traded fund (ETF) actually benefited from the recent price dip, data shows.
As on-chain analytics service Glassnode noted on Thursday, the Purpose Bitcoin ETF continued to add to its assets under management throughout the second half of May.
Purpose ETF Crosses 20,000 BTC
In an unusual success story from the past few weeks, Canada’s Purpose did not see a significant reduction in holdings or demand after BTC/USD hit $30,000 and under.
Beginning May 15, an average of 86.15 BTC per day entered the ETF for a total of 3,446 BTC between then and Thursday.
In total, Purpose now holds 21,114 BTC worth around $720 million.
“Ever since the May 19th capitulation event, the Purpose Bitcoin Exchange Traded Fund (ETF) just keeps stacking sats,” popular Twitter account Dilution-proof summarized in one of various positive reactions to the data.
Purpose was the first such Bitcoin ETF to get the green light from regulators in February 2021. As Cointelegraph reported, the United States has yet to respond, but should the products likewise get a debut there, the impact could be more significant, given the difference in size between the U.S. and Canadian market.
“How many countries are going to have Bitcoin ETFs trading before the United States?” Jameson Lopp, co-founder and chief technology officer of Casa, quizzed this week.
Worries Over Potential Upcoming Sell Wave
The news provides a pleasing counter-narrative to the institutional trials facing Bitcoin post price drop.
The coming few weeks will see unlocking of BTC stored in the Grayscale Bitcoin Trust (GBTC), something that is expected to heighten already intense selling pressure.
one thing we haven’t discussed yet – the grayscale $GBTC unlock schedule is looking really crusty
from mid-april to mid-june, 139,000 bitcoin worth of shares have unlocked. there’s another 140,000 bitcoin worth of shares that will unlock through the end of july
yeesh pic.twitter.com/Ha97Dh494O
— Meltem Demir◎rs (@Melt_Dem) June 23, 2021
Whales have also come under the spotlight recently, balanced only by players, such as MicroStrategy, continuing to add to their BTC positions.
Updated: 6-28-2021
Cathie Wood’s Ark Invest Teams Up With 21Shares To File For Bitcoin ETF
Wood recently asserted the crypto downtrend has improved the chances of a Bitcoin ETF securing regulatory approval.
Ark Investment Management has become the latest firm to file for a Bitcoin exchange-traded fund (ETF).
According to a June 28 filing with the United States Securities and Exchange Commission (SEC) submitted in partnership with European exchange-traded product issuer, 21Shares, the ETF would be listed on the Chicago Board Options Exchange’s (CBOE) BZX Exchange and trade under the ticker ARKB.
The ETF would also track the S&P BTC index, with the trust underpinning the ETF also holding BTC directly. The filing has received praise from the crypto industry.
The great folks over at @21Shares_ just filed for a Bitcoin ETF in partnership with Cathie Wood and @ARKInvest.@hany and the team continue to build one of the most important and valuable asset managers in the industry.
— Pomp (@APompliano) June 28, 2021
Cathie Wood, the CEO and founder of Ark Invest, also serves as a board member to 21Shares. According to CoinShares, 21Shares is currently the fourth-largest institutional crypto product issuer by assets under management with more than $1 billion.
ETF analyst, Eric Balchunas, told BNN Bloomberg that if approved, the Bitcoin ETF would be of significant benefit to 21Shares, allowing the firm to penetrate the U.S. market.
Ark is a big investor in the crypto space, holding shares in Grayscale’s Bitcoin and Ethereum trusts in addition to Coinbase stock. Cathie Wood is also a major Bitcoin proponent, recently reiterating her prediction that Bitcoin’s price will one day tag $500,000 despite the recent crypto downturn.
Despite the SEC having rejected every application it has received for a Bitcoin ETF so far, Wood recently speculated that the odds of an ETF being approved by the regulator improved after the recent crypto retracement.
Earlier this month, the SEC delayed decisions on two major Bitcoin ETFs, extending the review period for the respective Bitcoin ETFs proposed by VanEck and Valkyrie Digital Assets by 45 days each.
Updated: 6-30-2021
Crypto Trading Firm Valkyrie Raises $10M To Drive Bitcoin ETF Hopes
Tron founder Justin Sun, Litecoin founder Charlie Lee and former Major League pitcher C.J. Wilson participated in the round.
Crypto asset manager Valkyrie Investments has raised $10 million in a Series A funding found from an interesting roster of backers.
Precept Capital Management, XBTO, 10X Capital and UTXO Management headlined the fundraise but it also included Tron founder Justin Sun, Litecoin founder Charlie Lee and former Major League Baseball pitcher C.J. Wilson.
Valkyrie is well known in crypto as one of a handful of U.S. companies waiting patiently in line for a bitcoin (BTC, -5.41%) exchange-traded fund (ETF) to be approved by the Securities and Exchange Commission (SEC).
The funding will help drive Valkyrie’s three business lines, said the firm’s chief investment officer, Steven McClurg:
* A Trust Or Separately Managed Account (Sma) Offering Designed For Institutional Investors;
* The Etf Division;
* And A Hedge Fund Business.
This translates into expanding the Valkyrie presence in Nashville, including hiring additional research, compliance and marketing staff, according to a press release. There are also plans to expand the firm’s presence in Asia.
‘Absolutely insane’
A few days ago, the SEC said it would delay a decision on Valkyrie’s ETF application, having pushed back on a similar application from VanEck Bitcoin Trust the week before.
“Never in my career in financial services have I seen anything like this, where there’s 13 applications for the same ETF product,” McClurg said in an interview. “It’s absolutely insane.”
Updated: 7-8-2021
Former CFTC Chair Explains Why Regulators Should Approve A Bitcoin ETF
“A Bitcoin ETF would be a way for retail investors to invest in cryptocurrency without having to actually purchase it and deal with the complexities of custody,” said Timothy Massad.
Timothy Massad, who served as Chair of the United States Commodity Futures Trading Commission between 2014 and 2017, has laid out the reasons why he thinks regulators should approve a Bitcoin exchange-traded fund.
In an opinion piece published on Bloomberg Wednesday, Massad said the Securities and Exchange Commission, or SEC, should approve a Bitcoin ETF in a manner that would enhance the transparency and integrity of the nascent cryptocurrency industry. This way, investors can access the digital asset without having to buy it off exchanges or worry about self-custody.
Massad said the ideal path for approving a Bitcoin ETF would begin with a stronger regulatory framework for cryptocurrency. However, he acknowledged the “likelihood of that happening in the near future is low.” In a February interview with Cointelegraph, Massad described U.S. crypto regulations as being like “swiss cheese,” or full of holes.
In the absence of comprehensive regulations, Massad says the SEC can use the ETF listing process to improve the integrity of cryptocurrency exchanges.
“The approval would be granted on the condition that the ETF price be based on an index of exchanges meeting certain prescribed standards, similar to those for securities and derivatives exchanges,” he wrote.
U.S. securities regulators have been hesitant to approve a Bitcoin ETF due to concerns around liquidity, transparency and outright price manipulation. Several ETFs have been submitted to the SEC, and each one has been sent back to the issuer for review. The SEC is currently reviewing a handful of applications and has invited public comment on a prospectus filed by asset manager VanEck.
According to at least one subject matter expert, Todd Rosenbluth, a Bitcoin ETF approval is at least one year away. The head of ETF and mutual fund research at CFRA told CNBC in April that regulators are unlikely to greenlight an ETF in the near future.
North of the border, in Canada, regulators have approved multiple Bitcoin ETFs and early trends seem to indicate that the offerings are highly successful. The Purpose Bitcoin ETF continues to attract investments despite the massive correction in the Bitcoin price since May.
Updated: 7-16-2021
Record Outflows From Canada’s Biggest Bitcoin Fund See BTC Reserves Drop By 50%
On-chain data shows two dramatic declines in the Bitcoin reserves held by a Canadian Bitcoin fund but there’s a catch.
A Canada-based Bitcoin fund, operated by 3iQ Corp, has witnessed a dramatic decline in its BTC reserves since June.
Literally named the Bitcoin Fund (QBTC:CN), the closed-end investment product, was holding around 24,000 BTC in its vaults in early June. However, as the monthly session progressed, the reserves first dropped to below 16,000 BTC in a dramatic, straight-line decline.
Later, another massive withdrawal pushed the Bitcoin Fund’s BTC reserves to around 13,000 BTC, according to on-chain data from South Korea-based analytics firm CryptoQuant.
However, the withdrawals from the QBTC fund across June coincided with an inflow spike in 3iQ’s exchange-traded fund (ETF), called 3iQ CoinShares Bitcoin ETF (BTCQ). In detail, the Canadian ETF attracted inflows of 2,088 BTC in June 2021 against the QBTC outflows of 10,432 BTC in the same month.
ByteTree CIO, Charlie Morris, noted that 3iQ allowed its clients to convert their QBTC units into 3iQ CoinShares Bitcoin ETF. He added that the growth of crypto ETFs across major stock exchanges—which allows redemptions and withdrawals—prompted investors to reduce their exposure in the closed-ended fund.
A Lesser Bitcoin Exposure, Nonetheless
In comparison, 3iQ’s top rival, the New York-based Grayscale Bitcoin Trust (GBTC), did not witness declines in its BTC reserves. Grayscale Investments has closed GBTC since February, citing “administrative purposes.” The closed-end fund does not allow redemptions and withdrawals.
Additionally, data collected by ByteTree Asset Management shows that the 90-day inflow into the United States and Canada-based Bitcoin funds has dropped to 12,794 BTC compared to 191,846 BTC in January 2021, a 93.3% decline.
The 3iQ CoinShares Bitcoin ETF (BTCQ), despite attracting 2,088 BTC in June 2021, has so far experienced outflows of 354 BTC in July 2021.
Fund reserves reflect rising and declining institutional interest in Bitcoin. That is primarily because these investment products tend to work provide accredited investors ways to gain indirect exposure to crypto markets by issuing shares backed by real Bitcoin sitting in vaults.
Thus, as the Bitcoin reserves on average drop across the funds, it typically suggests a lower demand for cryptocurrencies among institutional investors.
The Fed Angle
Institutional investors reducing their exposure in the Bitcoin funds coincide with the Federal Reserve’s hawkish signals at the end of June’s Federal Open Market Committee’s meeting.
In detail, the U.S. central bank said mid-June that it could hike interest rates by the end of 2023 to contain prevailing inflationary pressures. It referred to the US consumer price index (CPI), a gauge to measure inflation, that surged 0.6% in May 2021 to reach a three-decade high of 4.5%; CPI climbed another 0.9% in June to reach 5.4% at its fastest pace in the last 13 years.
Since the Fed’s outlook, Bitcoin has dropped below $32,000. However, the flagship cryptocurrency has mostly remained inside the $30,000-34,000 price range, suggesting a mixed outlook among retail and institutional investors about the cryptocurrency’s next directional bias.
The bias conflict emerges despite popular narratives that pose Bitcoin as an ultimate edge against rising consumer prices. The record goes like this: Unlike the U.S. dollar or other fiat currencies, Bitcoin comes with a limited supply of 21 million tokens, which makes it scarcer than inflationary currencies, and in turn, more valuable in the long run.
But Bitcoin has reacted negatively to rising inflation in the previous months, prompting critics to question its safe-haven narrative, at least in the short term. For instance, Fortune covered a special section on Bitcoin’s erratic response to surging consumer prices, stating that the cryptocurrency is now marching “to its own drummer.”
Eric Diton, president and managing director of The Wealth Alliance, noted that Bitcoin had become an overvalued asset after rising from below $4,000 to a record $65,000 in almost a year. However, based on how far the cryptocurrency has come, its prices have to correct before continuing higher.
Nevertheless, a Bank of America survey of fund managers also found “long Bitcoin” among their most crowded trades, alongside long ESG and long commodities.
As Cointelegraph reported, traders are now closely watching the last major unlock dates over the next few days and weeks due to their potential impact on the cryptocurrency market.
Updated: 7-20-2021
Green Energy Crypto Mining ETF Launches On New York Stock Exchange
The new exchange-traded fund will focus on environmentally friendly crypto mining infrastructure firms.
An exchange-traded fund focusing on more environmentally friendly crypto mining operations and infrastructure has been launched in the United States.
The new Viridi Cleaner Energy Crypto-Mining and Semiconductor ETF started trading on Tuesday, July 20, on the New York Stock Exchange under the symbol ‘RIGZ’.
The product is part of growing efforts to attract mainstream investors with a focus on environmental, social and governance (ESG) issues.
Viridi Funds, which launched the new investment product, stated that the fund also invests in crypto mining infrastructure businesses and semiconductor companies such as Samsung Electronics, Nvidia Corp., and Advanced Micro Devices, according to Law360.
Viridi CEO Wes Fulford, a former CEO of Bitfarms, said the fund will focus on clean energy screening. He said that the migration of mining out of China to North America was good news, as more than half of crypto mining operations in the region now use renewable energy sources:
“Obviously, with what’s happened in China the power used is dramatically lower than it was at the beginning of June. And it’s also providing the added benefit that more computing power is finding its way to other jurisdictions, sort of decentralizing the network even further, which adds to the security.”
Fulford added that Bitcoin and Ethereum address the ‘S’ and the ‘G’ from the ESG principles pretty well, and the new EFT will be adding the ‘E’. He stated that things are still in the early innings of this emerging asset class and a “tidal wave of institutional flows” has yet to come.
According to a July 20 CNBC report, new data shows that Bitcoin mining isn’t nearly as bad for the environment as it used to be, thanks to older less efficient machines being switched off in China and operations moving to more environmentally friendly locations. North America has jumped from fifth to second place and now accounts for nearly 17% of all global Bitcoin mining.
On July 18, Cointelegraph reported that large U.S.-based crypto mining operations will benefit greatly from increased market share and hash rate dominance. It named Riot Blockchain, Marathon, Hut 8, and Hive Blockchain as potentially the biggest beneficiaries of China’s great mining migration.
Updated: 7-23-2021
SEC Commissioner Concerned About The US Lagging Behind Global Bitcoin ETFs
“We’re not a merit regulator, so we shouldn’t be in the business of deciding whether something is good or bad,” SEC Commissioner Hester Peirce said.
Securities and Exchange Commissioner Hester Peirce has voiced concerns over the United States lagging behind global jurisdictions in adopting cryptocurrency exchange-traded funds (ETFs).
During an online appearance at the Bitcoin (BTC) conference “The B Word,” Peirce pointed out that many other countries such as Canada have already been trading crypto ETFs, while the U.S. is still deciding whether to approve such a trading instrument. She stated:
“I would never have imagined that I would be in this situation where we would not yet have approved one and other countries are moving ahead.”
The SEC commissioner also mentioned her concern that U.S. regulators could be overstepping their remit by forcing the local crypto industry to play by a separate set of rules than everyone else.
“We’re not a merit regulator, so we shouldn’t be in the business of deciding whether something is good or bad, an investor is thinking of their entire portfolio, and sometimes we’re thinking in one-off terms of a particular product standing on its own, and we forget that people are building portfolios,” she noted.
Peirce’s latest remarks come in line with her recent criticism of U.S. crypto regulation, with the SEC commissioner last month once again urging authorities to refrain from overregulating the crypto industry.
Despite calling for a softened regulatory stance on crypto, the commissioner still believes that clear crypto rules are critical for the industry to thrive without fear of breaking the law. A long-running crypto advocate, Peirce is widely referred to as “Crypto Mom” within the crypto community.
As previously reported, U.S. regulators have delayed multiple approvals of crypto ETFs recently after consistently postponing such decisions over the past several years. In the meantime, some countries have already approved or launched Bitcoin ETF trading, with 3iQ and CoinShares’ Bitcoin ETF going live on the Toronto Stock Exchange in April. Canadian fund managers Purpose Investments and Evolve Funds Group previously launched Bitcoin ETF trading as well.
Updated: 7-27-2021
Bitcoin ETF Not Happening In 2021, Says Wilshire Phoenix Co-Founder
The United States SEC may not approve a Bitcoin exchange-traded fund until 2023, according to a former BTC ETF expectant.
William Cai, co-founder of investment firm Wilshire Phoenix, is the latest person to cast doubts on the possibility of a Bitcoin (BTC) exchange-traded fund (ETF) approval in the United States in 2021.
Speaking to Business Insider, Cai remarked that a Bitcoin ETF in 2021 is unlikely as he offered 2022 and 2023 as the earliest possible times for the U.S. Securities and Exchange Commission to greenlight a BTC ETF.
Several Bitcoin ETF hopefuls currently have filings with the SEC, including fund management outfit Global X, which submitted earlier in July.
The SEC has thus far elected to delay its decision on the pending ETF submission, and Cai expects the commission to deny these applications, stating, “We think they are all going to get stuck.”
Cai has some experience with the SEC’s handling of Bitcoin ETF applications. As previously reported by Cointelegraph, the commission rejected Wilshire Phoenix’s Bitcoin ETF filing in February 2020, much to the company’s disappointment.
According to Cai, despite the changing of the guard at the SEC’s leadership with Gary Gensler as the new chairman, the commission’s stance on Bitcoin ETFs remains the same. “I’ve seen nothing that suggests there’s been a switch in their thinking,” Cai added.
As part of the interview, the Wilshire Phoenix co-founder stated that price manipulation remains a major concern for the SEC.
Cai is not the only person to cast doubts on a Bitcoin ETF happening in 2021. In June, Greg King, CEO of Bitcoin trust issuer Osprey Funds, marked 2022 as the earliest estimate for an SEC-approved BTC ETF.
At the time, King stated that Bitcoin ETFs were not high on the list of priorities for the SEC. Cai also offered the same argument, telling Insider that the commission was focused on regulating meme stock, environmental, social and governance compliance, and the Robinhood initial public offering.
Updated: 8-5-2021
Invesco Files With SEC For Bitcoin Strategy ETF
Invesco stressed that the ETF will not invest in bitcoin directly.
Atlanta-based asset manager Invesco has filed with the U.S. Securities and Exchange Commission (SEC) to list an exchange-traded fund (ETF) with exposure to bitcoin futures and other related assets.
* In a filing Thursday Invesco stressed that the ETF will not invest in bitcoin directly.
* Instead, it will seek to have full exposure to bitcoin futures and at times may have exposure to other investment vehicles, including bitcoin ETFs listed outside the U.S. and investment trusts such as Grayscale Bitcoin Trust (Grayscale is a subsidiary of CoinDesk’s parent company Digital Currency Group).
* According to Invesco’s filing, the fund is “non-diversified,” thus is not required to meet diversification requirements under the Investment Company Act of 1940.
* SEC Chairman Gary Gensler has been vocal about regulation of the crypto industry in recent days, including the possibility of approving a crypto ETF, for which the agency has received well over a dozen applications.
Updated: 8-5-2021
Victory Capital Applies To SEC For Crypto ETF
Victory Capital revealed its plans to enter the crypto market in June through a private fund tracking the NCI aimed at accredited investors.
Victory Capital has applied to the U.S. Securities and Exchange Commission (SEC) to list an exchange-traded fund (ETF) tracking the Nasdaq Crypto Index (NCI).
* The Nasdaq-listed company filed an S-1 form to the regulator Wednesday, adding its name to a long list of crypto ETF hopefuls in the U.S.
The SEC is reviewing more than a dozen similar applications and has yet to approve a single one. Some applicants have had their approval windows extended more than once.
* Victory Capital revealed its plans to enter the crypto market in June through a private fund tracking the NCI aimed at accredited investors.
* The firm also announced its intention to launch private funds that mirrored equivalent Nasdaq indexes tracking the performances of bitcoin and ether.
Bitcoin Backers Not Happy Even As SEC Signals ETF Openness
U.S. Securities and Exchange Commissioner Gary Gensler gave what may be the strongest sign of support yet from the agency for a Bitcoin exchange-traded fund. Crypto fans, though, are not exactly thrilled.
At the center of the issue is what an approved fund would track. Gensler, in his first major speech centered on cryptocurrencies, suggested an openness to an ETF focused exclusively on Bitcoin futures, which require that investors put down a substantial amount of money on margin to trade. That’d be different from a Bitcoin-backed fund, which is what most crypto enthusiasts have been hoping for.
“We see Bitcoin futures-based funds as inferior products that have consistently underperformed the Bitcoin price and bring additional complexities in regards to how they must be managed, at a higher cost than ETFs,” Matthew Sigel, head of digital assets research at VanEck, said by phone. “Simply put, they are substandard vehicles.” His firm has crypto-focused applications in registration.
U.S. regulators have yet to approve a crypto ETF though more than a dozen companies are looking to launch one. Nine have filed for authorization since the end of 2020, according to a tally kept by Bloomberg Intelligence.
If crypto is going to be widely adopted, it needs some rules of the road & a cop on the beat to enforce them.
To be clear, I am technology-neutral.
What I’m not neutral about: Investor protection. pic.twitter.com/e6GsSAyXhB
— Gary Gensler (@GaryGensler) August 3, 2021
Policy makers have in the past voiced concerns over fraud and price manipulation, as well as worries over how a fund would be able to handle Bitcoin’s infamous volatility. As part of his comments, Gensler said that while he’s interested in blockchain — or the technology underpinning digital assets — and sees potential value in crypto, he plans to move aggressively to protect investors.
Meanwhile, Canada has approved several Bitcoin ETFs — the first-ever in the country launched at the start of the year.
“Investors want the real deal and a quick glance north of the border shows the real deal not only exists, but is prospering,” said Nate Geraci, president of the ETF Store.
Most pending ETF applications have been filed under 1930s laws that allow stock exchanges to list products. Bloomberg reported that Gensler is hinting that he’d like to see a filing that seeks approval through a 1940 law that governs mutual funds.
Here’s What Market-Watchers Had To Say:
VanEck’s Sigel:
“What the SEC seems to be doing is pushing individual investors into higher-risk, lower-quality products to get their Bitcoin exposure instead of sticking with the tried-and-true ETF wrapper, which has given millions of investors exposure to so many different assets, many of which are much more speculative and illiquid than Bitcoin.”
Geraci Of The ETF Store:
“Futures introduce a layer of complexity, as contracts held by an ETF must be managed and rolled. Futures-based ETFs are unlikely to perfectly track the spot price of Bitcoin. Plus, there are differences in taxation,” he said. “That said, I view this as a positive step towards ‘physical’ Bitcoin ETF approval. Bitcoin futures are regulated by the CFTC, which provides the SEC with a level of comfortability they don’t currently have with crypto exchanges. If futures-based Bitcoin ETFs are approved and show their mettle, perhaps the SEC can get more comfortable with entertaining the real deal.”
James Seyffart, ETF Analyst For Bloomberg Intelligence:
“I view it all as different stepping stones. The same level of demand won’t be there for a futures product so they won’t grow to be as large or grow as quickly as a physical Bitcoin ETF product will,” he said. But, “the mutual fund makes sense for numerous reasons. One, it’s a 40 act product, which carries more investor protections. Two, a mutual fund can be closed, an ETF can’t. And three, futures are regulated. It provides a bit of an additional layer of investor protection from the underlying Bitcoin market. But in my mind, it doesn’t make much of a difference because if you truly believe Bitcoin is manipulated, Bitcoin futures are going to be affected by said manipulation of the underlying market.”
Todd Rosenbluth, Head Of ETF And Mutual Fund Research At CFRA:
“Investors have favored physical commodities ETFs over futures-based ones as the latter adds additional complexity,” he said. “However, I continue to think the SEC remains concerned that an ETF cannot be closed to new investors, creating a liquidity risk. While the door is still open for an ETF approval, if it involves Bitcoin futures, near-term approval remains uncertain.”
Mohit Bajaj, Director Of ETFs At WallachBeth Capital:
“Futures are a derivative of Bitcoin and there is no physical Bitcoin backing behind it. It’s a proxy of the performance of Bitcoin. Maybe it’s just a first step. Maybe it will lead to more comfortability in eventually leading toward getting an actual Bitcoin ETF.”
Wes Fulford, CEO of Viridi Funds:
“These products already exist in other public markets, such as Canada, and investors have been waiting for one to launch in the U.S. Currently, investors can only look to ETFs, like RIGZ, that provide indirect exposure to crypto. If the SEC were to approve of an ETF, this would be a huge step for the industry.”
Updated: 8-9-2021
New Brazilian Bitcoin ETF Pledges Carbon Neutrality
Hashdex has promised to invest a portion of the assets managed by its new BITH11 ETF into carbon credits and green tech.
BITH11, a new exchange-traded fund (ETF) launched in Brazil by crypto-focused alternative investment firm Hashdex Asset Management, claims to be the country’s first “green” Bitcoin ETF.
The fund plans to neutralize its associated carbon emissions through purchasing carbon credits. To meet the ETF’s objectives, Hashdex has partnered with Germany’s Crypto Carbon Ratings Institute, which will produce annual reports estimating the energy consumption and carbon emissions underpinning the creation of Bitcoin (BTC) acquired by the fund.
The ETF is currently aiming to invest 0.15% of its liquid assets into carbon credits and eco-friendly technologies every year. The fund was launched on the B3 Brazilian Stock Exchange late last week under the ticker BITH11.
According to a translation, Rogério Santana, head of client relationship at the São Paulo-based B3 exchange, stated:
“The new ETF offers investors exposure to variations in the world’s main digital asset, with all its growth potential and value reserve, in a regulated, secure manner and under sustainability goals.”
Hashdex is an issuer of regulated crypto investment funds, having launched its first crypto-focused ETF, HASH11, in April of this year. Over the past month, HASH11 has gained 33%, according to Bloomberg.
In addition to HASH11 and BITH11, Hashdex also offers a weighted Nasdaq Crypto Index fund tracking BTC and its Bitcoin Risk Parity Gold Fund.
Green crypto funds have grown in popularity this year ever since concerns over the fossil fuel-based energy consumption of crypto mining operations entered mainstream discourse.
In May, Canadian Bitcoin ETF issuer Ninepoint announced plans to offset the carbon footprint of its BTC fund, partnering with carbon offsetting service provider CarbonX.
The following month, crypto-focused hedge fund manager One River Digital reported a surge in demand for carbon-neutral Bitcoin investment products.
On Tuesday, global investment firm SkyBridge Capital announced that it had partnered with carbon credit provider MOSS Earth to purchase tokens representing 38,436 tons of carbon offsets.
Updated: 8-12-2021
Global ETF Assets Hit $9 Trillion
Net flows so far this year have nearly eclipsed the $736.5 billion investors had moved into ETFs globally in all of 2020.
Investors poured $705 billion into exchange-traded funds through the first seven months of the year, pushing 2021’s world-wide tally to a record $9.1 trillion, according to data from Morningstar Inc.
Net flows so far this year have nearly eclipsed the $736.5 billion investors had moved into ETFs globally in all of 2020. Most of the cash has gone into cheap, index-tracking funds, with large-cap and short-term bond ETFs, as well as products offering inflation protection, attracting significant investor interest, according to the data.
U.S. ETFs accounted for a record $519 billion of the total, sending assets in U.S. funds to about $6.6 trillion. ETFs now hold more money than index-tracking mutual funds, which had about $8.8 trillion in assets as of June, though mutual funds overall still command more money, with about $40.7 trillion in assets.
ETFs are baskets of securities that are as easy to trade as a stock. They lack the investment minimums found in many mutual funds, are generally more tax efficient and carry lower fees. The success of ETFs was far from guaranteed after the first one launched in 1993. But enthusiasm for low-cost investments has led to an explosion in ETF assets over the past 10 years.
“ETFs are probably the greatest success story in financial services over the last two decades,” said Anaelle Ubaldino, head of ETF research and investment advisory at data firm TrackInsight, which also tracked ETFs crossing the $9 trillion mark last month.
Vanguard Group has been the biggest draw this year, with its ETFs pulling in nearly $224 billion through the first seven months of 2021. That is 45% more than all the money attracted so far in 2021 by BlackRock, BLK 0.16% the world’s No. 1 ETF manager by assets.
Two broad, inexpensive stock-market funds run by Vanguard garnered the most interest from investors. Vanguard’s 500 Index Fund and Total Stock Market Index Fund pulled in $32.3 billion and $23.4 billion so far this year. Of the top 10 funds by inflows in 2021, Vanguard managed six, while BlackRock’s iShares ETF unit oversaw the other four.
Since asset managers got regulatory approval in 2019 to run stock-picking ETFs that also shield their daily holdings, Fidelity Investments, T. Rowe Price Group Inc., Putnam Investments and others have launched actively managed funds. These are similar to some of their mutual-fund strategies, yet more accessible and usually cheaper for individual investors. Others such as Guinness Atkinson Funds and Dimensional Fund Advisors have opted to convert some mutual funds into ETFs.
JPMorgan Chase & Co. has launched some actively managed ETFs, including its Equity Premium Income fund last year, which has pulled in $2.4 billion from investors so far in 2021. The banking giant said Wednesday that it plans to convert four active mutual funds managing some $10 billion in assets into ETFs in 2022 pending approval from their boards.
Active ETFs still represent a small but growing segment of the overall ETF market. Nonindexed ETFs, including those that actively pick stocks, carried $358 billion in assets as of July, about 4% of the overall ETF market, according to Morningstar’s data. That was up from $193 billion a year ago.
ETFs come with some risks, however. Narrow, thematic funds can concentrate billions of dollars in assets in a small roster of companies, making them potentially susceptible to a liquidity crunch in volatile markets, some analysts say. ETFs that track indexes, meanwhile, have the potential to fall out of step with benchmarks, which is known as tracking error.
With stocks hitting records, some expect more growth ahead. In the U.S. alone, Matt Bartolini, head of SPDR Americas Research at State Street Global Advisors, predicts inflows for all of 2021 could reach nearly $800 billion—more than what has flowed into U.S. mutual funds in the past nine years combined.
“With such dazzling flow totals in a short period of time, it begs the question of how high flows could get in 2021,” said Mr. Bartolini. “Particularly if ETFs can make it into the four commas club.”
VanEck Tries Again For Bitcoin Strategy ETF With SEC
VanEck unsuccessfully tried to list a similar fund in 2017.
Investment firm VanEck filed a prospectus with the U.S. Securities and Exchange Commission (SEC) for a bitcoin (BTC, +0.59%) strategy exchange-traded fund (ETF) with exposure to bitcoin futures and other investment vehicles.
* VanEck unsuccessfully attempted to list such a fund with the SEC in 2017.
* The investment firm is resubmitting the application with minor amendments in the hope that the greater maturity of the futures market will make for a different outcome this time around.
* “VanEck was first to file for a bitcoin futures ETF in 2017,” Gabor Gurbacs, the firm’s director of digital assets strategy, told CoinDesk. “We are committed to bring to market a bitcoin ETF. Futures markets have matured a significantly since 2017.”
* The fund is billed as an actively managed ETF with exposure to bitcoin futures and other investment vehicles and products that provide exposure to bitcoin, according to the prospectus filed Monday. These may include crypto ETFs listed in other jurisdictions, such as Canada.
* The SEC has yet to approve a crypto ETF despite having received well over a dozen applications. Recent comments by Chair Gary Gensler have indicated that futures products may be considered.
* The fund will not invest in bitcoin or other digital assets directly.
* Investments will be made through a Cayman Islands-based subsidiary of VanEck and managed by Gregory Krenzer.
* The prospectus is similar to one VanEck filed in June for a bitcoin futures mutual fund, also managed by Krenzer.
* It is also similar to one filed by Invesco last week, which was billed as providing exposure to bitcoin through investing in futures and other products such as ETFs listed outside the U.S.
Updated: 8-23-2021
Money Managers Race To Launch First U.S. Bitcoin ETF After SEC Signal
While the regulator has indicated being receptive to exchange-traded funds for bitcoin futures, there are risks for individual investors.
Asset managers are jockeying to create the first U.S. bitcoin exchange-traded fund after a top securities regulator signaled a path to approval.
In the past two weeks, ProShares, Invesco Ltd. , VanEck, Valkyrie Digital Assets and Galaxy Digital have all filed plans for bitcoin futures ETFs. If approved, the funds would make trading bets on bitcoin’s future value akin to buying a stock.
Earlier in August, Securities and Exchange Commission Chairman Gary Gensler indicated that he would be receptive to ETFs that will trade in bitcoin futures rather than cryptocurrency itself as long as they follow stricter rules usually reserved for mutual funds. The SEC has already approved the first U.S. bitcoin-futures-based mutual fund, which started trading last month.
Futures let traders bet on whether an underlying market such as oil, gold or, in this case, bitcoin, will rise or fall. Futures trade separately from the underlying asset they are derived from; values between the two sometimes deviate, sometimes widely.
Asset managers have been trying to persuade regulators to green-light bitcoin ETFs for nearly 10 years. So far, the SEC has rejected or delayed a decision on the funds. The regulator has taken a cautious approach to regulating the volatile crypto market. The digital assets have boomed in popularity with amateur traders and a growing number of professional money managers.
Speaking at the Aspen Security Forum, Mr. Gensler said issuers who structure ETFs under the Investment Company Act of 1940 would help protect investors from illicit activities. The decades-old law is a more stringent set of guidelines that usually apply to mutual funds. For example, it requires an independent board and gives a fund the ability to stop accepting new money—something most ETFs can’t do.
“I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures,” Mr. Gensler added. CME Group Inc.’s CME 0.14% bitcoin futures contracts started trading in late 2017.
Unlike crypto exchanges, trading venues such as CME have agreements with the SEC, giving the regulator greater oversight.
Despite the additional safeguards, investors in such funds would have to deal with issues associated with trading futures, as well as the risks around cryptocurrencies.
Todd Rosenbluth, head of ETF and mutual-fund research at CFRA, warned that futures-based ETFs rarely replicate the performance of the underlying market they track. The reason is pricing fluctuations between futures contracts and the spot market, especially if demand for the asset or commodity is expected to change significantly in the future. There are also costs associated with rolling over contracts when they expire.
“It’s likely that some of the investors who gravitate toward these products will either be disappointed in the performance or unaware of the risks they are taking,” Mr. Rosenbluth said.
Funds that trade in futures tend to buy contracts for the nearest month, known in the market as front-month contracts. Before the contracts’ expiration, funds roll their assets into the next month. If futures contracts trade higher than bitcoin’s real-time price, funds would be forced to pay a premium to roll them.
Bloomberg ETF analyst Eric Balchunas estimated that this rolling process would cost investors as much as 10 percentage points in annual returns—on top of expense ratios that are expected to be around 1% a year.
Funds that trade futures “really are more appropriate for institutional investors,” said Steven McClurg, chief investment officer at Valkyrie, whose proposed ETF will exclusively trade in front-month futures contracts. “But when there’s not a spot product available, like with oil or natural gas, retail investors look toward futures products.”
‘It’s likely that some of the investors who gravitate toward these products will either be disappointed in the performance or unaware of the risks they are taking.’
— Todd Rosenbluth, head of ETF and mutual-fund research, CFRA
A worst-case scenario for investors would be a repeat of the United States Oil Fund debacle. That fund often rolled expiring contracts into more-expensive ones, causing it to lose twice as much over the past decade as the oil prices it tracked.
In 2020, when oil cratered, USO suffered enormous losses. The fund’s managers were forced to stop creating new shares and to revamp its holdings several times, ultimately diversifying its mix of contract expirations further into the future.
Some firms trying to launch a bitcoin futures fund detailed plans to diversify their asset mix. Invesco, for example, said in a regulatory filing that its fund may also invest in other bitcoin-related assets, such as ETFs listed outside the U.S. Invesco also said it won’t roll contracts on a predetermined schedule in an effort to generate the greatest roll yield.
Valkyrie’s proposal, meanwhile, is a pure-play bitcoin futures ETF, which is more in line with Mr. Gensler’s thinking, analysts said. Mr. McClurg of the firm played down the potential for a USO repeat starring bitcoin futures funds, saying the USO situation was a unique confluence of events, including Covid-19, overproduction of oil and too much supply.
“I can’t envision a world where that would happen,” he said.
23 And Counting: VanEck And ProShares File For ETH Futures ETFs And Quickly Withdraws Application
The latest two filings bring the total number of ETF applications this year to 23.
Two more Ether (ETH)-based exchange-traded funds have been filed this week, bringing the total to 23 crypto ETF filings so far in 2021.
VanEck and ProShares are the latest firms to reveal plans for institutional products focused on Ethereum. According to filings with the U.S. Securities and Exchange Commission on Wednesday, VanEck is seeking to launch an “Ethereum Strategy ETF”, while ProShares is calling its proposed product the “Ether Strategy ETF”.
Both ETFs aim to provide exposure to Ether by investing in ETH futures contracts in addition to pooled investment vehicles and other exchange-traded products that have ETH exposure. The funds will not be buying Ether directly, according to the documents.
Both firms have already filed for Bitcoin ETFs; however, the SEC is still dragging its feet and has yet to approve any. Earlier this month, Kryptoin filed for an “Ethereum ETF Trust” marking the 21st application in 2021, and the latest two bring that total up to 23.
Speaking to Blockworks, president of the ETF Store, Nate Geraci, said, “Given the most recent messaging from the SEC … it seems highly likely a Bitcoin futures ETF will be approved before an Ether futures product,” before adding:
“It’s not unreasonable to think a Bitcoin futures ETF could be approved before the end of the year.”
ProShares is a division of ProFunds Group, which manages various investment funds, with combined assets under management of around $50 billion, while VanEck has a total AUM of around $65 billion.
On May 7, VanEck filed for its Ether ETF, and a couple of weeks later, on May 28, Wisdom Tree filed an application to the SEC for a similar fund. In June, the ProFunds Group filed the “ProShares S&P Kensho Global Crypto & Blockchain ETF” with the SEC.
On Aug. 10, Cointelegraph reported that SEC Chair Gary Gensler hinted that he would be more open to accepting ETFs based on crypto futures rather than through direct exposure. VanEck filed another prospectus for a Bitcoin Strategy exchange-traded fund on Aug. 9.
VanEck And ProShares Apply To Withdraw Ethereum ETF Filings From SEC
It’s unclear why both asset managers chose to apply for and withdraw seemingly similar applications for Ether ETFs on the same days.
Less than two days after submitting separate applications to the United States Securities and Exchange Commission (SEC), asset managers VanEck and ProShares have seemingly decided not to pursue exchange-traded funds (EFTs) with exposure to Ether.
In individual Friday filings with the SEC, legal representatives of VanEck and ProShares both said the firms had elected not to proceed with registering their respective Ether-based exchange-traded funds. VanEck had submitted a filing to launch an “Ethereum Strategy ETF” with the SEC on Wednesday, while ProShares applied for an “Ether Strategy ETF” the same day.
Both products had seemingly aimed to provide exposure to Ether (ETH) by investing in futures contracts as well as pooled investment vehicles and other exchange-traded products. It’s unclear why both asset managers chose to apply for and withdraw seemingly similar applications for Ether ETFs on the same days, but the two firms said they had not sold any securities connected to the potential offering.
SEC chair Gary Gensler said earlier this month that he would be more open to accepting ETFs based on crypto futures rather than through direct exposure. At that time, VanEck already had Bitcoin (BTC) and ETH exchange-traded funds under review by the agency, but the company later filed a separate prospectus for a Bitcoin “strategy” ETF, a fund with exposure through BTC future contracts.
Updated: 8-24-2021
Tiny Issuer Thinks It Just Got The Edge In Race For Bitcoin ETF
Valkyrie Investments reckons it just vaulted to the front of the queue for approval from the Securities and Exchange Commission for the first U.S. Bitcoin exchange-traded fund thanks to a quirk that allows smaller issuers to file confidentially for new offerings.
The Nashville, Tennessee-based firm two months ago sought regulatory permission for a futures-based fund, likely the first company to do so before an onslaught by others following positive comments on the structure by the SEC.
The request was revealed Tuesday after the Nasdaq exchange, where the Valkyrie XBTO Bitcoin Futures Fund would be listed, filed a response to the SEC.
The application remained hidden thanks to an idiosyncrasy afforded to smaller companies, which allows them to file confidentially without fear of getting their ideas copied by bigger players, said Steven McClurg, chief investment officer at Valkyrie Investments.
“We still thought a physical Bitcoin ETF was a little further away and with futures, the way that they’re regulated and the way they trade with CME, they’re already a regulated product,” McClurg said in a phone interview. “So it’s like the one-step, two-step way to get to a physical ETF but we thought there was a lot of opportunity with futures.”
After SEC Chair Gary Gensler signaled that regulators may be more open to a Bitcoin ETF if it were based around futures rather than the cryptocurrency itself, bigger fund managers, including Invesco, rushed to file for such a product.
It would require that investors put down a substantial amount of money on margin to trade and would be different from a Bitcoin-backed fund.
Still, being first to file does not mean Valkyrie would be the first to be approved, should an approval even come through anytime soon.
U.S. regulators have yet to bless any crypto ETF, though at least 19 issuers are looking to launch one. Collectively, they’ve submitted over two dozen filings, according to a tally kept by Bloomberg Intelligence’s James Seyffart. Many strategists argue that being the first to receive approval could be important, as it might mean that such a fund attracts more inflows — as happened with the first to be sanctioned by regulators in Canada.
Meanwhile, Gensler has said that an ETF that complies with the SEC’s strict rules for mutual funds could provide investors with necessary protections. Most pending ETF applications have been filed under 1930s laws that allow stock exchanges to list products.
Valkyrie has applications out for a physically-backed fund as well as another futures-based one under the 1940 act, said McClurg.
Though many crypto backers voiced concerns over a futures-based Bitcoin fund, which they said is unnecessarily complicated, McClurg doesn’t see it that way.
“The SEC is trying to be cautious here — which they should,” he said. “Even though I do believe the market is ready for a physically-backed ETF, I know that they’re just trying to be extra cautious before putting something in the market that can hurt retail investors and this is their way of doing that.”
Updated: 8-25-2021
SEC Could Approve Bitcoin Futures ETF In October, Analysts Predict
“A launch could come as soon as October, and we believe the SEC should permit several at once to avoid handing out a first-mover advantage,” Bloomberg ETF analysts said.
The United States Securities and Exchange Commission is likely to approve a Bitcoin (BTC) futures exchange-traded fund (ETF) by the end of October, according to Bloomberg ETF experts.
Bloomberg ETF analysts Eric Balchunas and James Seyffart issued an investor note on Tuesday suggesting that last week’s abrupt withdrawals of Ether (ETH) futures ETF proposals by VanEck and ProShares could trigger the SEC’s approval of a Bitcoin ETF.
“VanEck and ProShares’ rapid withdrawal of proposals for Ethereum futures ETFs is a good sign for a potential Bitcoin futures ETF, given the SEC has allowed those filing to remain active. A launch could come as soon as October, and we believe the SEC should permit several at once to avoid handing out a first-mover advantage,” the analysts said.
Balchunas noted that ProShares’ Bitcoin futures ETF is among the proposals to be most likely approved by the U.S. securities regulator. “We think Ether withdrawal shows SEC has nose in this rn and is in reg contact with issuers which should mean any kinks ironed out so that they can launch 75 days after filing,” he added.
The latest Bitcoin futures ETF forecast comes shortly after asset managers VanEck and ProShares suddenly withdrew their applications for Ether ETFs just two days after filing paperwork with the SEC. However, a number of Bitcoin futures ETFs applications have still remained active, with asset managers such as Valkyrie, ProShares, Invesco and VanEck submitting Bitcoin futures ETF filings earlier this year.
As previously reported by Cointelegraph, SEC Chairman Gary Gensler recently suggested that the regulator might be open to approving Bitcoin futures ETFs under the Investment Company Act of 1940.
Updated: 8-27-2021
Bitcoin ETF Pledges To Reduce Carbon Footprint By Planting Trees
Accelerate Financial Technologies Inc. plans to launch a carbon-negative Bitcoin exchange-traded fund by planting trees to offset the unfavorable environmental impact of cryptocurrency mining.
Calgary-based Accelerate, which offers alternative ETF products, pledges to plant 3,450 trees for every C$1 million ($788,200) invested into its carbon-negative Bitcoin ETF, estimating this will result in the sequestration of about 1,000 tons of carbon dioxide. Exchange traded crypto funds have been approved in Canada, though not in the U.S.
Accelerate’s Bitcoin ETF comes as cryptocurrencies face increasing scrutiny around their energy usage. Bank of America said earlier this year Bitcoin’s energy consumption will soon rival that of some of the largest countries in the world. Bitcoin depends on a massive network of independent computers that compete to process transactions, with the winners awarded new coins in a process that’s become known as mining.
Chinese Bitcoin miners use the most energy, followed by Georgia and the U.S., according to an analysis by Bloomberg Intelligence.
Accelerate is looking to change the perception on Bitcoin’s environmental impact with the strategy and meet the growing demand for environmental, social and governance, or ESG, exposure from investors. Accelerate downplayed the notion that the offering could be considered another example of marketing spin being used to persuade investors that the fund is environmentally friendly.
“We’re highly cognizant of the concept of greenwashing,” Julian Klymochko, Accelerate’s chief investment officer, said in an interview, adding that he’s been skeptical of products being offered elsewhere along with equity-linked ESG metrics that don’t necessarily aid the environment.
Accelerate preferred a tangible option via tree planting versus buying so-called carbon credits, with the latter not producing the same environmental benefits, he said.
Ninepoint Partners LP said in May it would partner with environmental software fintech-firm CarbonX to purchase carbon credits for the Toronto-based firm’s carbon-neutral Bitcoin ETF, and support forest conservation projects. It’s also working with the Crypto Carbon Ratings Institute, an industry group recently formed after the backlash to energy usage of the digital investments.
Accelerate retained a planting partner along with Western Canadian-based H3M Environmental Ltd. to assist in environmental matters and emissions methodology. The ETF will begin trading Tuesday.
Canada was the first anywhere to carry the ETF label for a Bitcoin product. Demand for the funds has surged along with the price of Bitcoin, which is up over 60% this year to around $47,300. The largest cryptocurrency by market value traded at around $3,670 at the end of 2018.
Updated: 9-8-2021
Bitcoin ETF Battle In Canada Offers Latecomers To U.S. Race Hope
Conventional wisdom saying the winner will take all in the race to launch a U.S. Bitcoin ETF is being debunked by action north of the border.
Canada and North America’s first exchange-traded fund tracking the cryptocurrency is trailing a competitor that launched two months later, according to data compiled by Bloomberg, with the asset gap between the two this month climbing to the widest since June.
The 3iQ CoinShares Bitcoin ETF (ticker BTCQ) has now amassed C$1.2 billion ($946 million) in assets, compared with C$747 million for the Purpose Bitcoin ETF (BTCC).
It’s an outcome that could upend thinking in the $6.8 trillion U.S. ETF universe. Wannabe issuers are in a heated race for regulatory approval of a crypto ETF, with most analysts suggesting whoever crosses the line first will gain an insurmountable industry lead.
Yet the change of leadership in Canada is a reminder there’s more to attracting cash than simply launching first. Investors will evaluate a slew of factors before deciding on an ETF, including structure, security features, on-screen liquidity and spreads, according to Bradley Duke, founder and chief executive officer of ETC Group in London.
“While an issuer will certainly get a first-mover advantage and benefit from the press coverage it receives for being first, in the longer term, investors know that not all products are created equally and will weigh up the positives and negatives of each,” said Duke.
3iQ launched its Bitcoin product in April, and it’s been larger than BTCC since May. One reason may be that it’s cheaper: Total expenses for BTCQ are capped at 1.25%, compared with 1.5% for the Purpose fund. The names behind the vehicle are also likely familiar to cryptocurrency enthusiasts, with both 3iQ and CoinShares established brands in the space.
“Well-known brand names with specialization in the cryptocurrency ecosystem are powerful weapons,” James Seyffart, analyst at Bloomberg Intelligence, wrote in a late-August note.
Among the big names racing to launch the first Bitcoin ETF in the U.S. are VanEck and Invesco. Experts now say approval from the Securities and Exchange Commission could come in the autumn, after Chair Gary Gensler signaled regulators may be more open to a product based around futures rather than the cryptocurrency itself.
Updated: 9-7-2021
A Bitcoin ETF Is Likely Coming Soon. Is It Better To Just Buy Bitcoin?
Wall Street has been trying to launch the crypto investment product since 2013, in the early days when it was complicated to buy Bitcoin outright.
Firms across Wall Street have been eager to launch an exchange-traded fund tracking Bitcoin for almost a decade now. By the time they potentially succeed this fall, it may be too late for the product to be useful for everyday investors.
Since 2013, investment firms have argued that the products would make buying Bitcoin easier, eliminating the need for complicated digital wallets and keys. Then, as Bitcoin matured, platforms like Robinhood and Coinbase opened up access to anyone with a computer or smart phone.
Throughout all of this, the Securities and Exchange Commission has repeatedly refused to approve a Bitcoin ETF, citing concerns about the cryptocurrency’s notorious volatility and its potential for price manipulation. But in August, SEC chair Gary Gensler signaled that he’s potentially open to an ETF tracking Bitcoin futures.
While it might seem like semantics, there are important differences between a fund tracking futures instead of holding actual Bitcoin. The price of Bitcoin futures — which have only existed since 2017 — tends to track Bitcoin itself.
For instance, on Monday evening Bitcoin traded around $52,500, compared with Bitcoin futures at $52,650. Some people buy the futures to bet on a price increase, while others use them to short the price of Bitcoin, or hedge their other long positions.
For the SEC’s purposes, Bitcoin futures also offer an additional level of security because they are governed by the Chicago Mercantile Exchange and require investors to put down cash on margin to trade, as a form of collateral. For CME Micro Bitcoin futures, investors have to put up a minimum of 35% of the amount that the futures contract represents.
Since Gensler’s comments, at least seven firms including VanEck and Invesco have applied to launch Bitcoin futures products, adding to the more than two dozen filings for funds that would physically hold crypto assets.
Despite the enthusiasm, it’s unclear whether individual investors would need an ETF at this point. It’s now easier than ever to open up a Robinhood or Coinbase account to buy a coin or a fraction of a coin.
“It’s not like investing in Bitcoin is hard,” said Ben Johnson, Morningstar’s global director of ETF research, about a Bitcoin ETF. “A couple of weeks ago, I was like, how hard could this be really? How can I buy Bitcoin now sitting on my couch playing on my phone? So I bought some Bitcoin on my PayPal account.”
Industry experts say a Bitcoin futures ETF could receive the SEC’s approval by October or November. Here are some things to consider if you’re interested in buying:
What’s The Case For Buying?
If you’re an institutional investor. While some investors who own Tesla Inc. shares might not bat an eye at Elon Musk loading up the firm’s balance sheet with Bitcoin, other companies can’t buy the cryptocurrency as an investment, either due to internal rules or because their shareholders might object. A Bitcoin ETF could help get around those restrictions since the format is more widely accepted.
“There are all sorts of custody and regulatory hurdles for big financial institutions to jump through,” said Ross Mayfield, investment strategy analyst at Robert W. Baird & Co. “If it were offered in an ETF, it clears a lot of that up for financial institutions.”
If you want all your investments in one place. Since more traditional investment platforms like that of Vanguard and Charles Schwab don’t allow Bitcoin purchases, customers have to search elsewhere. A Bitcoin ETF would change that, since it could potentially sit right alongside holdings of stocks or other ETFs tracking indices like the S&P 500.
If you want the SEC’s blessing. For those still skeptical about the Bitcoin market in general, a tried and true format like an ETF could offer peace of mind, according to David Mazza, head of product at Direxion. “Many people associate purchasing a fund with getting a stamp of approval,” he said.
“There’s comfort in the structure.” Gensler has said that a filing through a 1940 law that governs mutual funds could be more likely to be approved, since that law has stronger investor protections and requires a fund’s board to oversee the investments.
If you want Bitcoin in your retirement accounts. It could be “just a way to get Bitcoin into more nooks and crannies than it’s able to access today,” said Morningstar’s Johnson. Theoretically, investors could purchase the fund for their 401(k) — and save money in taxes — if their account offers a brokerage window, to sit alongside other stakes in funds like the Vanguard S&P 500 ETF and Invesco’s QQQ.
If you prefer active management. Unlike an ETF that actually holds Bitcoin, a futures one would need to constantly buy and sell the contracts to maintain exposure, requiring a human behind the scenes. While that would increase the cost of the fund, some investors may prefer that kind of supervision.
Longer term, Nate Geraci, president of the ETF store, expects there to be actively managed funds containing a mixture of cryptocurrencies that could be adjusted based on market conditions. Imagine an ETF that’s made up of 60% Bitcoin, 30% Ether and 10% Dogecoin.
…and what are reasons to steer clear?
If you don’t want to pay fees for something you can buy yourself. Bitcoin ETFs will likely have expense ratios greater than 1% — meaning the funds will cost you $10 in annual fees for every $1,000 you invest, according to Bloomberg Intelligence.
Meanwhile, Robinhood offers commission-free trading for cryptocurrencies. For Coinbase, it’s a bit more complicated. Fees are determined at the time of purchase by factors like the size of the order and current market conditions, but are typically between 0.5% and 4.5% for trading. Industry experts agree that a Bitcoin ETF would likely be more expensive than current crypto trading platforms.
“There could also be additional cost to futures that are higher than the cost of holding physical Bitcoin,” said Matt Hougan, chief investment officer of Bitwise Asset Management, which creates crypto indexes. “If the only ETF we get is futures, I think you’ll see a lot of retail investors stick with Coinbase.”
If you don’t want to invest in futures. A large portion of everyday investors might not understand how the futures market works and may want to steer clear of complicated concepts like contango and backwardation. “With futures-based products, you introduced additional cost, more complexity, you have futures contracts that have to be rolled,” said the ETF store’s Geraci. “It’s just a sub-optimal option for investors.”
If you want a wide range of cryptocurrencies. A Bitcoin futures fund won’t be useful for someone who wants stakes in more up-and-coming coins like Cardano and Binance Coin. Although some U.S. firms had filed for ETFs tracking Ethereum futures, they recently withdrew them.
If you already have a Robinhood or Coinbase account or a digital wallet. For those who already own cryptocurrencies through another platform, an ETF might not benefit their investing goals.
Many investors will stick with what they’re familiar with, said Sylvia Jablonski, chief investment officer for Defiance ETFs. “If an investor is very savvy already and using a digital wallet, then they’ll probably just do it directly,” she said.
Updated: 9-10-2021
Crypto Can Do Better Than ETFs
The founder of WallStreetBets says crypto-native tools like on-chain asset management and smart contracts are the next step for financial products.
In what is becoming a seasonal tradition, the U.S. Securities and Exchange Commission (SEC) is using any legal and technical recourse to punt yet again on approving U.S.-based crypto exchange-traded funds (ETFs). Even with these challenges, several firms haven’t been deterred from attempting to become the first U.S operator in a global ETF market representing $6 trillion in assets under management (AUM).
We should not be that surprised by the SEC’s foot-dragging, considering the long and tortured financial history that got us to ETFs in the first place. It took around 450 years from the establishment of the first stock exchange in 16th century Antwerp until the first U.S. ETF was launched in 1993.
It wasn’t until 1987′s Black Monday crash that the financial community faced a problem (see below) for which ETFs presented a sort of solution. Ever since, the instrument has often acted as a safe harbor in stormy financial climes, from the Great Recession of the late 2000s to pandemic-weary markets in the 2020s.
Jaime Rogozinski is the founder of WallStreetBets – a large online community that yields a commanding presence in the world of finance. Over the past 16 years, he has started multiple successful companies, mainly in tech and finance fields, that he has helped build from the ground up. His experience ranges from bootstrapped startups to multilateral banking.
Like the race to bring the first crypto ETF to the U.S., the first ETF itself was not created overnight. It took several attempts to craft those early ETFs, mainly due to prevailing securities, tax and corporate law regarding structured products, managed investment schemes, mutual funds and derivatives.
Crypto ETFs don’t have nearly the same universal buy-in across the financial community, so it is no surprise this has been marked with even more false starts and stumbles. It is enough to make one wonder whether crypto ETFs will ever be universally accepted: They may be too risky for the old guard and too centralized for the new one.
Crypto ETFs: An Old Dog Forced Into New Tricks
ETFs were created because investors wanted to achieve the same sort of return as a market index without having to hold the constituent assets of that index directly, essentially reproducing portfolio diversification, but at lower cost and with less effort. For its time, the ETF was a radical financial innovation that, at its heart, solved a most elementary problem for investors.
Now, in the nearly 30 years since the launch of that first ETF, there are over 150 ETF providers, a list that reads like a roll call of major institutional finance: Vanguard, BlackRock, State Street, Invesco and VanEck.
For all of the benefits that traditional ETFs offer, like portfolio diversification and market performance, they do have some drawbacks, including the need for brokerage access that creates a whole litany of fees, illiquidity, trading delays tied to “market hours” and extra costs from the need for providers to maintain custody of the ETF’s underlying assets.
Now, 30 years after that first ETF, blockchain technology has literally rewritten the whole scene.
Blockchain, cryptography and tokenization have made programmable finance accessible to all at the speed of the internet, creating whole currencies, derivatives and new financial industries out of decentralized consensus.
Now, what if you could take what was so attractive about ETFs 30 years ago and reconstruct that type of appeal for an entirely new world of financial options that we couldn’t even conceive of as little as 15 years ago?
It turns out we can.
Why ETF When You Can ETP?
The powerful combination of decentralized finance (DeFi) protocols, on-chain asset management and smart contract technology is heralding the arrival of the decentralized version of ETFs, tokenized and fully collateralized baskets of digital assets called ETPs (exchange-traded portfolios).
These “baskets” are fully collateralized by the pooled assets that are held within the relevant smart contract. These “smart pools” can then be tokenized so investors can deposit funds into the smart contract, receiving a corresponding number of tokens that represent a given share in the underlying assets.
In addition, ETPs are non-custodial, meaning the investor remains in control of their deposited assets, and can withdraw them at any time by redeeming the corresponding tokens. Goodbye, brokerage fees and market hours.
As layer 2 blockchain protocols help reduce what have been the traditional gas fees associated with the deposit and withdrawal of smart contract funds, ETPs begin to look like very attractive products from a cost perspective.
Even better, ETPs offer larger financial incentives: macro-hedges against inflation, participation in top crypto assets, pooled DeFi assets, baskets of traditional tech stocks, index-based portfolios and yield-bearing stablecoins.
ETFs have come a long way in the last 30 years, but trying to use that framework for crypto is a bit of a non-starter, even as tantalizing as it might be to some in the industry. With the advent of products that concentrate both investment and investment tools in crypto innovation – products like ETPs – investors will be able to participate in more opportunities offering better liquidity and less friction than ever.
For the old guard, it will require even more trust in a new paradigm that discards old inefficiencies. For the new guard, it will require even more imagination to not dress up tomorrow’s solutions in those same inefficiencies.
Updated: 9-11-2021
Overseas Funds Cash In On Crypto Boom
A handful of European exchange-traded products have logged gains in the triple digits and beyond, but few are available to U.S. investors.
Some overseas investors are reaping big gains from a handful of exchange-traded products that have surged alongside many digital coins.
Eight of the 10 best-performing exchange-traded products in the world this year are European-based funds that track some form of cryptocurrency. A binance coin-tracking exchange-traded product run by Swiss firm 21Shares AG is up 10-fold this year. A pair of ethereum notes managed by CoinShares in Europe have risen more than threefold, as has a ripple-based ETP run by 21Shares.
The average exchange-traded product trading in stocks, bonds and other securities has gained 11% for 2021, according to FactSet, while the S&P 500 index is up 19%.
Asset managers say crypto ETPs can provide investors with an easy, tax-efficient way to gain exposure to digital coins, which rank as some of the best-performing assets in markets so far in 2021. But those benefits can come at a steep cost. Some Crypto ETPs charge investors as much as 2.5% annually of their investment, more than double the average expense of all open-end mutual funds.
The ETPs are also volatile, like the cryptocurrencies and digital tokens they track, exposing investors to potentially significant losses. And because ETPs typically are structured as notes backed by issuer’s holdings, there is the added risk of losing some or all of the investment if the issuer defaults—a risk that largely doesn’t exist in traditional exchange-traded funds.
“The toughest clients understand the nuances,” said Ophelia Snyder, co-founder and president of 21Shares. “But I literally built this product for my mom.”
So far this year, investors have poured $3.4 billion into global crypto ETPs, according to Simon Mott, chief marketing officer at Trackinsight, helping to push assets to $9.25 billion, most of which reside in Europe.
Analysts and lawyers say securities regulators in the U.S. are likely closely watching the development of crypto ETPs overseas as they wrestle with whether to approve such funds. The Securities and Exchange Commission worries that the funds could be susceptible to fraud and manipulation if the regulator can’t monitor trading in the underlying assets.
For most U.S. investors, buying a crypto ETP that trades overseas isn’t an option. Most big brokerages, including Charles Schwab & Co., restrict buying of funds that trade on overseas exchanges.
Six of the top-performing crypto ETPs are run by 21Shares. Its binance coin product is the top performer, followed by ETPs tracking ripple, ethereum and tezos, along with two others mixed with various cryptocurrencies, all of which have at least doubled this year.
Some of 21Shares’ ETPs follow indexes, such as its Crypto Basket Index tracking the top five digital coins, while its single-coin products aim to follow a reference price calculated from cryptocurrency data provider CryptoCompare.
When 21Shares launched its binance ETP in October 2019, it held roughly 1.1 million coins worth about $20.7 million, or $18.52 each. As of late Friday afternoon, binance coins were worth about $404, putting the ETP’s stockpile at about $443.6 million.
That’s a 2,083% gain for anyone who held the coin. The ETP, however, is up 1,928% since inception. The lower return highlights a key drawback of any crypto-holding ETP versus holding the coin directly: the annual fees investors pay.
Most of 21Shares’s ETPs charge a 2.5% yearly levy, plus additional entry and exit costs. If an investor cashed in a $10,000 investment in the Binance ETP after a year, 21Shares estimated total costs of about $382, or a 3.8% impact on return. That doesn’t include additional costs charged by brokerages, including asset-management fees and commissions.
Laurent Kssis, head of capital markets at 21Shares, said the higher management fee was due to more costly infrastructure that previously didn’t exist for crypto products, including custody and market making, as well as the higher risk that a service provider takes on with a crypto issuer.
Crypto ETP investors can bank on experiencing the same volatility as they would with the actual coins.
Crypto ETP investors had to contend with the same turbulence that brought bitcoin up to about $63,000 apiece in April, then down to less than $30,000 in July, only to rise again to $45,619 on Friday. CoinShares’ Ethereum Tracker One ETP was up nearly 300% through April, then fell 23% over May and June, reflecting the performance of ethereum.
Those steep downdrafts highlight the possibility for big losses following a period of massive gains. It’s happened with highflying tech and meme stocks, and analysts say cryptocurrencies are just as susceptible to a substantial pullback. High fees during such stressful periods would only add to investors’ losses.
“Investor protection, in some ways, is what this whole fight is about,” said David Grim, a Stradley Ronon Stevens & Young LLP lawyer who previously worked with the SEC, on the regulator’s hesitancy.
Updated: 9-13-2021
Ark Investment Management Opens Door For Fund To Invest In Canadian Crypto ETFs
The Cathie Wood-founded firm disclosed the move through a revised prospectus with the SEC.
Ark Investment Management revised the prospectus for its ARK Next Generation Internet ETF (ARKW) to open the possibility of investing in crypto exchange-traded funds (ETFs) in Canada, according to a filing with the U.S. Securities and Exchange Commission (SEC) Friday.
* “The fund may have exposure to cryptocurrency, such as bitcoin, indirectly through an investment in a grantor trust or in other pooled investment vehicles, such as exchange-traded funds domiciled in Canada,” the investment management firm founded by crypto bull Cathie Wood wrote, replacing previous language.
* The amended document further says that the fund may invest in the Grayscale Bitcoin Trust (GBTC) or “other pooled investment vehicles that invest in bitcoin, such as exchange-traded funds that are domiciled and listed for trading in Canada (Canadian Bitcoin ETFs).” Grayscale is part of Digital Currency Group, CoinDesk’s parent company.
* In a series of tweets, Bloomberg ETF analyst Eric Balchunas speculated that Ark was looking to replace ARKW’s investment in GBTC with a Canadian ETF. ARKW holds over 8.5 million shares of GBTC, making it the second-largest holding in the fund.
* Balchunas noted that GBTC is down 22% year to date, while the Canadian ETF has dropped 6%. “That’s pretty significant dispersion,” he wrote. “I’m sure that’s irking them.”
Updated: 9-14-2021
Bitwise Joins Hunt For Bitcoin ETF Approval With Futures Product Filing
The asset manager is teaming up with ETF Series Solutions in its bid to get a U.S. bitcoin ETF over the finish line.
ETF Series Solutions has filed to launch a bitcoin futures exchange-traded fund (ETF) in partnership with Bitwise, a provider of crypto-based funds.
The application for the Bitwise Bitcoin Strategy ETF was filed with the U.S. Securities and Exchange Commission on Tuesday under the Investment Company Act of 1940. The fund seeks to invest in bitcoin futures and other financial products.
Proponents of bitcoin ETFs claim they would offer retail investors a regulated financial product that has exposure to bitcoin, giving those investors an alternative to investing in bitcoin directly. The SEC, the federal agency tasked with overseeing such products, has yet to approve one.
“The Fund will not invest directly in bitcoin,” the filing said. “While the Fund intends to obtain exposure to bitcoin primarily through indirect investments in standardized, cash-settled bitcoin futures contracts traded on commodity exchanges registered with the CFTC (’Bitcoin Futures’), it may also invest in pooled investment vehicles and Canadian-listed funds that provide exposure to bitcoin.” The CFTC is the Commodity Futures Trading Commission, another federal agency that regulates financial products.
The ETF might also invest in cash, U.S. government securities or money market funds, according to the filing. U.S. Bancorp Fund Services will act as the transfer agent and administrator, while U.S. Bank will serve as the custodian.
SEC Chairman Gary Gensler has indicated that the agency is more likely to approve a bitcoin futures ETF than a spot bitcoin ETF. A futures ETF will invest in a regulated bitcoin futures product offered by CME, rather than in bitcoin directly.
Gensler has raised concerns about crypto spot market regulation, echoing a view SEC staff has often hinted at in rejecting previous bitcoin ETF applications.
Bitwise CEO Hunter Horsley declined to comment on the fund, but said, “Bitwise has been managing crypto index funds since 2017. We continue to be focused on helping advisors and investors understand and navigate the space.”
Updated: 9-15-2021
Grayscale’s Vision For Bitcoin ETF At Odds With Those of SEC Chair Gensler
Analysts say the so-called GBTC discount could widen if Grayscale’s plan for a spot bitcoin-based ETF fails to win SEC approval.
Grayscale, the world’s largest digital asset manager, says it will continue to seek regulatory approval for a bitcoin exchange-traded fund (ETF) backed by actual units of the cryptocurrency, even as U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler says he would prefer to approve an ETF backed by bitcoin futures contracts.
Some analysts predict that the Grayscale Bitcoin Trust (GBTC), whose shares already trade in public stock markets, has no chance of winning approval anytime soon for its current plan to convert the $30 billion trust into an ETF backed by the cryptocurrency.
The related speculation is that investor demand for GBTC shares could erode if the SEC approves competing proposals for a bitcoin ETF, such as a recent flurry of filings pegged to the futures market. (Grayscale is a unit of Digital Currency Group, of which CoinDesk is an independent subsidiary.)
One possibility is that the so-called GBTC discount could widen if the predictions prove accurate. This discount represents the difference between the per-share value of the bitcoin held by GBTC and the share price as traded in public markets. Generally speaking, the lower the demand, the wider the discount.
The discount to the fund’s net-asset value is currently near 15%, though in May it widened to 20%. For most of last year and into early 2021, the shares traded at a premium to the net asset value. But investor demand for the vehicle waned as the bitcoin market entered a downtrend starting in March, and as bitcoin ETFs were approved in Canada and elsewhere. The SEC has yet to approve any bitcoin ETFs.
“Risks may be enhanced if fees for the new ETFs are half of GBTC’s 2%,” according to Bloomberg Intelligence analysts James Seyffart and Eric Balchunas.
Grayscale is still banking on the possibility that the SEC is open to a spot bitcoin ETF. “Spot” refers to “spot markets,” or in this case the mostly unregulated exchange-based and over-the-counter markets where traders swap bitcoin. That’s contrasted with the bitcoin futures contracts traded on regulated exchanges like the Chicago-based CME.
“We are not sitting back with our feet up,” David LaValle, Grayscale’s head of ETFs, said in an interview. “Gensler’s comments have not changed our business strategy, and we will utilize and leverage an ETF wrapper to bring other products to market such as traditional equity-based ETF.”
As for GBTC, “when we’re able to convert into ETF, that discount will collapse, and we look forward to that opportunity,” LaValle said.
But some analysts say that opportunity might be in the distant future, arguing that a bitcoin futures ETF will be approved by the SEC before a spot ETF.
“Converting funds from structure to structure is hard, requiring significant operational and legal work,” Dave Nadig, director of research at ETFTrends.com wrote in a blogpost. “I actually think that puts GBTC at the back of the line, not the front.”
It’s Not So Simple
Grayscale’s LaValle noted in the interview that a futures-based bitcoin ETF comes with complexities. With futures trading, there’s an additional layer of financial structuring; futures contracts are considered to be derivatives of the original, underlying assets. An oil futures contract, for example, is not the same as directly trading a barrel of oil.
“A futures-based ETF, BTC or otherwise, is a more complex, expensive cost structure, with operational hurdles that can impact the return stream,” LaValle said.
Meanwhile, other asset managers are trying to get a bitcoin-futures ETF across the finish line.
On Tuesday, the rival digital-asset manager Bitwise submitted an application to the SEC for its Bitcoin Strategy ETF, under the Investment Company Act of 1940.
“The Fund will not invest directly in bitcoin,” the filing said. “The Fund intends to obtain exposure to bitcoin primarily through indirect investments in standardized, cash-settled bitcoin futures contracts traded on commodity exchanges” that are registered with the U.S. Commodity Futures Trading Commission.
“A spot bitcoin ETF would be a better solution for most investors than a futures-based bitcoin ETF,” Bitwise Chief Investment Officer Matt Hougan told CoinDesk in an email. “It would be simpler, lower-cost and easier to understand. But a futures-based bitcoin ETF is better than no ETF at all.”
Fidelity Lobbies SEC To Approve Bitcoin ETF In Private Meeting
Fidelity argues that Bitcoin markets have already reached maturity under the SEC’s own standards.
Multinational financial services firm Fidelity Investments has pressed the United States Securities and Exchange Commission to approve its Bitcoin exchange-traded fund (ETF).
A private meeting was held on Sept. 8 among Fidelity Digital Assets president Tom Jessop, six of the firm’s executives and several SEC officials. The finance executives laid out a number of reasons why the regulator should approve the investment product. These include increased demand for digital assets and related products, the prevalence of similar funds in other countries, and the rise of Bitcoin (BTC) adoption.
A Fidelity presentation from the meeting outlining the benefits of a Bitcoin product stated that global developed market regulators have approved Bitcoin exchange-traded products (ETP) in Canada, Germany, Switzerland and Sweden.
In response to SEC Chair Gary Gensler’s comments last month on the possibility of reviewing only BTC futures products, Fidelity argued that strict adherence to either a 1933 law allowing stock exchanges to list the products or allowing futures only products was no longer necessary because the market has matured.
The Securities Act of 1933 was passed following the stock market crash of 1929 in order to protect investors by establishing laws against misrepresentation and fraudulent activities. Fidelity believes that these laws are too stringent and markets are now more transparent and established.
“We believe Bitcoin futures-based products are not a necessary interim step before a Bitcoin ETP; firms should be able to meet investor demand for direct exposure to Bitcoin […] through ETPs because the Bitcoin market has matured and can support them.”
It also argued that the market has already reached “significant size” and has deep liquidity as defined by the SEC’s own standards.
Fidelity filed for a Bitcoin ETP called the Wise Origin Bitcoin Trust in March 2021, and more than 20 similar applications from other firms have been made since, yet the regulator continues to procrastinate.
The Bitwise Bitcoin Strategy ETF is the latest to be lodged in the SEC’s lengthening application queue following a filing on Tuesday.
Fidelity Digital Assets continues to expand its operations despite regulatory red tape. The firm plans to increase its crypto asset employee numbers by up to 70% by the end of the year according to Bloomberg.
The SEC is doing things at its own lethargic pace, having postponed VanEck’s proposed Bitcoin Trust ETF for the third time this year on the same day as the meeting with Fidelity, delaying the decision date until Nov. 14.
Fidelity Investments privately prodded the U.S. Securities and Exchange Commission (SEC) last week to approve its bitcoin exchange-traded fund (ETF), according to recent filings.
The financial services giant urged the regulator to approve its fund, citing increased investor interest in crypto. Fidelity also pointed to the rising number of investors holding bitcoin and similar funds worldwide. Bloomberg first reported the news Tuesday.
Fidelity Digital Assets President Tom Jessop, among other executives from the firm, met with SEC officials on a Sept. 8 video call.
Fidelity didn’t respond to a CoinDesk request for comment by the time of publication.
The SEC has yet to approve a bitcoin ETF. Presently, there are more than 10 applications pending, including those from VanEck, WisdomTree, and more recently, financer Anthony Scarammuci’s SkyBridge.
Fidelity originally filed its Wise Origin Bitcoin Trust in March with a follow-up response in June. Last week marked the second round of talks between the SEC and Fidelity, whose application is pending.
Purpose Investments became the first in North America to be approved for a bitcoin ETF when Canadian regulators gave their go-ahead in February.
Updated: 9-22-2021
Commodity Strategist Predicts Bitcoin ETF Could Get The Nod In Us Next Month
A Bitcoin ETF could be approved by U.S. regulators by October, according to Bloomberg Intelligence commodity strategist Mike McGlone.
Bloomberg Intelligence commodity strategist Mike McGlone believes it is only a matter of time before the United States Securities and Exchange Commission approves the country’s first Bitcoin (BTF) exchange-traded fund (ETF).
In an interview with Stansberry Investor host Daniela Cambone on Tuesday, McGlone asserted that Canada is extending a competitive lead over the U.S. after approving Bitcoin ETFs from 3iQ and CoinShares in April.
He emphasized that capital is flowing from the U.S. to Canada’s institutional crypto products, including money from Cathie Wood’s Ark Invest. However, he believes that lawmakers in the U.S. will not want to miss out for much longer.
When asked about a timeframe on a potential U.S. Bitcoin ETF approval, McGlone said it could happen “potentially by the end of October.” He maintained that it was likely to be a futures-backed product first, adding that it would open a “legitimization window for a massive amount of money inflow.”
McGlone also reiterated the latest report from Bloomberg Intelligence that stated Bitcoin prices hitting $100,000 was a possibility this year and that this would be driven by the approval of an ETF.
Crypto YouTuber Lark Davis shares McGlone’s price targets, observing that in previous bull markets in 2013 and 2017, the latter quarters saw huge price rallies.
#bitcoin still going to 100k this year, Q4 2013 and Q4 2017 both saw 300% + rallies.
What would make BTC do that again?
A BTC ETF getting approved in the USA.
— Lark Davis (@TheCryptoLark) September 22, 2021
The SEC has yet to approve a crypto ETF despite the number of applications it has received from prospective issuers continuing to mount.
Earlier this month, multinational financial services firm Fidelity Investments lobbied the SEC to approve an exchange-traded product, arguing that Bitcoin markets have already reached maturity under the regulator’s own standards.
SEC Registrants Seek DeFi And Physically Backed Bitcoin ETF Approval
Amplify ETFs, Invesco and Galaxy submitted registrations to the U.S. SEC for Bitcoin and DeFi-based ETF offerings.
Crypto companies from the United States filed two registration statements with the Securities and Exchange Commission, seeking permission to sell exchange-traded funds (ETF) in relation to Bitcoin (BTC) and decentralized finance (DeFi).
Atlanta-based investment company Invesco joined New York’s Galaxy Digital Funds to file and register Invesco Galaxy Bitcoin ETF, a trust with physically protected private keys. Illinois-based Amplify ETFs filed the second registration to add DeFi-centric open-end ETF funds offering to the Amplify ETF Trust.
If approved by the SEC, the Invesco Galaxy Bitcoin ETF will be registered as a securities offering with the ability to get listed on traditional national exchanges in the United States. According to the filing, the trust will use “robust physical barriers to entry, electronic surveillance and continuously roving patrols” to protect Bitcoin private keys.
On the other hand, the SEC’s approval for Amplify ETFs’ FORM N-1A filing will allow the company to issue unlimited new shares for American investors. However, this is the second time Galaxy has applied for a Bitcoin ETF registration since April 12, the approval of which is due in October.
Both Invesco and Amplify ETFs are yet to respond to Cointelegraph’s request for comment.
SEC Chairman Gary Gensler has been pursuing crypto businesses to register with the authorities. In a statement from Sept. 14, Gensler asked crypto-related companies to “come in and talk to us,” citing probabilities of legal status on a case-to-case basis.
In August, Gensler shared similar sentiments, seeking a robust crypto regulatory regime to improve investor protection across “crypto finance, issuance, trading, or lending.” More recently, he demanded clarity for the stablecoin ecosystem. “The poker chip is these stablecoins at the casino gaming tables,” he said.
Updated: 9-29-2021
Gensler Reiterates Support for Futures-Based Bitcoin ETFs
The SEC chairman struck a similar tone in August, igniting a rush in tailor-made ETF filings.
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler reiterated his support Wednesday for a narrow class of bitcoin exchange-traded funds (ETFs) that would invest in futures contracts instead of the crypto itself.
Gensler singled out bitcoin ETFs, which invest in futures contracts that trade on the Chicago Mercantile Exchange and register under the Investments Company Act of 1940. The so-called ‘40 Act “provides significant investor protections,” he said in prepared remarks for a Financial Times conference: “I look forward to staff’s review of such filings.”
He struck a similar tone in an August speech that ignited a rush in tailor-made bitcoin futures ETF filings. None has been approved by the SEC, but industry observers expect decisions as early as October.
The SEC is reviewing almost two dozen ETF filings for bitcoin, bitcoin futures, ether and ether futures products.
Investors haven’t been quite as eager to plow into bitcoin futures-linked products. One bitcoin futures mutual fund has amassed only $15 million in assets two months after launch, according to a tweet from Eric Balchunas, an analyst for Bloomberg.
The Bitcoin futures mutual fund that launched 2mo ago only has $15m in aum, VERY LOW considering the pent up demand. Here’s a look at first 43 days of $BTCFX vs $BTCC (physical) in Canada (whose mkt is 27x smaller btw). Not sure if MF or futures is problem but poss bad sign.. pic.twitter.com/d3WwPxnpuG
— Eric Balchunas (@EricBalchunas) September 29, 2021
Updated: 10-1-2021
SEC Extends Four Bitcoin ETF Deadlines By 45 Days
The decision timeline of four Bitcoin ETFs, including Global X Bitcoin Trust, has been extended by the SEC on Friday.
The United States Securities and Exchange Commission has extended the deadline of four Bitcoin exchange-traded funds (ETF) on Friday for 45 days, citing the requirement for additional time to decide whether to accept the 19b-4 applications.
The approval of four Bitcoin (BTC) ETFs — Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, WisdomTree Bitcoin Trust and Kryptoin Bitcoin ETF — was rescheduled to Nov. 21, Dec. 8, Dec. 11 and Dec. 24, respectively.
In Its Official Statement, The SEC Outlined:
“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and any comments.”
In mid-September, U.S.-based investment firm Invesco joined forces with New York’s Galaxy Digital Funds to file a Bitcoin ETF called Invesco Galaxy. Currently awaiting approval, the ETF security offering has the potential to be listed on national U.S. exchanges, with potential clients assured that all private keys would be rigorously guarded by a multitude of technological and physical deterrents.
It is widely expected that the introduction of the first Bitcoin EFT by the SEC will elevate the asset’s technical indicators as a surge of traditional investors enters the market. Data from iShares reveals that the total value of global commodities exchange-traded products equates to $263 billion, and still, this figure discounts all mutual funds, which could take the value closer to $500 billion.
Bloomberg ETF analysts recently predicted that the SEC could approve a Bitcoin ETF by the end of October, highlighting ProShares’ Bitcoin futures ETF as the most likely candidate. The pair also advised that the regulatory institution should “permit several at once to avoid handing out the first-mover advantage.”
Updated: 10-7-2021
SEC Approves Volt Equity ETF Providing Exposure To Bitcoin-Centric Companies
Regulators have green-lighted a new exchange-traded fund that provides exposure to “Bitcoin Industry Revolution Companies.”
The United States Securities and Exchange Commission, or SEC, has approved the Volt Crypto Industry Revolution and Tech ETF, providing investors with easy access to companies with significant exposure to Bitcoin (BTC).
The exchange-traded fund, which was approved on Tuesday, is intended to track so-called “Bitcoin Industry Revolution Companies,” which are defined as entities that hold a majority of their net assets in BTC or derive a majority of their earnings from Bitcoin mining, lending or transacting, according to an SEC filing.
Eighty percent of the fund’s holdings will be allocated to such companies, the prospectus states. The new ETF will appear as a New York Stock Exchange Arca listing under the ticker symbol BTCR.
U.S. securities regulators have been deliberating for years whether to approve their first Bitcoin ETF. Last Friday, the SEC announced it would delay its decision on four Bitcoin ETFs by 45 days, pushing back the timelines on the Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, WisdomTree Bitcoin Trust and Kryptoin Bitcoin ETF to Nov. 21, Dec. 8, Dec. 11 and Dec. 24, respectively.
Unlike other proposals for a physically-backed Bitcoin ETF, the newly approved Volt Equity fund doesn’t track the price of Bitcoin or hold the asset in custody.
Rather, it seeks exposure to companies that generate a significant portion of their business from Bitcoin-related activities. As such, the Volt product is the closest thing U.S. investors have to a pure-play Bitcoin ETF for now.
Speculation is rampant that the SEC is on the verge of approving its first pure-play Bitcoin ETF, albeit with a slight modification. As regulators continue to mull a spot Bitcoin ETF, a Bitcoin futures equivalent could be passed in the coming weeks, according to Bloomberg analyst Eric Balchunas.
Yes, the SEC has kicked can on bitcoin ETF approval BUT that is for the physically-backed ones under ’33 Act. The futures ETFs filed under the ’40 Act (which Genz loves) are very much alive and likely on schedule (we think 75% chance approved in Oct). Here’s our odds: https://t.co/cSZ8aDsITl pic.twitter.com/DUEvRANvO7
— Eric Balchunas (@EricBalchunas) October 2, 2021
Optimism surrounding the potential approval may have contributed to Bitcoin’s momentous price rally earlier in the week. The flagship digital currency surged to $55,000 on Wednesday as the asset’s total market capitalization returned to $1 trillion — marking the first such milestones in roughly four months.
The SEC’s deliberations about a Bitcoin ETF have taken much longer than its counterparts in Canada, which have already granted approvals for three exchange-traded funds. The Purpose Bitcoin ETF, which launched in February, currently has $1.51 billion in assets under management, according to Bybt data.
The Evolve Bitcoin ETF and CI Galaxy Bitcoin ETF launched in February and March, respectively.
Invesco Lists Two Crypto ETFs With Galaxy Digital On The CBOE
The ETFs will track Alerian Galaxy Global indexes to give investors exposure to blockchain and crypto mining firms.
Asset manager Invesco has introduced two exchange-traded funds (ETFs) with exposure to cryptocurrency and blockchain companies.
The Atlanta-based company is teaming up with digital asset firm Galaxy Digital and index provider Alerian for the Invesco Alerian Galaxy Crypto Economy ETF, which will trade on Cboe Global Markets under the ticker “SATO,” and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF, with the ticker “BLKC.”
The ETFs will track two Alerian Galaxy Global indexes. The SATO fund will include exposure to blockchain and crypto mining firms, while BLKC will track companies engaged in the research and development of blockchain technology not tied to cryptocurrency. Both will include exposure to an “investment vehicle that directly holds physical cryptocurrency,” Invesco said.
The products “unlock another way for retail and institutional investors to get involved in the rapidly evolving and transformative world of digital assets,” said Steve Kurz, partner and head of asset management at Galaxy Digital.
Earlier this year, Cboe Global Markets CEO Ed Tilly said he was looking to broaden the company’s return to cryptocurrency by introducing more products and possibly relisting bitcoin futures that were delisted in 2019.
Updated: 10-8-2021
BlockFi Files For Bitcoin Futures ETF
The fund would only invest in bitcoin futures contracts traded on the CME.
BlockFi filed to offer a bitcoin futures exchange-traded fund (ETF) Friday, joining a race that industry experts believe could reach a crescendo in weeks.
The fund, “BlockFi Bitcoin Strategy ETF,” would only invest in futures contracts traded on the CME, according to regulatory filings. It would be registered under the Investment Company Act of 1940 (commonly referred to as the‘40 Act). Those attributes are in line with a hypothetical bitcoin ETF that SEC chair Gary Gensler has hinted may finally receive the long-sought approval.
BlockFi has a slim chance of crossing the finish line first, however. A bevy of similar offerings filed months earlier are set for final verdict later this month. ETF experts believe one of these is likely to be approved, particularly after Gensler’s comments in recent weeks.
Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, said he predicts one or more applications will receive an approval this month.
A BlockFi spokesperson confirmed the filing in a statement to CoinDesk.
“If approved, the actively managed fund would invest primarily in Bitcoin futures contracts registered with the Commodity Futures Trading Commission, and would not have direct exposure to Bitcoin. We look forward to sharing more details with the market when appropriate,” the statement added.
At least one major contender has begun preparing for Gensler’s go-ahead. Earlier this week, ETF firm VanEck secured an insurance policy for its yet-to-launch bitcoin futures ETF. The policy comes online on Oct. 26, one day after the SEC’s decision deadline.
The policy does not indicate whether VanEck’s approval will actually be approved or not.
Wall Street Could Get Four Bitcoin Futures ETFs by Month-End
After years of waiting for a U.S. Bitcoin ETF, the crypto community may finally get as many as four products in a matter of weeks.
This month, the Securities and Exchange Commission once again has to approve, reject or delay a set of applications for exchange-traded funds based on the largest digital currency. This time round, they all follow a format that SEC Chair Gary Gensler has indicated could be received favorably by the regulator.
They’ll hold Bitcoin futures rather than the digital asset itself, and are filed under the Investment Company Act of 1940 — a route that offers higher investor protection.
It’s all raising hopes in the $6.7 trillion U.S. ETF industry and beyond that after years of delays, the world’s largest market may finally be ready to join the party. In that time, dozens of cryptocurrency exchange-traded products have already launched in Canada and across Europe.
“We are pretty bullish on approval here,” said James Seyffart, an ETF analysts with Bloomberg Intelligence. “We just can’t see Gensler and the SEC going out of their way to state positive comments about a 1940-act Bitcoin futures ETF at the end of September and then denying all of them less than a month later.”
In a move that further raised hopes among crypto advocates, the regulator asked two issuers to withdraw their Ethereum-futures ETF filings over the U.S. summer, but made no such demands on similar Bitcoin-based applications.
This week it also approved the Volt Crypto Industry Revolution and Tech ETF (ticker BTCR). The actively managed product plans to invest a majority of its assets into companies “with exposure to Bitcoin and its supporting infrastructure,” according to its prospectus. It’s one of a number of efforts to at least provide investors with indirect access to cryptocurrencies.
“Given that ETF issuers have been tirelessly pursuing Bitcoin ETFs for over eight years now, it seems somewhat disingenuous for the SEC to encourage more filings at this point only to disapprove them,” said Nate Geraci, president of advisory firm the ETF Store.
“Approving futures-based Bitcoin ETFs seems like an easy way for the SEC and Chair Gensler to get a ‘win’ in terms of appearing forward-thinking on crypto.”
As long as the SEC doesn’t discriminate between the different filings and follows the usual process, a product from ProShares could be first to get the regulator’s blessing after the company was first to make the appropriate futures-based filing, said BI’s Seyffart.
Valkyrie Investments, a smaller upstart issuer, also holds a good chance, he said. Its filing was a week behind ProShares’, but the proposed ETF would hold only Bitcoin futures. In contrast, the ProShares application includes clauses that would grant its fund the ability to hold Bitcoin-related instruments.
As of the start of the month there were nine Bitcoin futures applications in the queue, according to a tally kept by BI, though two were filed under the 1933 act that allows stock exchanges to list products.
One other, filed under the 1940 act, proposes to hold a combination of crypto equities and Bitcoin futures. On Friday, crypto lender BlockFi Inc. put forward an application for a futures-based one that would also invest in short-duration fixed-income securities and other investments.
Cameron and Tyler Winklevoss, the twin founders of Gemini Trust Co., filed the first application for a Bitcoin ETF in 2013. Approval has remained out of the grasp of issuers for years amid concerns that the crypto space is too volatile and vulnerable to manipulation.
But not everyone is confident an approval is now at hand.
“The odds of approval in the next month are better than 50/50, but I would hardly be surprised if the SEC kicked this particular can down the road a few more times along with the physical Bitcoin ETF,” said Dave Nadig, chief investment officer at data-provider ETF Trends. “It’s clear that what’s needed is an actual regulatory plan. We have yet to get a hint that one is really forthcoming soon.”
Updated: 10-13-2021
Bitcoin Futures ETF Will Likely Be Delayed Until 2022, Says Research Firm CFRA
Regulatory uncertainty could be the cause for yet more delays in the approval of long-awaited Bitcoin exchange-traded products.
Crypto asset investors may have a longer wait for a Bitcoin (BTC) futures exchange-traded product according to Todd Rosenbluth, senior director of exchange-traded funds (ETF) and mutual fund research at research firm CFRA.
Speaking on CNBC’s ETF Edge on Monday, Rosenbluth stated that while a Bitcoin futures product is likely to be the first crypto ETF to gain approval, he cautioned that the current clouded regulatory situation could cause further delays.
There are more than 20 crypto asset-based exchange-traded products waiting for approval from the United States Securities and Exchange Commission, and the regulator is yet to pass any, instead kicking the can down the road on multiple occasions.
The researcher suggested that regulators could be waiting for all of these products to meet their goals so that they can be approved at the same time to avoid a “first-mover advantage,” before adding:
“It’s possible — in fact, we think it’s likely — that we’re going to see a delay of a Bitcoin futures ETF until 2022 until the regulatory environment is more clear.”
Van Eck Associates CEO Jan van Eck commented that the primary concern for the SEC is the discrepancy between actual Bitcoin prices and the price of the futures contract, in addition to the potential of funds getting too large.
When there is a Bitcoin rally, futures strategies can underperform by as much as 20% a year, he stated before adding, “The SEC wants to have some visibility into the underlying Bitcoin markets.”
Van Eck also suggested that the regulator needs to gain more control over crypto trading, which it appears to be attempting with its recent threats against Coinbase and the exchange’s stablecoin lending product. Other popular trading platforms such as Robinhood are already regulated and registered as broker-dealers.
Any speculation over a possible delay could hit Bitcoin’s price as analysts had suggested that big investors may be buying up BTC in anticipation of an ETF approval this month. The asset has rallied 37.5% over the past fortnight to reach a local top of $58,000 on Tuesday, but more regulatory procrastination could quash current market momentum.
Bloomberg senior ETF analyst Eric Balchunas is still confident that there is a 75% chance that an ETF will be approved this month.
Earlier this month, the SEC extended the deadline of four BTC ETFs — the Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, WisdomTree Bitcoin Trust and Kryptoin Bitcoin ETF — for 45 days.
In September, VanEck’s physically backed Bitcoin ETF was delayed for the second time this year, with a decision date set for Nov. 14 by the SEC.
New BetaShares ETF To Track Coinbase, Riot And MicroStrategy
The fund will trade on ASX and aims to provide a level of crypto exposure to institutional investors.
Six months following its application with the Australian Securities Exchange (ASX), BetaShares is now close to launching a new crypto-focused exchange-traded fund (ETF).
According to a Wednesday announcement, the official name of the Aussie ETF manager’s new product is BetaShares Crypto Innovators ETF. After relevant regulatory approvals, it would trade under the ticker symbol CRYP on the ASX.
As with the similar Bitcoin (BTC) or crypto-focused ETFs, BetaShares’ fund aims to provide a level of crypto exposure to institutional investors looking to invest in cryptocurrencies indirectly.
The new fund will track the Bitwise Crypto Industry Innovators Index, which launched in May, as a way to get exposure to the top publicly listed firms operating in the blockchain and crypto industries.
The announcement highlights crypto exchange Coinbase, Bitcoin mining company Riot Blockchain and Michael Saylor’s MicroStrategy as current index constituents. A majority of the index (85%) consists of companies that derive at least 75% of their revenue from directly serving crypto markets, such as crypto exchanges, mining companies and service providers.
“The crypto economy is highly dynamic and growing rapidly and is built using exciting and disruptive technology,” said BetaShares CEO Alex Vynokur. He added that the new fund would enable exposure to the crypto sector in a familiar, liquid ETF structure.
“Mark Twain is famous for saying that ‘during the gold rush it’s a good time to be in the pick and shovel business.’ CRYP will take a ‘pick and shovel’ approach to the crypto sector, investing in the companies that are driving the crypto economy.”
BetaShares submitted its application to the ASX in March. The company didn’t reveal the nature of its fund initially. Vynokur then stressed the significant demand for crypto-focused ETFs, adding that a regulated structure of an ETF is the more appropriate structure for the majority of investors.
Uranium ETFs Roaring Back After $1 Billion Influx On Nuclear Bet
The rally for two exchange-traded funds focused on uranium is surging back, delivering fresh gains to investors who’ve poured more than $1 billion into them this year in a bet on nuclear power’s resurgence.
The NorthShore Global Uranium Mining ETF (ticker URNM) and the Global X Uranium ETF (URA) jumped 13.52% and 11.65%, respectively, on Tuesday, and extended the gains after markets opened Wednesday.
The jumps end what had been a rocky start to October for both ETFs, which had pulled back from a steep rally in the face of rising fossil-fuel prices. Those gains tracked the price of Uranium higher as investors gave a fresh look to the radioactive metal as worsening power shortages increase the allure of nuclear power as an alternative.
That view has been buttressed by some recent announcements. On Tuesday, the French government said it will help a state-controlled utility company develop so-called small modular nuclear reactors by 2030, a move President Emmanuel Macron signaled as key to reducing global carbon emissions.
Japan’s new prime minister said that the nation should replace aging nuclear power plants with such module reactors.
ETFs that track uranium are some of the best performers of the last two years, reversing a downturn that came when investors shunned the commodity in the wake of Japan’s Fukushima nuclear disaster.
“There is a growing realization among people in the energy industry and those investing in it that the baseload (always available) feature of nuclear power — as well as the fact it delivers carbon free electricity — makes it an important component of the world’s carbon neutral goals,” said Michael Alkin, founder of Sachem Cove Special Opportunity Fund, which invests in uranium.
Updated: 10-14-2021
Optimism For Approval of First Bitcoin ETF Hits Fever Pitch
Optimism is sky-high in the $6.7 trillion exchange-traded fund industry that after nearly a decade, the first U.S. Bitcoin fund could begin trading next week.
Shares of Bitcoin jumped around $1,000 within minutes in late afternoon trading after the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy tweeted a June advisory about investing in funds that hold Bitcoin futures.
In the past week, crypto lender BlockFi Inc. and Cathie Wood’s Ark Investment Management have put their names on applications for futures-backed Bitcoin ETFs, a structure that Securities and Exchange Commission Chairman Gary Gensler has hinted that he’d be open to.
Meanwhile, Valkyrie Investments updated its futures-backed ETF prospectus with the ticker BTF on Wednesday — typically a sign that an issuer is nearing launch, according to Bloomberg Intelligence’s Eric Balchunas.
The drama centers on Proshares, given that the SEC’s deadline to reject or approve the issuer’s futures-based filing under the Investment Company Act of 1940 — a route that offers higher investor protection — expires on Monday.
While the ETF industry has watched the SEC demur on countless applications since the Gemini Trust Co.’s Cameron and Tyler Winklevoss filed the first in 2013, Gensler’s own words suggest this time is different, Balchunas said. The SEC head signaled he’d favor funds based on CME-traded Bitcoin futures in August — a stance that he reiterated late last month.
“At the end of the day, really the strongest piece of evidence is Gensler’s own words. He literally told them what to do,” Balchunas said. “They can feel what’s going on.”
Should U.S. regulators give the greenlight, four futures-backed Bitcoin ETFs could begin trading on U.S. exchanges this month, with deadlines for applications from Invesco Ltd., VanEck and Valkyrie approaching. Meanwhile, dozens of cryptocurrency exchange-traded products have launched in Canada and across Europe.
Building speculation around a potential U.S. launch has fueled a torrent rebound in Bitcoin, with the world’s largest cryptocurrency breaking above $58,000 this week for the first time since May. Bitcoin has surged by over 90% since breaking below $30,000 in late July.
Of course, it’s far from certain that the current round of speculation is anything more than wishful thinking. There’s roughly a 25% chance that the SEC rejects or delays a decision next week, Balchunas said. And while issuers are clearly hopeful, there’s no way to know what regulators are thinking, according to Morningstar Inc.
“Issuers are desperately trying to do everything that they can to be the first, or among the first, out of the gate. This is a good old-fashioned asset grab,” said Ben Johnson, director of global ETF research at Morningstar. “The only thing I think we can say for sure is that they’re an indication of where these issuers think the SEC might be leaning.”
New Tickers And ARK Filing Shows Bitcoin Futures ETF Approval Imminent
According to Bloomberg senior ETF analyst Eric Balchunas there are “good signs” that the SEC will approve Bitcoin futures ETF applications from Ark Invest and Valkyrie.
A Bloomberg’s senior ETF analyst says there are “good” signs that a Bitcoin exchange-traded fund (ETF) will soon be approved, pointing to Ark Invest filing for a Bitcoin futures ETF with an assigned ticker and Valkyrie updating its own ETF prospectus with a ticker.
Cathie Wood’s Ark Investment Management LLC filed for a Bitcoin (BTC) futures ETF under the ARKA ticker, while Valkyrie has assigned its BTC futures prospectus with the BTF ticker.
According to Bloomberg analyst Eric Balchunas, firms typically update their proposals when they have everything set and “ready for launch,” suggesting that Valkyrie may soon be given the green light by the United State Securities and Exchange Commission (SEC).
Balchunas also pointed to Ark Invests’ Bitcoin futures ETF application on Thursday in partnership with 21Shares and white-label Alpha Architect, noting that the assigned ARKA ticker was “another good sign” that the SEC was set to give a tick.
People keep asking me what I’m looking for first to confirm SEC approval and it is these type of updated prospectus filings. That’s what happens right bf a launch, they fill in all the XXs and add ticker. That said, this is bitcoin so WTF knows for sure lol.
— Eric Balchunas (@EricBalchunas) October 13, 2021
Referring to Valkyrie’s ETF, the analyst added that he looks for “these type” of updated prospectus filings when determining whether an official SEC greenlight is incoming, and said that applicants often update the final details “right before” launch. He conceded that with the crypto sector, nothing is certain.
Permabear Mr Whale downplayed the significance of the Ark Invest news, saying that all Ark did was update its “ARKW ETF prospectus” to say that it may gain exposure to BTC via exchange-traded funds in Canada.
However, Ark’s latest ETF filing with the SEC does not mention the word “Canada” and the application clearly outlines that the fund is seeking to invest in “exchange-traded Bitcoin futures contracts that are cash-settled in U.S. dollars” on the Chicago Mercantile Exchange (CME).
ALSO notable, this is the second straight filing to not have the word “Canada” in it. It ONLY invests in futures no BTCC or GBTC options. Rumor is SEC no like that and wants them to be strictly futures. pic.twitter.com/l8KTxFtWH8
— Eric Balchunas (@EricBalchunas) October 13, 2021
The price of BTC has surged 28% since the start of October to sit at around $57,500 at the time of writing. Many onlookers have attributed the recent pump to expectations that the SEC will soon approve a futures-based Bitcoin ETF.
Balchunas stated earlier this month that Bitcoin futures-backed ETFs have a high chance of being approved in October. He argued that they are regulated under the “40 Act” which is favored by the SEC as it offers greater consumer protections than physically-backed Bitcoin ETFs regulated under the “33 Act.”
“Yes, the SEC has kicked can on Bitcoin ETF approval BUT that is for the physically-backed ones under ’33 Act,” he said and added:
“The futures ETFs filed under the ’40 Act (which Genz loves) are very much alive and likely on schedule (we think 75% chance approved in Oct).”
Opinions vary, however, and Todd Rosenbluth, senior director of ETFs and mutual fund research at research firm CFRA argued this week he believes that approval of a BTC futures ETF may be delayed until 2022.
Speaking on CNBC’s ETF Edge, Rosenbluth stated that the current clouded regulatory landscape could cause further delays and that the SEC could be waiting to approve all the ETFs simultaneously to avoid a “first-mover advantage.”
“It’s possible — in fact, we think it’s likely — that we’re going to see a delay of a Bitcoin futures ETF until 2022 until the regulatory environment is more clear,” he said.
What Will Happen If A Bitcoin ETF Is Approved? Find Out On ‘The Market Report’ With Mati Greenspan
“The Market Report” with Cointelegraph is live right now with special guest Mati Greenspan, founder and CEO of Quantum Economics.
Join Cointelegraph host and analyst Benton Yaun alongside resident market experts Jordan Finneseth and Marcel Pechman on “The Market Report” — which is live right now! Here’s what to expect in this week’s markets news breakdown:
$820 million worth of Bitcoin (BTC) options are set to expire on Friday. The bulls are ready to celebrate as they target prices above $58,000.
Billionaires are backing Bitcoin over gold as governments in the West print more and more money. What does this mean for the crypto market?
Could we soon be able to pay using crypto at a variety of stores and online markets via Google Pay?
After the weekly news round-up, Mati Greenspan, founder and CEO of Quantum Economics, joins to talk about how more institutions are getting involved in Bitcoin, the approval of a Bitcoin exchange-traded fund (ETF), regulations and how crypto might help ease wealth inequality.
Using insights from Cointelegraph Markets Pro, a platform for crypto traders who want to stay one step ahead of the market, the Cointelegraph experts identify two altcoins that stood out this week: TomoChain‘s TOMO and Stacks’ STX coins.
Next up, Finneseth discusses what will happen to the altcoin market after a Bitcoin ETF is approved. Will people move out of altcoins and into Bitcoin, hoping for an increase in price?
Do you have a question about a coin or topic not covered here? Don’t worry! Join the YouTube chatroom and write your questions there. The Cointelegraph experts will do their best to make sure you get the answer you’re looking for.
“The Market Report” streams live every Thursday at 4:00 pm UTC, so be sure to head on over to Cointelegraph’s YouTube page, and smash that like and subscribe button for all our future videos and updates.
Bitwise Applies For ‘Actual’ Bitcoin ETF With NYSE Arca
The investment firm withdrew its application for a physically-backed Bitcoin ETF in 2020 but has already received approval for a fund offering investors exposure to companies in the blockchain and crypto industry.
After almost two years, Bitwise Asset Management has once again applied with the United States Securities and Exchange Commission to create a Bitcoin exchange-traded fund (ETF).
In a Thursday Twitter announcement from Bitwise chief investment officer Matt Hougan, the investment firm will be pursuing a Bitcoin (BTC) ETF with NYSE Arca that holds “actual BTC,” and not derivatives or other indirect exposure to cryptocurrencies.
According to Hougan, the Bitwise team has spent more than two years analyzing the firm’s ability to “surveil and enforce” any attempts at manipulation and concluded that the Chicago Mercantile Exchange, or CME, is a “regulated market of significant size” for the crypto market.
“The market has matured,” said the Bitwise CIO. “An actual BTC ETF can now be approved.”
The company’s filing with the SEC shows it plans to register 1,000 shares of its Bitwise Bitcoin ETP Trust with a proposed maximum offering price of $25. The SEC filing states the company will use the CME U.S. Reference Rate as a price reference for Bitcoin in the trust.
Bitwise first applied for a Bitcoin ETF registration with the SEC in January 2019. The regulator rejected the proposal in October 2019, but later said it would be reviewing its decision. Bitwise withdrew its application the following year after the SEC essentially kept the proposal on standby.
At the time, Hougan said Bitwise planned to refile “at an appropriate time” after the firm had addressed some of the agency’s concerns in the initial filing.
Though Bitwise has not refiled its application with the SEC for an exchange-traded fund with direct exposure to Bitcoin since that 2020 withdrawal, the company did launch a Crypto Industry Innovators ETF in May, which offers investors exposure to some of the biggest publicly listed firms operating in the blockchain and crypto industry.
The fund was based on Bitwise’s Crypto Industry Innovators 30 Index, which tracks top firms “engaged in actual, material activity in the crypto sector.”
Though SEC Gary Gensler has hinted that he would be more open to accepting ETFs based on crypto futures rather than through direct exposure, the U.S. regulatory agency has yet to approve any application for a physically-backed BTC ETF.
Last week, however, the SEC did approve an application for the Volt Crypto Industry Revolution and Tech ETF, which provides investors with access to companies with significant exposure to Bitcoin.
Updated: 10-15-2021
SEC Likely To Allow Bitcoin Futures ETF To Trade Next Week
The long-awaited launch of a Bitcoin exchange-traded fund could finally arrive on Monday.
The long wait for a Bitcoin (BTC) exchange-traded fund (ETF) could soon be over according to sources reported by financial media giant Bloomberg.
Citing “people familiar with the matter,” Bloomberg has reported that the United States Securities and Exchange Commission is poised to approve the first Bitcoin futures ETFs in the country.
The anonymous sources said:
“The regulator isn’t likely to block the products from starting to trade next week.”
A futures product is likely to be the first one approved since they are viewed more favorably by regulators. Futures are governed by the Chicago Mercantile Exchange (CME) and require investors to put down cash on margin to trade them.
Bloomberg senior ETF analyst Eric Balchunas is confident that the ProShares Bitcoin Strategy ETF could be the first one launched as the decision deadline is Monday, Oct. 18. The Invesco Bitcoin Strategy ETF may be approved the following day barring any further delays by the SEC.
In a tweet on Friday, the analyst stated, “Pretty much done deal. Expect launches next week,” before adding the “odds now over 90% IMO.”
JUST IN: Bitcoin futures ETFs said not to face any opposition at SEC, according to multiple sources confirming this (aside, I’m hearing same thing). Pretty much done deal. Expect launches next week. Nice late night story from @kgreifeld @VildanaHajric @benbain pic.twitter.com/axT6ME4MeI
— Eric Balchunas (@EricBalchunas) October 15, 2021
SEC Chair Gary Gensler has voiced favor for funds based on CME-traded Bitcoin futures filed under a 1940s law, adding more weight to the potential of a long-awaited approval.
On Thursday, Cointelegraph reported that Ark Invest had teamed up with 21Shares to file for an ETF that will trade in Bitcoin futures, indicating that they, too, were confident that a product approval is imminent.
Deadlines for ETF applications from VanEck and Valkyrie are also approaching on Oct. 25, so there could be a slew of them hitting exchanges over the next couple of weeks.
Monday could be a big day for Bitcoin prices, as markets have been bubbling up in anticipation of this landmark event. At the time of writing, BTC had just spiked to $59,600 before a slight retreat, according to CoinGecko.
Nasdaq Listing Hints That The SEC May Soon Approve ETF Application From Valkyrie
Nasdaq’s vice president of listing qualifications, Eun Ah Choi, said shares of Valkyrie’s Bitcoin ETF had been certified for listing on the exchange.
The United States Securities and Exchange Commission, or SEC, may soon approve an application from crypto-asset manager Valkyrie for a Bitcoin (BTC) exchange-traded fund, or ETF, with the shares to be listed on the Nasdaq Stock Market.
According to an Oct. 15 notice from the SEC, the agency has accepted the registration request for shares of Valkyrie’s Bitcoin Strategy ETF for listing on Nasdaq. In a letter from Nasdaq’s vice president of listing qualifications, Eun Ah Choi — filed the same day — the exchange said Valkyrie’s Bitcoin ETF shares had been certified.
In its Aug. 11 prospectus with the SEC, Valkyrie said its Bitcoin Strategy ETF would offer indirect exposure to the crypto asset with cash-settled futures contracts. The contracts will be purchased using a Cayman Islands-based subsidiary wholly owned by the fund with exchanges registered with the U.S. Commodity Futures Trading Commission.
The deadline for the SEC to officially approve Valkyrie’s ETF application is Oct. 25, but this could be extended to December. The federal agency is currently considering applications for Bitcoin futures ETFs from VanEck, ProShares, Invesco and others.
First U.S. Bitcoin Futures ETF May Debut Monday, Filing Says
Asset manager ProShares signaled plans to launch a Bitcoin futures exchange-traded fund as soon as Monday, an action that would end an eight-year wait for a security tracking the cryptocurrency on the U.S. stock market, according to a filing.
The fund manager filed an updated prospectus late Friday with the Securities and Exchange Commission for the Bitcoin Strategy ETF (ticker BITO).
The filing indicated Oct. 18 as the approximate date for the proposed launch of the fund, which will trade on the NYSE Arca Exchange and charge a management fee of 0.95%. An official at ProShares declined to comment. A spokesperson for the SEC didn’t immediately respond to a request for comment.
Bloomberg News reported Thursday that the SEC isn’t likely to block the products from starting to trade next week, according to people familiar with the matter. Barring a last-minute reversal, the fund launch will be the culmination of a nearly decade-long campaign by the $6.7 trillion ETF industry.
Cameron and Tyler Winklevoss, the twins best known for their part in the history of Facebook Inc., filed the first application for a Bitcoin ETF in 2013.
An ETF has been out of grasp for U.S. issuers for nearly a decade, with regulators citing concerns on everything from price manipulation to validating ownership of the coins held by funds. The mood music shifted in August, when SEC head Gary Gensler signaled he’d favor funds based on CME-traded Bitcoin futures filed under a 1940s law — a stance he reiterated late last month.
That openness spurred a flood of futures-backed filings. Wall Street could see four futures-backed Bitcoin ETFs could begin trading on U.S. exchanges this month, with deadlines for applications from Invesco Ltd., VanEck and Valkyrie also approaching.
Bitcoin has surged in recent weeks, fueled by speculation that a U.S. launch could be imminent. The world’s largest cryptocurrency broke above $62,000 for the first time since April on Friday, just below its all-time high of $64,869 set earlier this year. Bitcoin has more than doubled from its late July low.
ProShares Follows Valkyrie In Approval For Listing Bitcoin Strategy ETF
Bloomberg analyst James Seyffart reported that the crypto futures ETF would be listed with the ticker symbol BITO, possibly as early as Oct. 18.
The United States Securities and Exchange Commission has accepted the registration request for ProShares’ Bitcoin Strategy ETF, with the shares to be listed on the New York Stock Exchange’s Arca.
According to an Oct. 15 notice from the SEC, the agency has accepted the registration of securities from ProShares Trust’s Bitcoin (BTC) exchange-traded fund, which offers exposure to the crypto asset with futures contracts. In addition, ProShares filed a post-effective amendment prospectus, which states its ETF could launch as early as Oct. 18.
The assets will be listed on NYSE Arca, should the SEC officially approve the application. Bloomberg analyst James Seyffart reported that ProShares Bitcoin Strategy ETF would be listed with the ticker symbol BITO with 95 basis points.
The potential ProShares listing comes following the firm applying to withdraw its application for an Ether (ETH) ETF with the SEC in August. At the time, ProShares said it had not sold any securities connected to the potential offering.
SEC Approves Bitcoin Futures ETF, Opening Crypto To Wider Investor Base
ProShares is set to launch trading of its bitcoin futures ETF next week.
After years of trial and error by would-be fund sponsors, cryptocurrency investing is finally opening up to the masses with the tacit U.S. approval of a bitcoin futures exchange-traded fund.
The Securities and Exchange Commission (SEC) greenlighted bitcoin futures ETFs in a first for the industry on Friday, after the regulator’s five commissioners met on the issue. ProShares, which filed for its Bitcoin Strategy ETF this past summer, may be the first to launch next week.
The company filed a post-effective amended prospectus on Oct. 15, stating its filing is expected to launch on Monday, Oct. 18, though the fund may not begin trading immediately.
Proponents of a bitcoin ETF believe the product will be more widely accessible for individuals interested in bitcoin than the actual cryptocurrency by giving investors a regulated alternative to the underlying digital asset. The first product will track bitcoin futures, rather than the price of bitcoin directly, however.
SEC Chair Gary Gensler indicated he believes futures-based products might provide stronger investor protections due to the laws under which they operate.
The SEC has, in the past, explicitly rejected bitcoin ETF applications, but it does not need to formally approve one. Under federal law, the SEC can just allow an application to become effective, rather than make a formal announcement.
‘Encouraging Sign’
ETFStore President Nate Geraci told CoinDesk the form is “a step forward” for digital assets and bridging them with the more traditional financial sector. He confirmed that the filing of a post-effective amendment is confirmation of the SEC’s tacit approval.
“It’s an encouraging sign for the future of crypto to see SEC Chairman Gensler get comfortable in helping mainstream investors more easily access bitcoin exposure,” he said in an email. “The availability of a bitcoin ETF will now bring more investors under the crypto tent and facilitate greater education across the space.”
James Seyffart, an analyst at Bloomberg Intelligence, also confirmed to CoinDesk the filing is a sign the fund is launching.
He also anticipates the futures-based ETF launch to act as a bridge to ultimately launching a spot market-based ETF.
Seyffart noted that ProShares’ amended filing removed language about the fund possibly investing in Canadian bitcoin ETFs as a sort of hedge.
“It seems the SEC really did not like that language for whatever reason,” he said. “But they are following standard guidelines and allowing first to file to launch first. So we will be tracking closely how much of a first mover advantage there is here.”
A spokesperson for ProShares referred CoinDesk to the post-effective prospectus.
Long Time Coming
Industry participants have long sought to launch a bitcoin ETF, with Gemini founders Tyler and Cameron Winklevoss first seeking an ETF in 2013. The SEC has rejected every previous application to date, and still has yet to weigh in on more than 30 other current applications.
It is likely the SEC will only allow futures ETFs to launch this year, however. Gensler’s comments supporting a futures ETF hint that he will not allow a spot market ETF to launch in the near term.
“I highly doubt the SEC will approve the product this year,” Seyffart said.
Updated: 10-17-2021
Bitcoin Futures ETFs May Boost Cash And Carry Yields
These ETFs could prompt more investors to buy futures. That would drive the futures curve further into contango.
Several bitcoin futures-based exchange-traded funds (ETF) may debut in the U.S. in the coming weeks. These products may revive interest in the famed “cash and carry” arbitrage strategy, which in turn would bring more buying pressure to the spot market.
The ETFs would buy bitcoin futures contracts, primarily front-month trading on a regulated venue like the Chicago Mercantile Exchange (CME), in a bid to mimic the cryptocurrency’s price performance instead of purchasing actual coins.
Assuming Wall Street embraces these ETFs, the futures premium, or the spread between futures prices and spot prices, would rise significantly, boosting yields from cash and carry strategy, which involves buying the asset in the spot market and simultaneously selling futures contracts.
Carry trades are direction-neutral and profit from an eventual convergence of the two prices. (Futures price converges with the spot price on expiry).
“If the futures ETF comes out, there will be more inflows into buying futures. That would drive the futures curve further into contango [a situation where the futures contracts trade at a premium to the spot price], offering a strong incentive to carry traders,” said Ilan Solot, global market strategist at Brown Brothers Harriman. “They would start the trade by buying BTC in the spot market, creating an initial push up in spot prices.”
Cash and carry arbitrage was a big hit among institutions early this year as futures premium spiked to 20% or more on the CME and other exchanges alongside bitcoin’s price rise. So, several firms could lock in annualized returns of over 20% by selling front month or three-month futures contracts and buying the cryptocurrency in the spot market.
Premiums, however, fell to single digits following bitcoin’s 35% sell-off in May and as major exchanges like Binance and FTX cut back on leverage.
Premiums have risen sharply this month with the return of the bull to the crypto market. On the CME, the front-month contract is currently trading at an annualized premium of 16% versus a discount of -0.4% at the end of September, according to data provided by the crypto derivatives research firm Skew.
With futures-based ETFs likely coming soon in the U.S., double-digit futures premiums appear sustainable.
“One key effect of a futures-based ETF is the possible increase in yield in the space,” QCP Capital said in its Telegram channel on Friday. “With the ETF funds forced to buy futures instead of spot, the futures premium would be driven higher. A ‘risk-free’ rate [cash and carry yield] of 10-20% could be the new norm.”
On Friday, the U.S. Securities and Exchange Commission (SEC) opened the doors for the masses to invest in bitcoin with its tacit approval of a futures-based bitcoin ETF. ProShares may be the first to launch next week, although it may not begin trading immediately.
In the week gone by, crypto lender BlockFi and Cathie Wood’s Ark Investment Management put their names on applications for futures-backed bitcoin ETFs.
Meanwhile, Valkyrie Investments updated its futures-backed ETF prospectus with the ticker BTF, hinting at a possible launch. Per Bloomberg Intelligence, the regulators were considering nine bitcoin futures ETF applications at the beginning of the month.
The consensus is that the futures-based ETFs would bring more mainstream investors to the crypto market. However, these products are vulnerable to contango bleed and usually underperform the underlying asset.
Updated: 10-18-2021
CME Sees Record Open Interest In Bitcoin Futures Ahead of ETF Debut
Record open interest on the CME represents increased institutional participation.
The amount of money locked in the bitcoin futures contracts on the global derivatives giant Chicago Mercantile Exchange (CME) surged to record highs on Friday as the U.S. Securities and Exchange Commission (SEC) greenlighted futures-based exchange-traded funds (ETF) tied to the cryptocurrency.
The dollar value of open interest (OI), or the number of futures contracts traded but not liquidated with an offsetting position, stood at $3.64 billion on Friday, marking a more than doubling for the month, according to data provided by bybt. The previous lifetime high of $3.26 billion was recorded during the bull market frenzy in February.
Glassnode data shows the total number of outstanding contracts on the CME has increased by 60% to 56,410. The spread between the CME-based front-month futures contract, also known as premium or basis, and the spot price has surged from an annualized 1% to over 16% this month alongside bitcoin’s 40% rally to $62,000.
Activity on the CME has picked up amid increased expectations that in the upcoming weeks several futures-based ETFs may begin trading in the U.S., as well as stronger participation from state-side institutional investors.
“Speculation about an imminent futures ETF really took off last week as the SEC had been uncharacteristically quiet ahead of the approval deadline for the first of the ETFs on October 18,” said Martha Reyes, head of research at digital asset prime brokerage and exchange Bequant.
“U.S. institutions, in particular, have been fueling the rally as evidenced by activity on the CME and the basis flippening on the CME over the retail-led exchanges,” Reyes added.
Activity on the other exchanges have also picked up, albeit at a slower rate, as evidenced from the CME’s jump to the number two position on the list of the biggest bitcoin futures exchanges by open interest.
The exchange was the fourth largest last month. Total futures open interest (OI) across the globe has also risen to over $23 billion for the first time in five months.
“BTC futures OI has reached highs not seen since May, highlighting growing expectations of the listing in the U.S. of BTC futures ETF,” said Noelle Acheson, head of market insights at Genesis Global Trading. “One difference between now and then is the higher weighting (11% vs 17%) of cash-margined futures, implying lower leverage overall in the market.”
The impending futures-based ETFs from ProShares, Invesco, Valkyrie and others will invest in regulated bitcoin futures contracts like those trading on the CME instead of buying the actual cryptocurrency.
While the approval of futures-based ETFs is being widely hailed as an open door for more mainstream money, some observers are still skeptical.
“Demand for these bitcoin futures ETFs is likely to be disappointing. These could be of interest to a limited audience of institutions that can’t hold spot or derivatives directly, as well as retail investors that prefer the familiarity and convenience of ETFs,” Acheson said.
“Most investors, however, are more likely to continue to access BTC exposure through spot or derivatives, or through any of the many listed securities or international funds that offer spot BTC exposure,” Acheson added.
Bitcoin was last seen trading near $60,800 representing a 1% drop on the day.
‘BTFD’ Mantra Inspires Ticker For Planned Bitcoin ETF
With the first U.S. Bitcoin futures ETF launching Tuesday and many more in the queue, one little-known asset manager is looking to stand out by directly tapping the lexicon of the day-trading crowd for its ticker.
The proposed Valkyrie Bitcoin Strategy exchange-traded fund plans to trade under the ticker BTFD, according to an update to the firm’s filing made late on Monday.
It’s a profanity-powered version of “Buy the Dip” — a call-to-arms popular with the Reddit army and vindicated over the years as risk assets from stocks to digital assets boomed to new highs after staging precipitous declines. Before Monday, filings indicated the fund would list under the ticker BTF.
BTFD is hoping to be the second U.S.-listed fund linked to the digital asset via the futures market. The ProShares Bitcoin Strategy ETF (BITO) became the first when it debuted on Tuesday amid huge demand.
The arrival of Bitcoin ETFs in Canada showed that first movers may enjoy a considerable advantage, even with just days between launches, so it seems Valkyrie may be looking to draw attention to its own offering.
It remains to be seen if the Securities and Exchange Commission will permit the suggestive lettering — the amended paperwork comes with a standard disclosure that acknowledges “the information in this Prospectus is not complete and may be changed.”
“We saw the overwhelming feedback on social media to our initial ticker,” Leah Wald, CEO at Valkyrie Funds, said by email. The firm “decided to make the change in a nod to the broader crypto community,” she said.
Nasdaq has already accepted the new ticker, Wald said.
You Can Already Trade Bitcoin Futures Through A Commodity ETF
The crypto world is abuzz over the idea of an exchange-traded fund that tracks Bitcoin futures. It turns out that you can already buy an ETF that offers such exposure.
The actively managed WisdomTree Enhanced Commodity Strategy Fund, ticker GCC, has added a roughly 3% allocation to cash-settled Bitcoin futures traded on the Chicago Mercantile Exchange, the money manager said.
That makes it the first ETF to provide exposure to crypto assets through futures contracts tied to the cryptocurrency, according to WisdomTree, which has the ability to raise the allocation as high as 5%.
“We recognize the growing number of advisors and investors allocating to digital assets and investments that provide exposure to digital assets,” said Jarrett Lilien, WisdomTree’s president. “We have made a strategic effort over the past few years to invest in and develop expertise in the space.”
The $183 million fund, which launched at the end of 2020, provides investors with exposure — via futures contracts — to four commodities sectors: agriculture, industrial metals, energy and precious metals. The company website says GCC’s cumulative return totals about 24% this year.
Bitcoin, up roughly 30% in the past month, has rallied amid optimism ETF issuers won’t face resistance from the Securities and Exchange Commission in launching products tied to Bitcoin futures, a format the regulator has suggested it might be more favorable toward.
ProShares is preparing to launch its Bitcoin futures fund on the New York Stock Exchange on Tuesday. Others could follow soon after:
At the start of October, there were 12 filings for futures-based ETFs in front of the SEC. Ten of them are filed under the Investment Company Act of 1940, which the SEC has suggested it favors, while two others are under the 1933 act, according to James Seyffart at Bloomberg Intelligence.
One other, filed under the 1940 act, proposes to hold a combination of crypto equities and Bitcoin futures. The 1940 Act is seen as a route that offers higher investor protection.
Grayscale confirms Bitcoin ETF Plans And Adds Exposure To Zcash, Stellar Lumens And Horizen To Its Trusts
Grayscale said it would proceed “once there’s official and verifiable evidence of the SEC’s comfort with the underlying Bitcoin market.”
Institutional asset manager Grayscale has announced it will be converting its GBTC Trust into an exchange-traded fund (ETF) once the United States Securities and Exchange Commission (SEC) has “comfort” with recently-approved Bitcoin futures ETFs.
In a Monday Twitter thread, Grayscale communications director Jennifer Rosenthal said the asset manager would proceed with offering an ETF when “the SEC has formally expressed their requisite comfort with the underlying Bitcoin market.” The offering would convert the asset manager’s Grayscale Bitcoin Trust (GBTC), first listed in 2013, into an ETF.
“Once there’s official and verifiable evidence of the SEC’s comfort with the underlying Bitcoin market — likely in the form of a Bitcoin Futures ETF being deemed effective — the NYSE Arca will file a document called the 19b-4 to convert $GBTC into an ETF,” said Rosenthal.
The announcement follows ProShares announcement that its Bitcoin (BTC) futures-linked ETF will begin trading on the New York Stock Exchange under the ticker BITO starting Oct. 19.
Filings with the SEC show the regulator has also accepted the registration request for shares of Valkyrie’s Bitcoin Strategy ETF to be listed on the Nasdaq and may accept others in the near future — the SEC currently has several crypto ETF applications under review.
Grayscale also added three cryptocurrencies available for trading through its suite of crypto investment trust products. The firm said its Grayscale Zcash Trust, Grayscale Stellar Lumens Trust and Grayscale Horizen Trust were now listed on the OTCQX Best Market under the ticker symbols ZCSH, GXLM and HZEN, respectively.
According to Grayscale, the three trusts are not subject to registration and disclosure requirements from the SEC. The vehicles provide a way for investors to gain exposure to the tokens without directly investing in them.
Grayscale offers six other crypto investment products with exposure to Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC) and Litecoin (LTC), in addition to a basket of cryptocurrencies through its Digital Large Cap Fund.
The New ProShares Bitcoin ETF Has A Unique Set Of Risks
It will have the same characteristics as a commodities fund, meaning investors will need to understand “contango” and “backwardation.”
After much anticipation, the ProShares Bitcoin Strategy ETF is scheduled to begin trading on Tuesday. To be clear, this isn’t an exchange-traded fund that is backed by actual Bitcoin. Instead, it is backed by futures tied to the cryptocurrency. Before you rush headlong into this market, it’s important to understand that there are crucial differences.
The vast majority of commodity-based mutual funds and ETFs and are also backed by futures, but that’s because the actual physical storage of most commodities is impractical, like with oil.
Also, with almost all commodities most of the trading action and liquidity tends to happen in the futures market, not the spot market. The United States Oil Fund LP is the classic example of a commodity fund that is backed by futures.
The fund earned some notoriety in 2020 when it scrambled to roll its futures contracts out the curve (in violation of its prospectus) in order to prevent the fund’s bankruptcy in the event that the price of oil went negative — which it did.
The United States Oil Fund case is an example of why a Bitcoin ETF on futures might not be such a good idea; it’s impossible to predict what will happen in the futures market. But the main reason that people oppose futures-based ETFs is the cost of carry.
When commodity futures are in contango, or when the price of deferred month contracts trade above front-month contracts, there is a significant cost to roll futures contracts from one month to the next, and that underperformance is passed to the investor. This has been a major complaint about commodity ETFs for years.
While commodity futures frequently trade in contango, they can also trade in backwardation, which is when deferred month contracts trade below front month contracts.
In this case, investors earn a positive roll yield. Many commodity futures are trading in backwardation at the moment, although Bitcoin is in contango. There is no reason to believe that it might not one day be in backwardation.
Gold is an example of a commodity where the ETFs hold the actual metal and not futures, because the storage and accounting of physical gold is fairly straightforward. So why can’t a Bitcoin ETF hold actual Bitcoin?
The reason is because the U.S. Securities and Exchange Commission’s primary objection to physical Bitcoin funds is that the underlying market is unregulated. Well, the gold market is unregulated and we have physical gold ETFs, so what gives? The Bitcoin people are trying to figure this out.
There should be a physical Bitcoin ETF. The Winkelvoss twins were the first to apply for one, back in 2013, when Bitcoin was trading below $1,000 (it’s now around $62,000). If their fund had been approved, it would now likely be the largest, most liquid ETF in existence, and would have provided supercharged returns to a whole generation of investors.
This is a regulatory failure. But at the time, the technology around Bitcoin was relatively primitive, there were cyber attacks happening all the time, and the sentiment back then was that Bitcoin was dangerous, unsecure and unsafe. It has matured a lot.
I invested in physical Bitcoin from 2019 to 2021 through Coinbase Global Inc. I was never comfortable with the investment. Coinbase would suffer outages, the customer service wasn’t to my liking and I kept hearing stories of lost cryptocurrencies and people being locked out of their accounts. I was in a hurry to sell. If a Bitcoin ETF had existed, I would have bought that instead.
It’s in a brokerage account and you get formal 1099 tax documents at the end of the year to help with taxes, instead of the mishmash of a trade blotter that leaves you to figure out the taxes on your own.
I don’t think it’s inevitable that there will someday be a spot Bitcoin ETF, at least not until the crypto markets have a regulatory framework, which might take years. I would not hold my breath.
And I don’t necessarily think that Bitcoin futures ETFs are incrementally worse for investors; they will have the same issues that investors have been dealing with in the commodities markets for 15 years.
It’s as simple as this: the Bitcoin futures market is regulated, and the spot Bitcoin market is not. Having a spot Bitcoin ETF is analogous to having a spot live hogs ETF.
The bigger business issue for ETF issuers is that there are dozens of cryptocurrency funds waiting for approval. A few of these will gain assets, such as perhaps ProShares, because they’re first, but the other Bitcoin ETFs are going to end up as one big stock ticker jumble that doesn’t gather much in the way of assets.
Like most things in the ETF world, it’s a gold rush. Being first counts, having the lowest fees counts and the marketing counts. Should be interesting to watch.
ProShares Bitcoin Futures ETF To Start NYSE Trading On Tuesday
The SEC has given the go-ahead for bitcoin futures ETFs.
ProShares will launch a bitcoin futures exchange-traded fund (ETF) that will start trading on the New York Stock Exchange tomorrow, the company confirmed in an SEC filing on Monday. CoinDesk first reported on Friday that the ETF was scheduled to launch this week.
* The U.S. Securities and Exchange Commission (SEC) approved bitcoin futures ETFs on Friday.
* ProShares filed for its Bitcoin Strategy ETF this past summer. The fund is linked to bitcoin futures that are traded on the Chicago Mercantile Exchange.
* With the SEC mulling dozens of bitcoin ETFs, Chairman Gary Gensler has made it clear that funds linked to the futures market rather than the underlying asset were more likely to win regulatory approval.
* “This is an exciting step but not the last,” Douglas Yones, head of exchange-traded products at the NYSE, told the New York Times’ DealBook.
* News of long-awaited approval for a bitcoin-related ETF sent the world’s largest crypto by market value to levels not seen since April. Bitcoin climbed above $60,000 for the first time in nearly six months on Friday.
* There will be hopes that the debut of a bitcoin ETF on the NYSE will open the floodgates to a stream of similar products winning regulatory approval and accelerating the flow of investments into crypto.
Grayscale Hints At Plans To Convert Bitcoin Trust Into BTC-settled ETF
Grayscale looks to be seeking to restructure its Bitcoin Trust into a physically backed fund after the SEC approved a Bitcoin futures ETF.
Institutional investment giant Grayscale is reportedly considering converting its Bitcoin Trust into a physically settled exchange-traded fund (ETF).
On Sunday, Barry Silbert, CEO of Grayscale’s parent company, Digital Currency Group, hinted that Grayscale is making plans to convert its Bitcoin Trust into a spot-settled Bitcoin (BTC) fund.
After having taken to Twitter to criticize the cash-settled Bitcoin futures ETF recently approved by the United States Securities and Exchange Commission, Bitcoin commentator Preston Pysh chimed in to ask Silbert when Grayscale’s Bitcoin Trust would be converted into a BTC-settled ETF. “Stay tuned,” Silbert responded.
stay tuned
— Barry Silbert (@BarrySilbert) October 17, 2021
However, Grayscale Bitcoin Trust investors appear to have been unsettled by Silbert’s remarks, with Twitter user Sovereign Individual questioning what a restructure would mean for investors holding shares in Grayscale’s Bitcoin Trust.
“What happens to us Grayscale investors once the spot ETF is approved? Is our investment converted into ETF shares?” they tweeted.
Rumors of Grayscale’s purported ambitions for a Bitcoin ETF began circulating last week after a CNBC report citing anonymous insiders claimed that Grayscale was waiting for the SEC to finally approve a Bitcoin ETF.
On Friday, the SEC announced it had accepted the registration of securities from ProShares Trust’s futures-based Bitcoin exchange-traded fund. ProShares’ ETF offers investors exposure to contracts that speculate on the future price of BTC that are settled in cash.
Despite the ETF’s approval being cited as the primary catalyst for Bitcoin’s recent bullish market action, many analysts have criticized the fund for its cash-settled structure, instead advocating for the SEC to approve a Bitcoin ETF that is backed by and settled in BTC.
According to Grayscale’s latest holdings update on Friday, the firm boasts $52.6 billion in assets under management — 73% of which is held in the Bitcoin Trust. The data suggests that Grayscale’s Bitcoin stash comprises roughly 620,000 BTC or 3.3% of Bitcoin’s total supply.
Invesco Drops Efforts To Launch Bitcoin Futures ETF
A competing product by ProShares will start trading on Tuesday.
Would-be bitcoin exchange-traded fund (ETF) issuer Invesco is pulling out of the race to issue a bitcoin futures product.
The company said Monday it would no longer attempt to launch an ETF linked to bitcoin futures in the U.S., a day before a competing product by fellow issuer ProShares begins trading.
The company could not immediately be reached for comment. However, a spokesperson told Bloomberg in a statement that it would continue efforts to launch an ETF in the U.S. that tracks the price of bitcoin directly.
“We have determined not to pursue the launch of a bitcoin futures ETF in the immediate near term. However, we will continue to work in partnership with Galaxy Digital to offer investors [a] full shelf of products with exposure to this transformative asset class, including pursuing a physically backed, digital asset ETF,” the statement said.
A bitcoin futures ETF, such as the one that will begin trading on Tuesday, tracks the price of CME’s bitcoin futures rather than the price of bitcoin directly. A physical bitcoin ETF would track the underlying cryptocurrency’s price.
While there may not be a huge difference in returns in the short term, the returns might diverge by a few percentage points over the course of a year.
Still bitcoin futures ETFs are likely the only crypto ETF products to launch in the U.S. at the moment. Securities and Exchange Commission Chair Gary Gensler has expressed a preference for futures ETFs due to the investor protections outlined by the law that governs these ETFs.
Invesco has yet to file a notice with the SEC formally withdrawing the ETF filing. A filing Monday announced that it was delaying the effective date of its Bitcoin Strategy ETF, the name of its futures fund, to the end of October. These filings are typically filed by issuers if they have yet to secure all of the necessary permissions to launch an ETF.
Updated: 10-19-2021
ProShares Bitcoin Futures ETF ‘BITO’ Hauls In $570M of Assets In Stock-Market Debut
According to ProShares, the fund’s sponsor, the new ETF’s assets shot to $570 million from $20 million on its first day of trading.
The first-ever exchange-traded fund (ETF) backed by bitcoin futures hauled in some $570 million of assets on its first day of trading, a sign of just how hungry investors remain for bets on the cryptocurrency as prices approach a record high.
ProShares, the fund’s sponsor, announced the level of assets in an emailed notice from a press representative. The ProShares Bitcoin Strategy Fund, which launched Tuesday on the New York Stock Exchange under the ticker BITO, had $20 million of seed capital at the start of the day.
The fund also saw about $1 billion of trading volume on the first day, ProShares said. That made it the second-most heavily traded new ETF on record, the firm said, citing Bloomberg.
The fund’s price rose to $41.94 at the close of stock-market trading, up 4.9% from the initial $40 net asset value.
Dave Nadig, chief investment officer and director of research of ETF Trends, said that much of Tuesday’s trading volume appeared to come from retail investors, since there were few large “block” trades of the size that big institutional traders often deal in.
“This is probably going to be what we all expected, which is it’s an access vehicle for certain players in the marketplace,” Nadig said in a phone interview. “There’s lots of folks who are active participants in the markets who just don’t want to cross over the crypto bridge by themselves.”
Bullish Signal
The new ETF’s debut came as bitcoin’s price surged Tuesday to a six-month high, climbing toward the all-time high near $65,000 set in April.
As of press time, the cryptocurrency was changing hands around $63,839, up 3.3% over the past 24 hours.
Matt Hougan, chief investment officer of Bitwise Asset Management, said in emailed comments that the strong first-day showing “suggests there is a large amount of capital that is still excluded from the crypto market simply because it’s hard to access.”
“That will change over time, and that capital will enter the market,” Hougan said. “That’s a pretty bullish signal for the long term.”
Jeff Dorman, chief investment officer of Arca Funds, wrote in a newsletter Tuesday that “this was a long, arduous road for many, and becomes yet another indication that digital assets are crossing into mainstream.”
The first of its kind in the U.S., the ProShares ETF offers investors the opportunity to gain exposure to returns of bitcoin with the ease of buying an ETF in a brokerage account.
The U.S. Securities and Exchange Commission (SEC) approved the ETF on Friday, and several other pending ETF proposals could win approval from the SEC later this week.
The ProShares ETF is structured to invest in bitcoin futures contracts traded on the Chicago-based CME, rather than investing in the cryptocurrency directly.
So the ETF by itself won’t introduce any new demand for bitcoin. However, traders might buy more bitcoin as they look to hedge against the futures price or take advantage of pricing disparities.
Analysts Predict Valkyrie Will Launch Bitcoin Futures ETF This Week
Bloomberg ETF analysts are predicting Valkyrie’s futures-based Bitcoin ETF will commence trading this week.
Commentators are predicting that a second futures-based Bitcoin exchange-traded fund (ETF) will have gone live by the end of the week following the launch of ProShares’ Bitcoin Strategy ETF later on Tuesday.
On Tuesday, Bloomberg analyst Eric Balchunas predicted that Valkyrie’s Bitcoin (BTC) futures-based ETF is “likely” to launch in the coming days after being certified for listing on the Nasdaq exchange last week.
If true, the milestone would make Valkyrie’s fund only the second Bitcoin ETF to launch in the United States, with ProShares’ futures-based ETF slated to begin trading on the New York Stock Exchange under the ticker BITO on Tuesday.
Fellow Bloomberg analyst James Seyffart had initially predicted that Valkyrie’s Bitcoin Strategy ETF (BTF) would go live on the same day as ProShares’ product. However, Balchunas tweeted earlier on Monday that Varlkyrie’s fund will “likely” launch on Wednesday or Thursday, adding that ProShares will have the “market to itself” for the time being.
Update: Valkyrie not going live tomorrow. Likely looking to launch Wed or Thu tho, but we’ll see. Anyway, $BITO will have market to itself tomorrow. https://t.co/G2Ucit6yxM
— Eric Balchunas (@EricBalchunas) October 18, 2021
Balchunas also noted that Valkyrie had updated its ticker from BTFD to BTF in its application.
Invesco Bows Out Of Race To Launch Futures-Based Bitcoin ETF
Despite the bullish sentiment surrounding the United States Securities and Exchange Commission approving the U.S.’ first Bitcoin ETF, Invesco announced it had withdrawn its application for a futures-based ETF on Monday.
While onlookers had predicted Invesco’s futures ETF would receive the green light from the SEC this week, the firm revealed on Monday that it had withdrawn its application, adding its intentions to work toward launching a spot Bitcoin ETF in partnership with crypto broker-dealer Galaxy Digital. Invesco stated:
“We have determined not to pursue the launch of a Bitcoin futures ETF in the immediate near-term; however we will continue to work in partnership with Galaxy Digital to offer investors a full shelf of products with exposure to this transformative asset class, including pursuing a physically-backed, digital asset ETF.”
However, during Tuesday’s episode of Anthony Pompliano’s Best Business Show, Seyffart and Balchunas argued that the approval of a spot BTC-backed ETF is unlikely to happen anytime soon.
Balchunas asserted that SEC Chair Gary Gensler is much more “comfortable” with Bitcoin futures-based ETFs, as they offer greater consumer protections than spot-backed funds.
Bitcoin Futures ETF Debuts As Second-Highest Traded Fund Ever
The first Bitcoin-linked exchange-traded fund listed in the U.S. debuted as the second-most heavily traded fund on record in a watershed moment for the crypto industry.
The ProShares Bitcoin Strategy ETF — trading under the ticker BITO — rose about 4.9% to $41.94. More than 24 million shares changed hands Tuesday, according to data compiled by Bloomberg. Because of the way the fund settles trades, net flows into or out of the product probably won’t be known until overnight on Wednesday.
With turnover of almost $1 billion, BITO’s debut ranked only behind a BlackRock carbon fund for a first day of trading, the latter of which ranks higher due to pre-seed investments, according to Athanasios Psarofagis at Bloomberg Intelligence.
Bloomberg also reported that options on BITO will begin trading on the NYSE Arca Options and NYSE American Options exchanges on Wednesday.
Meanwhile, Bitcoin made a run at its record high of just under $65,000.
“From our conversations with market participants, I think it’s related to the growing belief as the trading day goes on that this is going to be considered a successful launch,” said Stephane Ouellette, chief executive and co-founder of FRNT Financial Inc., a crypto-focused capital-markets platform. “Given the amount of avenues retail investors already have to participate in BTC, clearly the U.S.-based ETFs are nonetheless satisfying some kind of latent, even if niche, demand.”
A Bitcoin ETF has been long-awaited by both the crypto community and investors on Wall Street, many of whom have argued for years that approval by regulators would open up digital currencies to more mainstream investors. The ProShares fund is based on futures contracts and was filed under mutual fund rules that SEC Chairman Gary Gensler has said provide “significant investor protections.”
“We are really excited to bring BITO, the first Bitcoin-linked ETF, to investors as an important opportunity for them conveniently to invest in Bitcoin in their regular brokerage account,” Simeon Hyman, global investment strategist at ProShares, said on Bloomberg TV. “This is going to allow many people who have been waiting for an easy way to do this and a robust way to do this to now be involved and have it in their portfolios.”
Retail investors rushed to buy the ETF Tuesday. BITO was one of the most-bought assets on Fidelity’s platform with more than 8,800 buy orders coming from customers as of 2:55 p.m. New York time.
“It’s an incredibly bullish week — there’s been really positive sentiment around the ETF in particular,” said Sam Bankman-Fried, chief executive officer FTX, one of the largest crypto exchanges.
It’s long been assumed that whoever received approval first could stand to reap the greatest benefits — including industry recognition as well as potentially attracting huge amounts of cash.
Some analysts are already bullish on BITO’s prospects — the futures-based Bitcoin ETF could attract more than $50 billion in inflows in its first year given the hype around it, according to noted Bitcoin bull Tom Lee, co-founder of Fundstrat Global Advisors.
There are other applications for futures-based Bitcoin ETFs in the queue. Analysts are anticipating launches from issuers such as Valkyrie, whose Bitcoin Strategy exchange-traded fund could trade under the ticker BTFD.
Meanwhile, Grayscale Investments LLC and the New York Stock Exchange filed to convert the world’s biggest Bitcoin fund, ticker GBTC, into an ETF, appealing to regulators for approval just as its wildly popular vehicle is beset with competition.
Market-watchers have a few measuring sticks with which to gauge BITO’s initial reception. The SPDR Gold Shares fund, ticker GLD, had the fastest-ever climb to $1 billion in assets under management, reaching the landmark in just three days, according to Bloomberg Intelligence.
More recently, the VanEck Social Sentiment fund, ticker BUZZ, saw more than $400 million worth of shares traded on its debut earlier this year, one of the highest amounts ever for an ETF on its first day.
“This is likely going to be the biggest launch of all time,” said James Seyffart at Bloomberg Intelligence. BITO is bound to pass VanEck’s BUZZ launch, he said.
Seyffart added that the top launch and all launches above BUZZ’s had backing from pre-seeded institutions, which had been lined up to invest into the funds for hundreds of millions of dollars.
“It’s likely not going to pass some of these funds that traded over a billion in the first day due to hundreds of millions from an institution or two that was lined up prior to launch. But it should pass BUZZ for what we tend to refer to as an ‘organic’ launch,” he said.
Bloomberg News reported last week that the U.S. Securities and Exchange Commission wasn’t going to stand in the way of the launch of a futures-backed Bitcoin fund.
Gensler has been viewed as being more open-minded toward crypto than his predecessor, Jay Clayton was. Observers cite Gensler’s previous interest in the crypto world — he once taught a class at MIT’s Sloan School of Management called “Blockchain and Money.”
And the chairman had over the summer signaled that regulators may be more open to a Bitcoin ETF if it were based around futures rather than the cryptocurrency itself.
ProShares Bitcoin-linked ETF Launches On NYSE As BTC Price Rises Above $63K
The price of Bitcoin rose to a five-month high of $63,293 following shares of ProShares’ ETF opening for trading.
The first Bitcoin (BTC) futures-linked exchange-traded fund in the United States began trading on the New York Stock Exchange, opening at a price of $40 per share.
According to the New York Stock Exchange, ProShares’ Bitcoin Strategy ETF, the first exchange-traded fund allowing U.S. investors direct exposure to cryptocurrency futures, opened at a price of $40 per share of BITO before rising 3.8% to reach $41.54 at the time of publication.
The addition of the crypto fund to a major stock exchange follows years of deferred decisions from the Securities and Exchange Commission, or SEC, the regulator responsible for greenlighting the asset.
The NYSE welcomes @ProSharesETF in celebration of the first U.S. Bitcoin-Linked ETF $BITO https://t.co/0qh0NDS2d4
— NYSE (@NYSE) October 19, 2021
“BITO will open up exposure to Bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider and creating a Bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks,” ProShares CEO Michael Sapir said on Monday.
The SEC first accepted the registration request for ProShares’ Bitcoin Strategy ETF on the NYSE on Friday shortly before doing the same for shares of digital asset manager Valkyrie’s BTC futures ETF for a listing on the Nasdaq.
Institutional asset manager Grayscale also announced on Monday it planned to convert its GBTC Trust into an ETF in the future. The SEC currently has several crypto ETF applications under consideration.
“The ProShares ETF will provide greater market access and ease of use for institutional investors who want to get into the cryptocurrency markets,” said Mary Beth Buchanan, global chief legal officer at blockchain investigative platform Merkle Science. “The newest futures based ETF will trade on the NYSE and will feel more familiar to institutional investors than opening individual trading accounts and trading directly on a spot or futures based cryptocurrency exchange or crypto trading platform.”
According to data from Cointelegraph Markets Pro, the price of Bitcoin rose following shares of ProShares’ ETF opening for trading, moving 1.2% from $62,557 to a five-month high of $63,293. This marks a return to the crypto asset moving above $63,000 for the first time since April when it hit a then all-time high price of $64,863.
Melanion Capital Bitcoin ETF To Launch On Euronext Paris On Oct. 22
French financial regulator AMF officially approved Melanion Capital’s Bitcoin-linked ETF product in August.
Concurrent to the United States finally launching its first Bitcoin (BTC) futures-based exchange-traded fund (ETF) Tuesday, France inches closer to a major Bitcoin-related ETF launch.
Paris-based alternative investment firm Melanion Capital is preparing to launch its Bitcoin-linked ETF product already this Friday, the firm’s CEO Jad Comair announced to Cointelegraph on Monday.
Called “Melanion BTC Equities Universe UCITS ETF,” the Bitcoin ETF will start trading on France’s primary stock exchange, Euronext Paris, at 7 am UTC.
The product will be listed under the ticker symbol BTC FP, providing investors with Bitcoin exposure through a diversified basket of equities correlated to the daily price movements of Bitcoin.
“It is traded on the Paris stock exchange, therefore eligible to all investors, and we’re in the process of listing it all over Europe,” Comair said, adding that there is a strong demand for Bitcoin-related products in the region. “We have embarked on a plan to bring more institutional-grade crypto products to the market,” he added.
According to Comair, the idea of BTC FP is similar to a Bitcoin-linked ETF by Volt Equity, which was approved by the United States Securities and Exchange Commission (SEC) in early October. Instead of tracking Bitcoin directly, both Melanion Capital and Volt Equity’s Bitcoin ETFs are tied to companies correlated with Bitcoin.
“They both share the same idea: structuring a Bitcoin ETF by investing in equities holding Bitcoin, instead of going through the difficult and burdensome route of directly holding Bitcoin,” the Melanion Capital CEO noted.
This ETF will track the Melanion Bitcoin Exposure Index, which consists of several industry firms, including Michael Saylor’s software firm MicroStrategy, crypto mining firm Argo Blockchain, Mike Novogratz’s digital asset merchant bank Galaxy Digital and others.
“Our ETF is the first thematic Bitcoin product to be approved in Europe. ETF is a big deal, as it’s the most widely used and the one eligible for various pension plans,” Comair said.
The executive also noted that its ETF would bridge the gap between the crypto and institutional worlds. “The investment pockets of institutional investors have a lot of constraints to protect their customers, and an ETF is one of the most eligible wrappers that matches these constraints,” Comair noted.
In August, French financial regulator the Autorité des marchés financiers officially approved Melanion Capital’s Bitcoin-linked ETF.
The news comes as American ETF provider ProShares prepares to launch its Bitcoin futures-based ETF on the New York Stock Exchange on Tuesday. According to Bloomberg analyst Eric Balchunas, Valkyrie’s Bitcoin futures-based ETF is likely to launch this week.
A Bitcoin ETF Is Here. What Does That Mean For Investors?
With ProShares launching its exchange-traded fund, others are expected to follow as the SEC considers additional proposals.
The first bitcoin exchange-traded fund started trading Tuesday, making the most widely traded cryptocurrency available to most investors with a brokerage account. Here is a look at what it means.
What Is Happening?
The ProShares Bitcoin Strategy ETF rose nearly 5% in one of the most-heavily traded fund debuts. It is the first of several funds expected to follow over the next two weeks as the Securities and Exchange Commission considers additional proposals made in August by asset managers Valkyrie Investments and VanEck to sell bitcoin ETFs to investors.
The companies don’t expect their proposals to be turned down, according to people familiar with them, though the SEC could approve, disapprove or defer any or all of the applications.
New ETF proposals are subject to a 75-day SEC review period. If regulators don’t object, the funds are considered cleared for trading.
Invesco was among the firms expected to launch a bitcoin futures fund this month. But the asset manager said it wouldn’t proceed at this time. Valkyrie and VanEck are still slated to launch this month, with the former as early as this week. Five other firms have applied with the SEC to list similar funds, and decisions on them will likely be made in coming months.
The asset-management industry has been pushing for years to sell a bitcoin ETF, seeking to cash in on a surge in the value of digital currencies.
Some in the industry say investors should “allocate” to crypto, which means devoting some small amount of their portfolios to the asset class to boost returns and diversify holdings. A bitcoin ETF would make it easier to do so, according to people in the industry.
What Are Bitcoin ETFs?
An exchange-traded fund is an investment that tracks the price of a basket of underlying assets and is tradable on U.S. stock exchanges. In this case, the funds would track the price of bitcoin futures traded on the Chicago Mercantile Exchange, rather than bitcoin itself.
Why Are These ETFs Futures-Based?
These funds won’t hold actual bitcoins. Instead they will deal in bitcoin futures, which trade separately on regulated U.S. exchanges such as CME.
Regulators prefer futures-based ETFs because the SEC lacks jurisdiction over crypto trading venues that aren’t registered as exchanges in the U.S. The SEC says that leaves investors vulnerable to fraud and manipulation because regulators have no insight into where bitcoins are coming from and how prices are being determined.
The SEC hasn’t approved exchange-traded funds that hold bitcoin or other cryptocurrencies directly, and the agency has suggested it wouldn’t back such a move at this time.
What Else Is In These Funds?
ProShares said in its prospectus that the fund will primarily invest in bitcoin futures. Previously the firm planned to also buy shares of Canadian ETFs and pooled investment trusts that hold bitcoin as a way of gaining a more direct line of exposure to the actual coins.
Other asset managers, including Invesco and VanEck, have proposed holding similar assets beyond bitcoin futures.
The SEC has indicated that it prefers futures-based ETFs for crypto, thanks to the surveillance considerations noted above, so there is some expectation in the industry that all of the funds will end up as plain-vanilla bitcoin futures ETFs.
ETFs appeal to investors who want to buy a bundle of assets easily. Otherwise, investors would have to buy them directly.
Is There A Trade-Off With Futures?
Some crypto enthusiasts complain that futures-based ETFs won’t track bitcoin perfectly because of the costs of buying and selling futures contracts and other concerns. They contend that investors in bitcoin futures ETFs could be saddled with substandard performance if crypto keeps rising.
Is This Why Bitcoin Is Going Crazy Again?
Yes. Bitcoin has surged in recent days, with fans contending that the launch of a bitcoin ETF would increase the cryptocurrency’s legitimacy and make it easier for institutional investors to get exposure.
Updated: 10-20-2021
Contango Conmigo: Why A Bitcoin Futures ETF Could Be A Bloody Ride
Regulators maintain the futures market is a lower-risk way to list bitcoin. But there’s a major catch.
Since at least 2013, when the Winklevoss twins first filed an application to create one, a bitcoin exchange-traded fund (ETF) has been the crypto industry’s white whale.
An ETF would open bitcoin investment to a huge new array of players, from individual 401(k) users to major institutions, who can’t buy bitcoin directly for regulatory or compliance reasons. Yesterday, we finally got a bitcoin ETF … sort of.
The ProShares Bitcoin Strategy ETF (BITO) is now trading on the New York Stock Exchange, and ProShares execs even rang the opening bell.
They did it under a banner celebrating the first “U.S. Bitcoin-Linked ETF,” and therein lies a teachable moment for careful investors: “linked” is the kind of word that’s as fungible as a good currency, able to step in and do the work of dozens of lesser, more specific words.
In this case, the word being replaced is “futures” because rather than a fund that actually holds bitcoin the ProShares ETF will hold bitcoin futures contracts.
There’s huge irony to a futures ETF getting approved before a “real” bitcoin ETF. Regulators have broadly argued a futures ETF is less exposed to potential manipulation and custody risk in the bitcoin spot market – but the upshot could be massively missing gains for investors who buy the futures ETF instead of spot bitcoin.
The culprit is an issue known (for some reason) as “contango.” Investors in other commodities futures ETFs have been complaining about it for years, so we have a pretty good sense of how it works. I won’t get into the nitty-gritty here but the nut of it is that futures ETFs have to renew, or “roll,” their forward contracts regularly.
If the longer futures price is higher than the expiring contract on the date of renewal, the fund loses that much basis. This loss is known as “contango bleed.” Here’s our deeper dive into contango risk (https://www.coindesk.com/markets/2021/10/11/dying-for-a-bitcoin-futures-etf-watch-out-for-contango-bleed/), and an even deeper one from CenterPoint Securities (https://centerpointsecurities.com/contango-and-backwardation/).
(There is also an inverse phenomenon called “backwardation,” when the longer futures price is lower – but this seems less significant because it just gives futures ETF holders a small premium when the underlying commodity is already heading downward.)
These contango losses can be immense in conventional commodities, and may be truly gargantuan for bitcoin. In one snapshot noted by Motley Fool, a futures-based natural gas ETF stood to lose 1.5% on a single month’s roll. In larger markets, these spreads are often arbitraged out – professional traders can use them to make money and, in doing so, close the gaps.
But as laid out by Bloomberg, crypto’s dominance by retail traders makes that arbitrage less robust. The current roll cost on BTC futures is a disemboweling 17%, according to Charlie Morris of ByteTree Asset Management. He expects the ETF to underperform spot longer term by 8.4% annually, before fees.
That sounds a lot like paying a jaguar good money to rip your face off. Tyrone Ross, a crypto-focused financial advisor, says retail investors should stay away from BITO.
Simeon Hyman, a strategist at ProShares, pushed back against Morris’s analysis yesterday on CoinDesk’s “All About Bitcoin’’. Hyman instead estimates an annualized 2.5% roll cost, and rightly points out that an expanding market could shrink the bleeding further.
In any conventional asset, that would still be pretty brutal, but the expectation of continued upward movement for bitcoin could still make it worth it. Investors are certainly not being put off, with BITO attracting $570 million in inflows and a record-setting $1 billion in trading volume on day 1.
According to our reporting, that inflow seems to be substantially from retail investors. While some may be wise to contango risk, I guarantee many don’t even grok the difference between a futures and spot ETF.
If they only notice the distinction after five or 10 years of contango bleed, there will be some truly biblical wailing and gnashing of teeth. Whether Morris’s or Hyman’s estimate is more on target, BITO will bleed buckets over a longer timeline.
I am not one of the single-minded trolls who think all regulation simply distorts markets, but it’s hard not to see some seriously perverse dynamics embodied in what regulators have brought to fruition here.
Purpose Investments Files To List 3 More Crypto ETFs In Canada
The Canada-based asset manager also plans to launch a privately offered fund providing exposure to decentralized finance (DeFi).
Purpose Investments has filed to list three more cryptocurrency exchange-traded funds (ETFs) with the Canadian securities regulators.
* The proposals for the three actively managed funds – dubbed Purpose Crypto Opportunities ETF, Purpose Bitcoin Yield ETF and Purpose Ether Yield ETF – were announced on Wednesday following the launch of the asset manager’s bitcoin and ether ETFs earlier this year.
* The Crypto Opportunities ETF aims to invest in companies with exposure to digital assets, akin to the ETF that Evolve Funds filed with the Ontario Securities Commission in August.
* The Bitcoin Yield and Ether Yield ETFs meanwhile will aim to offer investors monthly yield by implementing a derivatives-based strategy and by obtaining either direct or indirect exposure to bitcoin and ether.
* Purpose Investments will act as the manager for the two yield ETFs, while private investment manager Neuberger Berman Breton Hill ULC will serve as an independent subadvisor for the Crypto Opportunities fund.
* The Canada-based asset manager also plans to launch a privately offered fund offering exposure to decentralized finance (DeFi).
Bitcoin Futures ETF Debuts With Highest-Ever First Day ‘Natural’ Volume Of $1B
ProShares’ Bitcoin Strategy ETF saw around $1 billion in volume on its opening day, with 24.313 million BITO shares changing hands.
ProShares’ Bitcoin Strategy exchange-traded fund (BITO) saw the highest ever first day “natural” volume for an exchange-traded fund (ETF), with the figure reaching a little over $1 billion by the end of the opening day.
It is second overall, tailing just behind the BlackRock U.S. Carbon Transition Readiness ETF, which booked $1.16 billion in volume on its debut in April.
The ProShares Bitcoin futures-based ETF launched on the New York Stock Exchange on Tuesday with an opening price of $40.88. According to data from TradingView, BITO closed the day at $41.94, with a total of 24.313 million shares changing hands, equating to a first-day volume of just over $1 billion.
Commenting on BITO’s opening day performance, Bloomberg senior ETF analyst Eric Balchunas tweeted that ProShares’ ETF was arguably the largest in terms of “natural” or “grassroots interest.”
Balchunas said BlackRock’s U.S. Carbon Transition Readiness ETF (LCTU) April launch volume was “unnatural,” as it was driven by “one pre-planned giant investor.” LCTU’s daily volume also fell off a cliff to between $2 million and $6 million in the days after launch.
There was reportedly $570 million worth of inflows for BITO on the first day, suggesting that ProShares’ ETF could rank itself as an industry heavyweight in terms of year-one net flows for a first-to-market single commodity ETF in 12 months.
According to data from FactSet, the top two single-commodity ETFs leading the pack are sold and silver, with year-one flows of $3 billion and $1.7 billion, respectively. Outside of commodities, the largest year-one flow for an exchange-traded product of $5.351 billion was for the Invesco QQQ Trust.
While the bullish performance marks a significant milestone for ProShares and the crypto sector, Balchunas warned that it could have consequences for the other firms next in line to launch their own Bitcoin (BTC) futures ETFs:
“The other result of today is it makes life that much harder for the next in line ETFs to succeed. Time is of the essence. Every day counts because once an ETF gets known as ‘the one’ and has tons of liquidity, it’s virtually impossible to steal.”
Following ProShares’ ETF launch on Tuesday, United States Securities and Exchange Commission Chair Gary Gensler outlined in an interview why he and the SEC favor ETFs backed by Bitcoin futures as opposed to the spot price of BTC.
“BTC futures have been overseen by the SEC’s sister agency, the Commodities Futures Trading Commission, for the past four years. You have something that’s been overseen for the past four years by a federal regulator, and it’s also been wrapped up in the SEC’s jurisdiction through the Investment Company Act of 1940,” he said.
Valkyrie’s Bitcoin futures-based ETF is set to be the second product to join BITO on the NYSE this week. It cheekily changed its ticker to BTFD, which is slang for “Buy The F—ing Dip.”
Bitcoin Options Open Interest Tops $14B As ProShares ETF ‘BITO’ Goes Live
A pickup in options activity ahead of bitcoin’s ETF listing signifies increased participation by sophisticated investors.
Investor interest in the bitcoin options market increased, with the cryptocurrency nearing record highs in the lead up to Tuesday’s launch of the first-ever U.S.-based bitcoin futures exchange-traded fund (ETF).
Bybt data shows the cumulative dollar value of bitcoin options contracts open on major exchanges rose to $14 billion on Tuesday, hitting the highest point since April. The tally was a whisker away from the peak of $14.68 billion reached on March 24.
Open interest, or the number of contracts traded but not squared off with an offsetting position, rose to a six-month high of 229,220 BTC.
Bitcoin reached a record UTC close above $64,000 on Tuesday as the ProShares’ ETF made an impressive debut on the New York Stock Exchange, registering a trading volume of $1 billion.
Hopes the U.S. would approve a futures-based ETF strengthened late last month after Securities Exchange and Commission (SEC) Chairman Gary Gensler reiterated support for the structured product. Since then, the price of bitcoin has rallied over 40%, and options open interest has increased by 50%.
The pickup in options activity in the days leading up to the SEC’s decision on ETF proposal signifies increased participation by sophisticated investors and market maturity.
“An extremely rare occurrence for Bitcoin is the Event-driven trade, observed as Futures ETF deadlines approached and then approved. Options are a perfect tool to employ in these scenarios,” Deribit Insights tweeted. Deribit is the world’s largest crypto options exchange, accounting for more than 80% of open interest and trading volume in bitcoin and ether options markets.
Options are derivative contracts that give the purchaser the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy and the put option gives the right to sell. A call buyer is implicitly bullish on the market, while a put buyer is bearish.
Seasoned traders often use both calls and options when the outcome of a binary event (a trigger for a big move), is uncertain, but a move in either direction is expected.
However, flows have been predominantly bullish ahead of the ProShares’ ETF listing, with traders piling into out-of-the-money or higher strike call options, as blockchain data analytics firm Glassnode mentioned in its weekly report published Monday.
“The favored options contracts appear to be call options with strike prices above $100,000, with a typical open interest of $250 million to $350 million for call options expiring at the end of the year. The open interest in call options dwarfs that in put options, aligning with the overall bullish market sentiment,” Glassnode said.
Over-the-counter tech platform Paradigm recently registered continuous buying of topside calls and call spread strategies at strikes between $70,000 to $120,000. Trades facilitated by Paradigm are automatically executed, margined and cleared at Deribit.
The ProShares Bitcoin Strategy Fund saw a trading volume of $1 billion on Tuesday, becoming the second-most heavily traded new ETF on record, according to Bloomberg data.
“Volumes were pretty much right on the screws where the “ETF Nerds” had been predicting – about $1 billion,” David Nadig, chief investment officer and director of research of ETF Trends, said in a Twitter response. “The nature of that volume seems to be [coming from] the small lot, implying retail investors, speculators and high-frequency traders rather than large institutional allocations.”
According to Bloomberg analysts, Valkyrie’s futures-based bitcoin ETF may commence trading later this week.
The launch of futures-based ETFs could have a positive impact on the derivatives market. “CME options are currently a very small part of the whole crypto options market. Perhaps we could see some growth and development in CME options as a result,” QCP Capital said in its Telegram channel last week.
On Tuesday, the CME accounted for 2.7% of the global bitcoin options open interest of 229,220 BTC.
Updated: 10-21-2021
Valkyrie Bitcoin Futures ETF To Launch On Nasdaq On Oct. 22
Valkyrie’s Bitcoin futures ETF will go live on Nasdaq just a few days after ProShares debuted a similar product on NYSE.
Valkyrie’s Bitcoin (BTC) futures-based exchange-traded fund (ETF) is poised to follow the launch of ProShares’ Bitcoin Strategy ETF on Friday.
Valkyrie Bitcoin Strategy ETF is finally effective and is set to start trading on Nasdaq under the ticker BTF on Friday, Valkyrie confirmed to Cointelegraph on Thursday.
The launch comes after the United States Securities and Exchange Commission granted a notice of effectiveness to Valkyrie Bitcoin Strategy ETF on Thursday.
According to Leah Wald, CEO of Valkyrie Funds, the upcoming launch of Valkyrie’s Bitcoin futures ETF marks an important milestone in the relationship between the cryptocurrency industry and U.S. regulators.
“This launch is important because it’s further affirmation that U.S. regulators want to collaborate with the industry to regulate crypto assets rather than ban them,” she said.
“The more products that come to market, the more awareness they bring and, hopefully, more adoption. There are of course other filings for similar products, and it would make sense for them to come to market,” Wald added.
As previously reported, ProShares’ Bitcoin Strategy ETF became the first Bitcoin futures-based ETF to launch in the United States, starting trading on the New York Stock Exchange on Tuesday.
Earlier in October, the SEC also approved a Bitcoin-linked ETF product by Volt Equity that provides investors with an instrument investing in companies with significant exposure to Bitcoin.
Updated: 10-22-2021
Second U.S. Bitcoin Futures ETF Makes Lower-Profile Debut
The second futures-backed U.S. Bitcoin exchange-traded fund made a slightly less conspicuous debut than the launch of the first such investment product three days ago.
The Valkyrie Bitcoin Strategy ETF — trading under the ticker BTF — fell 2.8% from its inception price of $25 Friday. More than 3.1 million shares worth about $78 million changed hands during the session. Bitcoin, meanwhile, pared an earlier advance to fall as much as 4.3% to $60,011. The largest digital currency reached an all-time high of just under $67,000 on Wednesday.
“There does seem to be a first mover advantage that plays out,” said Stephane Ouellette, chief executive and co-founder of FRNT Financial Inc., a crypto-focused capital-markets platform, citing the Canadian crypto ETFs as an example. “I wouldn’t intuitively think that the performance of the next one or one after is all that important from the perspective of the milestone for the asset class.”
The bar was high for Valkyrie after the Tuesday debut of the ProShares Bitcoin Strategy ETF (ticker BITO), which ranked as the second-busiest launch ever, taking assets in the fund over $1 billion in just two days.
“I think BITO stole its thunder — this was a much quieter launch.” said Steve Sosnick, chief strategist at Interactive Brokers.
The field could get crowded quickly: VanEck’s pending Bitcoin Strategy ETF (ticker XBTF) could come to market as soon as next week, carrying a management fee 30 basis points cheaper than the ProShares and Valkyrie funds.
“The market can handle a lot of different issuers’ products and we very much welcome the competition — obviously, we’re coming in second to market here but we’re very excited,” Leah Wald, Valkyrie Funds CEO, said in a Bloomberg Television interview Thursday, adding “we wish our competition luck.”
Booming demand has quickly become a problem for BITO, which is bumping up against the limit on the number of front-month futures contracts it is permitted to hold by the Chicago Mercantile Exchange, according to data compiled by Bloomberg.
That could be a potential issue for Valkyrie’s fund as well, which also holds short-term Bitcoin contracts. The ProShares fund fell for a second consecutive trading session, dropping roughly 3% Friday.
The U.S. Securities and Exchange Commission allowed the futures-focused ETFs to go forward after Chair Gary Gensler said they provided significant investor protections. The agency has rejected all applications for funds investing directly in the world’s largest cryptocurrency.
Still, some market-watchers say the crypto ETF industry could buck the trend when it comes to being first to go to market.
“In the past, when you had ETF launches, first-mover advantage was very sizable,” Matt Forester, chief investment officer of Lockwood Advisors at BNY Mellon Pershing, said by phone. “This area may be so new that it might take some time to sort that out.”
Valkyrie’s ETF Debut Soured by Falling Bitcoin Market
A new exchange-traded fund is joining the race to attract stock market investors looking for bitcoin exposure. But out of the gate on Friday, the ETF’s share price was tracking bitcoin lower.
Valkyrie Investments’ bitcoin futures exchange-traded fund (ETF) started trading early Friday, after winning the blessing of the U.S. Securities and Exchange Commission earlier in the week.
The new Valkyrie fund, officially the called the Bitcoin Strategy ETF, went live on the Nasdaq under the ticker BTF when stock markets opened Friday at 9:30 a.m. ET, but premarket trading started earlier.
But after roughly a few hours of trading, the stock was changing hands at $24.01, down 4% from the initial price, according to the Nasdaq.
The early performance appeared to track a decline in bitcoin’s price, which was lower for the second straight day, around $60,095 – slipping further from the all-time high close to $67,000 earlier in the week. Valkyrie had recovered by the end of trading to finish at $25 per share.
BITO, the ProShares ETF, also fell Friday, down 4.4% on the day to $39.04 a share.
After months of waiting, the cryptocurrency industry is finally getting the U.S. ETFs that fund executives have long sought – as a way of attracting money from investors who want exposure to bitcoin price via the stock market. While cryptocurrency analysts say the new offerings, focused on bitcoin futures contracts, are less ideal than an ETF backed by bitcoin directly, the reception so far among investors has been overwhelming.
The first U.S. bitcoin futures to go live, the ProShares Bitcoin Strategy ETF (stock ticker BITO), launched Tuesday and attracted more than $1 billion of assets in just two days, the fastest-ever ETF to hit the milestone. VanEck’s bitcoin futures ETF offering is slated to trade starting early next week.
Bitcoin spot markets rallied to new all-time highs Wednesday amid the filings parade. Bitcoin-linked ETFs are seen as an easy way for traditional investors to chase crypto market exposure from their brokerage accounts.
ProShares’ juggernaut bitcoin futures fund debut indicated interest runs deep. The first-ever U.S. bitcoin-linked ETF hauled in $570 million of assets in its first day, with over $1 billion in trading, one of the most successful ETF launches ever.
That’s complicated the playbook for all other bitcoin futures ETF hopefuls, including Valkyrie.
Updated: 10-23-2021
Smash-Hit Bitcoin ETF Ups The Ante For Issuers Racing To Launch
The cryptocurrency universe got its long-awaited wish: Not one, but two U.S. Bitcoin-linked exchange-traded funds finally launched, bringing further mainstream acceptance and a flood of cash.
But after the stunning success of the ProShares Bitcoin Strategy ETF (ticker BITO) — which accumulated more than $1 billion in assets in just days — the stakes are higher than ever for the queue of issuers hoping to gain a foothold in the sector.
Indeed, when the Valkyrie Bitcoin Strategy ETF (ticker BTF) debuted Friday, 3.1 million shares changed hands. That compares with the 24 million BITO shares traded at Tuesday’s launch, which unleashed enthusiasm that helped send Bitcoin to record a day later.
Those could be worrying stats for the firms behind seven pending applications for futures-based ETFs that are now in front of the Securities and Exchange Commission and most likely to win clearance next.
Meanwhile, Grayscale Investments LLC filed to convert its $40 billion Bitcoin fund into a physically backed ETF that would track the cryptocurrency — a structure that U.S. regulators have yet to approve but would be a game changer.
“It’s a competitive landscape,” Jesse Proudman, co-founder and CEO at Makara, a crypto-advisory firm, said by phone.
The $6.8 trillion ETF industry is notoriously fierce. Issuers, forced to try to stand out in an over-saturated market, duke it out among one another by offering exposure to thematic industries or by continuously decreasing their management fees or luring in investors through quirky tickers.
It’s also historically been assumed that whoever receives approval first stands to reap the greatest benefits — including industry recognition as well as potentially attracting huge amounts of cash. Crypto may not be exempt from this trend.
“First-mover advantage can have pretty significant benefits from an AUM perspective as investors go to allocate,” Makara’s Proudman said, referring to assets under management. “I don’t think there’s room for nine different ETF products all representing the same physical asset so I think attrition of some of these applications is inevitable.”
Some analysts anticipate BITO will continue to attract more cash, perhaps even as much as $50 billion in the ETF’s first year given the hype around it, predicted Bitcoin bull Tom Lee, co-founder of Fundstrat Global Advisors.
“Every day that goes by that there is a first-mover fund in the market is a day that that fund has an opportunity to raise money versus funds that haven’t been approved yet,” Dave Abner, global head of business development at Gemini Trust Co., said by phone. “Those who’ve filed futures funds that have not been approved yet, they’re feeling pressure right now.”
Another way that fund issuers stand out is by cutting their fees to rock-bottom levels — a trend that is already forming in the still-nascent Bitcoin ETF arena. VanEck’s pending Bitcoin Strategy ETF (ticker XBTF) — expected to launch as soon as next week — will carry a management fee of 0.65%, meaning $6.50 for every $1,000 invested.
That would undercut the 0.95% expense ratio carried by BITO and BTF.
While BTF may be the pricier option, Valkyrie’s deep expertise in crypto markets is worth more than the 30 basis-point difference, according to the firm’s chief executive.
“Other asset managers are in the ETF business and we’re embedded in the crypto market,” Leah Wald, Valkyrie Funds CEO, said on Bloomberg’s “QuickTake Stock” streaming program Friday. “At the end of the day, investors can choose whether they want subject-matter expertise and the ability to pivot as needed, or again, they can go with a bit of a monolith that maybe cares more about launching their next fund than prioritizing Bitcoin.”
It’s in the best interest of investors to have multiple options, says Ophelia Snyder, co-founder and president of 21Shares, which has two live filings, including one for an ETF tracking futures that’s got the backing of Cathie Wood.
“At the end of the day, what this is all about is getting people into the sector,” she said by phone. “There’s a philosophical element to this, which is getting that accessibility out there and showing how well-established the space now actually is — and a cohort of well-structured, well-built products from established and respected managers is exactly what this space needs.”
Updated: 10-24-2021
As the CME’s Volume Gets Pumped, the Bitcoin ETF’s Quirky Structure Could Explain Some of It
If one wants exposure to bitcoin, the purest play is buying bitcoin itself. Everything else comes with its own idiosyncrasies.
Last week’s launch of the ProShares Bitcoin Strategy ETF (BITO) was a smash hit by any measure. Yet, it may be that at least part of its success could be the result of how the instrument is structured rather than pure demand from buyers hoping for bitcoin exposure.
In just a few hours, the futures-focused exchange-traded fund (ETF) amassed $570 million in assets under management (AUM), making it one of the most successful debuts of an ETF in history. Within a few more hours, that number just about doubled.
BITO’s assets are mostly invested on the Chicago Mercantile Exchange (CME), which saw an expected increase in both open interest and volume for bitcoin futures. One question is whether some of that volume could be the result of traders positioning for profit from the way this particular ETF is structured.
Currently, for every dollar it takes in, ProShares allocates 40.2% to buying CME bitcoin futures contracts that settle in October and 31.2% for futures that settle in November. The remaining 28% or so is put in U.S. Treasury bills. Reminder: On the CME, bitcoin futures are settled in cash, meaning no actual bitcoin changes hands. It’s basically a side bet on the price of the asset.
So if by Wednesday there were $1.108 billion in AUM, $791 million of it was bitcoin futures on the CME. That’s the equivalent of 13.8% of the CME’s bitcoin open interest of $5.745 billion.
From Monday to Wednesday, open interest soared to $5.745 billion from $4 billion, an increase that was more than double the ProShares ETF’s holdings.
Meanwhile, volume was up, too, to levels never seen before on bitcoin futures: Tuesday saw $5.9 billion in futures change hands on the CME, and Wednesday’s figure was north of $7.5 billion. In the 19 trading days prior, the average was $2.5 billion per day.
Higher volumes? Higher interest? Why, of course that’s bullish, right? Perhaps, but maybe not 100%.
Here’s where it gets interesting.
Creation And Redemption
BITO isn’t structured like a typical stock ETF. Rather, some of its features are more likely to be found in ETFs that own bonds and other types of financial instruments.
With a lot of stock ETFs, “authorized participants” (AP for short) accumulate and deliver a basket of shares to the ETF provider in exchange for shares in the ETF in a rather Biblical-sounding process called “creation.” APs aren’t average Joes, however.
They are institutions and the like that can do this sort of thing in bulk and have the sort of relationships that allow such a trade to take place.
The APs do this kind of a trade if the value of the ETFs they get in return (which they then can sell in the market) is significantly higher than the stocks they deliver. And by “significantly higher” we’re talking just 1%.
That may not sound like a lot for a retail trader hoping to win big on something she saw on Reddit, but for institutions that do trades in the millions, this starts to add up to real money.
If this sort of trade is done enough times, the price of the underlying basket of stocks will rise as they get bought up and the price of the ETF shares will fall as they get sold until the prices of the two converge.
The also-Biblical-sounding “redemption” process is the reverse of the creation process, where APs get a basket of shares in exchange for redeeming their ETF shares to the provider. (ETF.com has a nice little primer on all of this, if you’re so inclined.)
BITO, though, does something similar to bond ETFs called “cash creation,” meaning the AP delivers cash rather than the underlying asset to the ETF provider in exchange for shares.
That could make for some quirky movements in the market, as noted in a Twitter thread by Dave Nadig, chief investment officer and director of research for news and data sites ETF Trends and ETF Database.
Pump Up The Volume
If BITO were to trade well above fair value during a hot trading day – say, the day of a long-anticipated premiere for an SEC-regulated bitcoin ETF – an AP could sell shares of the ETF “naked,” effectively short without borrowing (the minimum size the AP can create is 10,000 shares or about $4 million-worth as of Thursday).
Simultaneously, the AP could offset much of that risk by buying futures on the CME or even some other bitcoin-related asset (bitcoin itself or shares of MicroStrategy or whatever).
At the end of the trading day, the AP would give cash to the ETF provider (in this case, ProShares) in exchange for shares of BITO. ProShares then would take the money and buy futures contracts on the CME because that’s what it’s supposed to do when an AP gives it cash.
At the same time, the AP would most probably (though it’s not a given) unwind that hedge taken in other bitcoin assets when it initiated the short earlier in the day.
Again, should this trade get done by more than a few APs, prices of BITO and bitcoin futures would theoretically start to converge, though up to a point. The maximum amount of October bitcoin contracts an entity can hold is 2,000 and up to 5,000 total for all expiries; each contract holds five bitcoin. (BITO is now just about at those limits and the CME is set to increase those limits.)
All this could do a funny thing to volume, though. “AP activity will show up in underlying [CME contracts] twice,” tweeted Nadig. “One quick hedging round trip, followed by one long position until roll/redemption.”
As it turns out, the ratio of volume to open interest in CME bitcoin futures averaged 1.3x Tuesday and Wednesday compared to a 1.0x over the previous 19 days. Thus, open interest those two days averaged $5.3 billion but volume averaged $6.7 billion.
That’s not saying $2.8 billion in above-average volume was necessarily the result of APs seeking out arbitrage opportunities. Indeed, Nadig, speaking to CoinDesk, made it clear that he didn’t know if it happened at all.
Nonetheless, the outsized spike in volume relative to open interest indicates that traders were doing at least some amount of flipping.
Thus, when looking at data price and volume data, it helps to remember that sometimes how an instrument is structured can explain some of it.
In the end, if one wants to own bitcoin, the purest play is buying bitcoin itself. Everything else comes with its own idiosyncrasies.
Bitcoin ETF’s Success Could Come At Fundholders’ Expense
The first exchange-traded fund based on bitcoin futures is rolling up assets, but traders say the ProShares fund’s structure makes it a sitting duck for ‘front-running’
There are signs that the bitcoin futures market isn’t big enough for a planned wave of crypto exchange-traded funds.
Since launching Tuesday, the ProShares Bitcoin Strategy ETF has amassed $1.2 billion in investor assets, the quickest billion-dollar fundraising on record.
But that success is almost certain to come at fundholders’ expense, analysts say, because the gains make the ProShares ETF an outsize target for traders who seek to exploit futures-based ETFs’ Achilles’ heel: their need to take large positions in near-term futures and frequently “roll” them into the following month, rather than taking cash at expiration.
The ProShares ETF, which buys bitcoin futures contracts rather than the cryptocurrency itself, now controls more than a fifth of outstanding bitcoin futures contracts expiring this month and nearly a third of next month’s. The scale of those holdings will pressure returns of the futures-based ETFs that have been launched and slow the pace of further introductions, analysts said.
“For us, it creates more trading opportunities,” said James Koutoulas, chief executive of Typhon Capital Management, a nearly $200 million hedge fund that trades futures, including bitcoin.
ProShares says its fund offers investors an opportunity to gain exposure to bitcoin. To maintain that exposure, ProShares takes investors’ cash from ETF purchases and uses some of it to buy bitcoin futures, primarily the closest month’s futures contract, since that typically offers the closest correlation to the cryptocurrency’s spot price.
That is when it gets complicated. When the contract expires, the fund must roll its existing contracts into next month’s. Other investors know this, so they buy the next month’s futures first—an act that drives up the price and allows traders to profit by selling into the demand created when the fund rolls. The higher price that the fund pays comes out of investors’ pockets.
“It can cost you a lot of money to roll your bitcoin futures,” said Francisco Blanch, an analyst at Bank of America. “There’s an element of traders taking advantage of it, and an investor potentially losing out.”
Another wrinkle: Position limits imposed by CME Group Inc. have already led ProShares to invest into the next month, analysts said—a decision that could reduce the stress of rolling this month’s contracts into the next one but that risks expanding the gap between the fund’s performance and bitcoin’s. Those limits double next month, potentially somewhat alleviating that issue.
“This is an evolving market,” said ProShares Chief Executive Michael Sapir. “We expect the market to continue to grow on both sides of the trade and become more and more efficient.”
In its prospectus, the fund highlights the lack of liquidity in the bitcoin futures market, adding that large positions increase the risk of illiquidity, might make positions more difficult to sell and may affect the price of bitcoin futures. Doing so “may increase the losses incurred,” the prospectus added.
The price of the ProShares ETF declined 1.2% between the 9:30 a.m. market opening on Tuesday, its first trading day, and Friday’s 4 p.m. close. Bitcoin fell 2.4% over the same span.
Asset managers and futures traders say the prospect of other ETFs buying the same contracts stands to exacerbate the problem. The Valkyrie Bitcoin Strategy ETF that was launched Friday will ultimately push roll costs higher and hit performance at both funds, analysts added.
One of the biggest ETF issuers in the country, Invesco Ltd. IVZ 2.21% , has already said it is backing off for now from following ProShares with its own bitcoin futures ETF. The firm didn’t elaborate on the decision, but people familiar with the matter said capacity issues within the bitcoin futures market were a factor.
Over the past year, the annualized roll yield on bitcoin futures—reflecting the gap between the front-month futures and bitcoin’s price—has averaged 8.4%, said Charlie Morris, founder and chief investment officer of ByteTree Asset Management.
That means an investor in a futures ETF would net $91.60 annually before fees for every $100 in gains made by bitcoin. The gap stands to widen with volatility, which has picked up recently following large price gains in bitcoin. Annualized roll yield was as high as 17% Thursday, he added—meaning investors in a futures-based fund would net $83 for every $100 in bitcoin gains.
That isn’t unprecedented. A popular ETF known as the United States Oil Fund, known as USO, has grown so big that it often controls a significant portion of the most-active oil-futures contracts.
Though that market is much deeper and more liquid than the futures market for bitcoin, oil traders routinely came to buy the next-month futures before USO could, a practice known as front-running that had the effect of increasing the costs that the fund paid for its futures and punishing returns for the fund’s investors.
This isn’t an isolated issue. Over the past 10 years, USO has lost nearly 80% of its value, while crude-oil prices have risen and fallen sharply but ended essentially where they started.
Unlike USO, the funds run by ProShares and Valkyrie are both actively managed, giving fund managers greater latitude and potentially limiting the impact of the front-running trades. “Our objective is to reduce any possibility of friction there might be in carrying out the roll,” said ProShares’ Mr. Sapir.
Still, both ETFs publish their daily holdings, just like USO and most other ETFs, allowing traders a clear line of sight into how they are positioned.
“It’s like poker,” said Mr. Koutoulas of Typhon Capital Management. “You lose an edge when the whole market knows your position.”
Updated: 10-25-2021
ProShares Seeks Waiver From CME For Position Limits On New Bitcoin Futures ETF
If CME doesn’t yield, ProShares’ options include shifting assets into later-dated contracts or potentially investing in crypto-related equities.
ProShares, the sponsor of the first-ever exchange-traded fund (ETF) backed by bitcoin futures, has applied for a waiver to limit the amount of bitcoin futures a buyer can purchase in the new fund, Barron’s reported.
* Starting with the November front-month contract, the Chicago Mercantile Exchange (CME) will limit the number of futures a buyer can buy in the new ETF to 4,000, dropping to 2,000 three days before expiration. As each contract represents five bitcoin, total ownership is limited to 20,000 bitcoin.
* To get around this limit, ProShares has already split its futures portfolio, with half in October and half in November.
* CEO Michael Sapir told Barron’s that if the CME doesn’t grant the waiver, ProShares could shift assets into later-dated contracts, structured notes or swaps. Barron’s also noted that ProShares’ prospectus for the ETF says the fund could also invest in equities with crypto exposure.
Updated: 10-26-2021
South Korean Pension Fund To Invest In Bitcoin ETF
KTCU plans to invest in Bitcoin ETF products after consultation with domestic asset managers,” an executive reportedly said.
South Korea’s public pension fund, the Korean Teachers’ Credit Union (KTCU), is reportedly looking to gain exposure to Bitcoin (BTC) via a crypto exchange-traded fund (ETF).
KTCU, one of the largest institutional investors in South Korea, is considering investing in a pure Bitcoin ETF or Bitcoin-linked ETFs in the first half of 2022, local news agency The Korea Economic Daily reported Monday.
According to the report, KTCU is considering investing in several Bitcoin ETF products, including those by South Korean asset management firm Mirae Asset Global Investments. The company launched two ETFs tracking the value of Bitcoin futures via its Canadian subsidiary, Horizons ETFs, in April 2021.
“As there are some well-made cryptocurrency-linked ETF products by asset managers such as Korea’s Mirae Asset Global Investments, we plan to invest in the ETF products after consultation with domestic asset managers,” an executive at KTCU reportedly said.
The official also mentioned potential investment in a Bitcoin ETF by Mirae Asset’s subsidiary, Global X ETFs, which filed for a Bitcoin ETF with the United States Securities and Exchange Commission in July.
According to the report, KTCU is the second-largest institutional investor in South Korea, with $40.2 billion in assets under management. The pension fund has allocated 40% of its investments in alternative assets, 10% domestic and 9% international stocks. KTCU has yet to determine the size and other details of its potential Bitcoin ETF investment.
The news comes amid global pension funds getting increasingly interested in gaining exposure to cryptocurrencies like Bitcoin and major companies in the industry. Last week, the Houston Firefighters’ Relief and Retirement Fund reportedly purchased $25 million in Bitcoin and Ether (ETH). Canada’s Ontario Teachers’ Pension Plan Board participated in a $420-million funding round for major crypto exchange FTX, the firm announced on Thursday.
Bitcoin Price Dips Below $62K As Smart Money Keeps An Eye On ETF Inflows
Mixed emotions mount around the expected launch of the third U.S. regulated Bitcoin ETF, as analysis predicts a “copy-paste” 2021 bull run for altcoins.
Bitcoin (BTC) fell below $62,000 on Oct. 26 as the expected launch of the third United States regulated exchange-traded fund (ETF) failed to budge the sideways price action.
$61,600 Support Target For BTC
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting daily lows as U.S. markets opened on Oct. 26.
The market is anticipating the launch of another BTC ETF but Bitcoin price is not reflecting bullish momentum. The VanEck Bitcoin Strategy ETF (XBTF) is expected to launch soon but the mood is decidedly different as Bitcoin seemed unmoved by the prospect of fresh institutional involvement.
Last week’s ProShares Bitcoin Strategy ETF saw a surge, which ended in new all-time highs for BTC/USD, these still unmatched as a correction challenged $60,000 support.
At the time of writing, $62,000 formed a shaky focus, which is still in line with the latest price forecasts from popular analysts.
“It would be natural price progression for BTC to dip into ~$61600 (orange level),” Rekt Capital commented alongside a fresh price chart.
“Holding there would be a sign of strength on the side of buyers.”
Expectations have remained high for all-time highs to see a retest on the back of recent movements, while research has argued that a dip as low as $50,000 would still preserve the overall bullish trajectory.
As Cointelegraph reported, even the October close is predicted to be around $63,000, giving Bitcoin room to track sideways longer before pressure increases.
PlanB, the analyst who called $63,000 the “worst-case scenario” for the monthly close, proclaimed the second leg of the 2021 bull officially in progress this week.
Altcoins Due A “Copy Paste” Of Earlier Bull Run
Major altcoins were similarly tentative in their behavior on the day, with Ether (ETH) unmoved at $4,150.
The top ten cryptocurrencies by market cap were likewise flat over the past 24 hours — a rare episode of communal calm for an asset group that has been characterized by volatility this month.
“We know this structure from earlier on in which we’ve also had retests happening before we’ve started to continue moving,” Cointelegraph contributor Michaël van de Poppe said in his latest YouTube update.
He predicted a “copy paste” scenario of the gains from the start of 2021 at a later date, with the timeframe for this nonetheless unpredictable.
“Upside is generally higher than what you expect to be happening,” he added.
ETFs Are A Bad Way To Bet On Bitcoin
Why are traders flocking to a bitcoin ETF when they can hold the cryptocurrency directly? The answer comes down to trust.
The new bitcoin ETFs are close to the Platonic ideal of two things at the heart of the financial industry, arbitrage and gambling. And a third thing: Without the distortions the financial industry created in the first place, they would have no reason to exist.
The whole concept of a bitcoin ETF is odd. Bitcoin is a cryptocurrency; it’s easy to buy and, for individuals who want to speculate on its future value, easy to hold. All you have to do is download some software, pick a secure password, sign up to a crypto broker, transfer the bitcoin into your blockchain wallet and you’re done.
If you wanted a traditional currency you wouldn’t pay a 0.95% annual fee, plus hefty futures costs, to get something that roughly tracks the value of a dollar—you’d just hold some dollars.
That didn’t stop many from finding the idea attractive: the ProShares Bitcoin Strategy ETF, the first, attracted more money than any other ETF launch and had the second-highest trading on its first day. A week after launch it holds $1.2 billion.
Much of this money is likely to be a new layer of gambling, as traders bet on other people wanting it.
But the expected underlying demand is from those who can’t or won’t take the simple option of buying bitcoin directly, so prefer to use a structure listed on the stock market and approved by the Securities and Exchange Commission.
That all sounds reasonable—until you ask why they prefer it, given the high costs and the ease of buying directly. The answer is that it’s all about trust, which is pretty ironic given that bitcoin was created to solve a problem of trust.
Michael Sapir, chief executive of ProShares, contrasts the regulated futures market with what the SEC itself calls the “Wild West” of crypto trading. He warns that lots of exchanges “have a degree of manipulation embedded in them,” so there might be hidden costs to buying bitcoin direct, as well as risks.
There are certainly risks. If you hold bitcoin directly on the blockchain, and you lose the password to your wallet, you’ve lost your bitcoin. If someone steals your password, you’ve lost your bitcoin. And if you give it to someone else, they now control your bitcoin.
For an individual, this is manageable, if scary; choose a unique secure password you can remember, don’t write it down or keep it on the internet where it could be hacked, and don’t tell anyone.
But in the financial system most of our investments are handed over to others, with the vast bulk of assets world-wide run by institutions such as insurance companies, pension funds, mutual funds and endowments, or by advisers. These institutional investors and advisers have a serious trust problem. Whom do they trust to hold the bitcoin password?
Ultimately someone has to have custody of it, and that person can suddenly become very rich by running off with it—something they can’t (easily) do with stocks, bonds or property. The trust problem is hard to manage, as shown by founders of crypto firms occasionally vanishing along with all the bitcoin their investors thought they were looking after.
The new ETFs sidestep the trust problem by buying bitcoin futures instead of bitcoin, introducing a new layer of gambling and arbitrage. Bitcoin futures are merely side bets on the price of bitcoin, settled in dollars; they are to bitcoin what a bet on the Kentucky Derby is to the horse.
Their connection to the price of bitcoin comes from the final settlement and from arbitragers who profit by selling overpriced bitcoin futures and buying actual bitcoin. (The same could apply in reverse, but usually the futures price is higher.)
In turn, the price of the ETF is kept in line with the value of the bitcoin futures it owns by arbitragers, like other ETFs.
All these layers of arbitrage cost money—real money, not bitcoin. The ETF has a 0.95% annual fee, but the main cost comes from the futures being more expensive than bitcoin. The ETF buys them a month ahead, but they fall in price as they approach maturity, so it makes a loss, known as the roll cost.
This approach has made about 13 percentage points less than bitcoin’s 118% so far this year, according to the Horizons Bitcoin Front Month Rolling Futures index calculated by Solactive; Mr. Sapir says it is more like five points a year since 2017.
There are plenty of people offering technical solutions to the institutional custody problem of bitcoin, and several are trying to persuade the SEC to approve an ETF that just buys bitcoin.
It would strip out the layers of arbitrage and gambling created by using futures, leaving just the arbitrage inherent in ETFs and the gambling inherent in bitcoin—but would only succeed if investors trust the solution.
Still, the basic principle of any bitcoin ETF is an arbitrage between the blockchain and the traditional financial system, the inverse of what Tether and other stablecoins are doing.
The stablecoins let you think in dollars on the blockchain; bitcoin ETFs let you think in bitcoin in the mainstream system. And as with everything else in finance, that comes with costs—costs ordinary people can easily avoid if they want bitcoin, just by buying bitcoin instead.
Updated: 10-27-2021
Direxion Plans U.S. ETF That Shorts Bitcoin Futures And Warns Of Risks
The U.S. Bitcoin-related ETF industry may hit another milestone with an offering that shorts crypto futures.
The Direxion Bitcoin Strategy Bear exchange-traded fund would offer managed short exposure to CME Bitcoin futures contracts, according to a filing with the Securities and Exchange Commission dated Tuesday. This comes after the ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF, both of which are backed by futures, made their debuts last week.
Bitcoin rose to a record of nearly $67,000 amid those ETF launches, though it’s fallen back since then and was trading around $61,000 in early London hours on Wednesday. The cryptocurrency has more than quadrupled in the past year, demonstrating its trademark volatility both to the upside and downside.
The Direxion fund would involve numerous risks, including the potential for short sellers to be wiped out. Bitcoin’s wild swings would be an issue as well. Other potential dangers include liquidity and issues around the futures roll, the filing said.
“If you are not prepared to accept significant and unexpected changes in the value of the Fund and the possibility that you could lose your entire investment in the Fund you should not invest in the Fund,” according to the filing.
New Bitcoin ETFs Filed: One For Bears, The Other With ‘Leverage For Ants’
ETF issuers are getting creative with two new filings for inverse and leveraged funds.
Exchange-traded fund (ETD) issuer Direxion has filed for a product that would enable speculators to buy contracts that short the price of Bitcoin (BTC).
In a filing made to the United States Securities and Exchange Commission on Tuesday, the company unveiled the Direxion Bitcoin Strategy Bear ETF. Like other futures products, it will not invest directly in BTC but will instead maintain managed short-exposure position contracts issued by the Chicago Mercantile Exchange (CME).
Direxion stated that the fund may invest in other BTC futures, money market funds, deposit accounts or short-term debt instruments. However, the firm did issue a dire warning that the value of the product could go to zero.
“The value of an investment in the Fund could decline significantly and without warning, including to zero. You should be prepared to lose your entire investment.”
Bloomberg senior ETF analyst Eric Balchunas described it as an inverse Bitcoin ETF. He reported that the company already has a “-1x BTC futures ETF” in Canada called BITI, adding, “While it’s gotten pretty wrecked, when it works it WORKS (as Bitcoin tends to sell off fast).”
INVERSE BITCOIN ETF: Direxion just filed for a -1x Bitcoin Futures ETF, which will seek to be short front month bitcoin futures, basically the $XIV of $BITO.. This comes mere hours after the first levered bitcoin ETF was filed. pic.twitter.com/bN2m7pIZw5
— Eric Balchunas (@EricBalchunas) October 26, 2021
Direxion originally filed for a Bitcoin ETF in 2018, but it ended up in the queue with all of the others that the SEC had delayed at the time.
Bloomberg reported that on Tuesday, Valkyrie filed for a leveraged BTC futures ETF that will offer 1.25x exposure to the asset. If approved, it will trade under the ticker BTFX and will be able to hold futures, swaps, options and forwards.
Not everyone was impressed with the minimal leverage available, with user VandelayBTC referring to a Zoolander meme to throw shade.
1.25x? What is this? Leverage for ants?
— Vandelay ₿TC Industries (@VandelayBTC) October 26, 2021
Commenting on the creative new futures products being proposed at the moment, The ETF Store president Nate Geraci said that there will be more of these types of filings and Ether (ETH) futures before a spot product wins approval.
“SEC has blessed CME bitcoin futures from a regulatory perspective. If these leveraged & inverse products exist in other blessed markets, then no reason not to exist here.”
As if in response to the bearish product proposal, Bitcoin prices have retreated 3.6% over the past 24 hours to trade at $60,787 at the time of writing.
Updated: 10-28-2021
Volt Equity’s ‘Bitcoin Revolution’ ETF Goes Live On NYSE Today
Volt Equity’s ETF consults with PlanB’s Bitcoin stock-to-flow model to adjust exposure.
The New York Stock Exchange (NYSE) continues listing Bitcoin (BTC)-linked exchange-traded funds (ETF), with Volt Equity becoming the latest company to debut such a product on the exchange.
Volt Equity’s Crypto Industry Revolution and Tech ETF will debut trading on the electronic securities exchange NYSE Arca on Thursday, the company’s CEO, Tad Park, told Cointelegraph. The ETF will be available for trading at market opening under the ticker symbol BTCR.
BTCR will open at $21, giving a nod to Bitcoin’s capped supply of 21 million BTC. According to the company, the ETF is implementing a management approach informed by PlanB’s Bitcoin stock-to-flow (S2F) model, a major quantitative model intending to predict BTC’s price.
“We consult the famous Stock-to-Flow model as one input to understand how Bitcoin’s mining supply shock due to its scheduled halvings could affect Bitcoin’s price and when. Based on what we’re seeing, we could adjust our mining-related exposure accordingly,” Volt Equity said.
Approved by the United States Securities and Exchange Commission in early October, Volt Equity’s product is not a pure Bitcoin ETF, as it’s based on companies with significant exposure to Bitcoin.
The ETF tracks so-called “Bitcoin Industry Revolution Companies,” including Michael Saylor’s MicroStrategy, Tesla, Twitter, Square, Coinbase crypto exchange, as well as Bitcoin mining companies, such as Canaan, Bitfarms and Riot Blockchain.
Volt Equity will regularly review the fund’s holdings and allocations “when appropriate” based on research, data and models like the S2F.
“Bitcoin is not just a coin, it’s a revolution that encompasses miners, companies using it on their balance sheet, and everyday HODLers who want to hold the first digital store of value that can’t be inflated away by a government,” Park said.
The latest ETF launch comes soon after NYSE Arca listed a Bitcoin futures-linked ETF by investment company ProShares on Oct. 19. As previously reported, the ProShares Bitcoin Strategy ETF became the first Bitcoin futures-linked ETF to launch in the United States.
In mid-October, major cryptocurrency fund Bitwise Asset Management also applied with the SEC to list a pure Bitcoin ETF on NYSE Arca. The SEC has not yet approved an ETF that would track Bitcoin’s price directly.
Major asset management firm AXS Investments filed for two Bitcoin futures ETFs on Wednesday. According to senior Bloomberg ETF analyst Eric Balchunas, major crypto investment firm Grayscale Investments expects the SEC to have approved its spot Bitcoin ETF by July 2022.
SEC Reportedly Knocks Back Valkyrie’s Leveraged Bitcoin ETF
The SEC does not appear to have the appetite for more exotic Bitcoin futures products.
Reports are emerging that the United States Securities and Exchange Commission has rejected one, or possibly two, recent Bitcoin (BTC) exchange-traded fund (ETF) applications signaling that the regulator is not quite ready for more exotic futures products just yet.
Just a day or so after Valkyrie filed for a leveraged Bitcoin futures ETF and Direxion applied for an inverse fund for bears, the SEC appears to have vetoed them both.
On Thursday, Bloomberg senior ETF analyst Eric Balchunas referred to a Dow Jones alert indicating the Valkyrie leveraged fund had been shelved by the SEC. He added that the move was likely also to apply to the inverse fund application.
Looks like the SEC not having it w the levered (and likely inverse) Bitcoin futures ETFs. Can’t hurt to try tho. Had they gone through likely billion dollar trading vehicles in a few yrs. via Dow Jones pic.twitter.com/MspMRf3hL9
— Eric Balchunas (@EricBalchunas) October 27, 2021
On Tuesday, ETF issuer Direxion filed for a Bitcoin Strategy Bear ETF that would enable speculators to buy futures that short the price of BTC. On the same day, Valkyrie filed for a leveraged BTC futures ETF that would have offered 1.25x exposure to the asset.
The Direxion product would be invested purely in futures; however, the Valkyrie one would have held futures, swaps, options and forwards. Another Dow Jones alert reported the SEC only seems interested in direct futures products at the moment, funds that buy contracts from the Chicago Mercantile Exchange (CME).
The regulator does not seem keen to approve any products that invest in the asset itself or anything other than CME futures contracts at this stage. Balchunas confirmed:
“Would be interesting (and poss) if they let the Inverse one go through. That one was limited to futures. Valkyrie’s was a bit of a departure from that language.”
The ETF Store president Nate Geraci reported that two more ETFs had been applied for on Wednesday from AXS Investments. The SEC filings are for a regular Bitcoin Strategy ETF similar to the two already approved and another shorting or inverse fund.
Another Dow Jones report states that Grayscale is confident that the SEC will be ready to approve a spot Bitcoin ETF before July 2022.
On Oct. 19, Grayscale filed an application with the SEC toconvert its popular Bitcoin Trust (GBTC) into a spot fund that is backed by the asset itself as opposed to futures contracts.
Geraci commented on the current lack of regulation over spot crypto markets, “So crypto markets/exchanges will be regulated by then? Seems ambitious.”
In related news, VanEck is making final preparations for the launch of its Bitcoin Strategy ETF, which will trade under the ticker XBTF. On Wednesday, Balchunas said there was a “good chance” it could start trading on Friday, Oct. 29, but possibly Thursday.
Updated: 10-28-2021
More Than 40 Digital Currency ETFs Await US Regulatory Approval
Competitors are quickly following suit after the first U.S.-based Bitcoin ETF debuted earlier this month.
Fund managers appear to be scrambling to match demand from investors as major cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) teeter around record price levels. According to a Bloomberg Terminal screenshot taken by Bloomberg Intelligence analyst James Seyffart, over 40 cryptocurrency exchange-traded funds, or ETFs, are now awaiting listing in the United States.
The source indicated that four have already been approved by the Securities Exchange Commission, the most notable of which is the Ark 21Shares Bitcoin ETF, created in a joint effort by 21 Shares and ARK Invest.
The latest fund applications came from AXS Investments on Oct. 27. They are the AXS Bitcoin Strategy ETF and the AXS Short Bitcoin Strategy ETF. The vast majority of funds pending listing seek to purchase BTC directly, or their futures and derivatives.
A few funds operate on a mixed strategy, only putting a portion of their assets in BTC while deploying the rest in U.S.-based equities or blockchain stocks. However, there are also three funds focusing on matching the performance of ETH.
They are the VanEck Ethereum Trust, the Wisdomtree Ethereum Trust, and the Kryptcoin Ethereum Trust. All three were filed earlier this year and are currently awaiting approval.
It took eight years for the SEC to authorize such financial products in the U.S., and they have already gained significant popularity among investors. Earlier this month, the Proshares Bitcoin Strategy ETF became the first crypto ETF to list in the country. At the time of publication, the fund’s total assets under management have surpassed $2 billion.
Updated: 11-2-2021
Riskier Bitcoin ETF Filings Prove Too Much For SEC Just Now
While U.S. regulators have finally warmed up to Bitcoin futures-backed exchange-traded funds, it appears that more complex derivatives-based funds are a bridge too far for now.
Direxion, a provider of financial products known for its leveraged ETFs, pulled a request late Tuesday to launch the Direxion Bitcoin Strategy Bear ETF. The firm had submitted the application on Oct. 26, and Securities and Exchange Commission staff requested it be withdrawn on the same day, the latest filing shows.
The withdrawal follows a similar move by Valkyrie, which was the second issuer to launch a U.S. Bitcoin futures ETF last month.
Late last week, it dropped its application for the Valkyrie XBTO Levered BTC Futures ETF — which would deliver 1.25 times the reference price of Bitcoin. According to a filing, the SEC had also requested Valkyrie yank the filing on Oct. 26.
The first U.S. Bitcoin ETFs launched last month, nearly a decade after the first applications were filed. The fact that the funds track Bitcoin futures — rather than physically hold the cryptocurrency — allowed products from ProShares and Valkyrie to launch, after SEC Chair Gary Gensler signaled he’d be more open to that structure.
However, it’s clear that regulators aren’t ready to greenlight any exotic crypto ETFs yet, according to Bloomberg Intelligence.
“While it does seem a bit inconsistent given their acceptance of the Bitcoin futures markets, it isn’t surprising and is likely part of a ‘baby steps’ regulatory mindset,” Eric Balchunas, an analyst with Bloomberg Intelligence, said of the SEC’s request. “I bet we will see one someday, but only when they feel ready.”
Direxion didn’t immediately respond to a request for comment.
It’s not just crypto. In early October, Gensler published a statement announcing that regulators are looking into new rules for leveraged funds, and warned of the potential risks. Even still, appetite for derivatives-powered funds has been high.
SEC Delays Decision On Valkyrie Bitcoin ETF Until Next Year
The new date for a decision is Jan. 7, 2022.
The U.S. Securities and Exchange Commission (SEC) has once again delayed its decision on whether to approve Valkyrie’s proposed bitcoin exchange-traded fund (ETF).
* The SEC gave notice Monday that it is extending the deadline for its decision to Jan. 7, 2022.
* The U.S. markets regulator most recently set Dec. 8 as its deadline.
* “The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised in the comment letters that have been submitted in connection therewith,” the notice said.
* While the SEC has approved the listing of bitcoin ETFs linked to the futures market, it has yet to approve funds that provide direct exposure to the underlying asset itself.
CME Introduces Micro Ether Futures As ETH Nears ATH Above $4.4K
Micro Ether futures will become the fourth crypto derivatives product by CME and is expected to be launched on Dec. 6.
The Chicago Mercantile Exchange (CME), one of the world’s biggest derivatives marketplaces, continues expanding its cryptocurrency derivatives offerings by adding a new Ether (ETH)-based product.
CME announced Tuesday that it is planning to launch a micro Ether futures contract, sized at 0.1 ETH, enabling a new type of Ether exposure to institutional and individual traders.
The new product will become the fourth crypto derivatives product ever launched by CME and is expected to be rolled out on Dec. 6, 2021, pending regulatory approval.
The news comes amid Ether sitting near all-time high levels after the cryptocurrency posted its highest historical price on Friday, reaching $4,460. At the time of writing, the second-largest cryptocurrency by market cap is trading at $4,438, according to data from cryptocurrency tracking website CoinGecko.
Tim McCourt, CME Group Global head of alternative investment products, noted that the launch of micro ETH futures aims to bring more investors to the market by enabling smaller investments.
“Since the launch of Ether futures in February, we have seen steady growth in liquidity in these contracts, especially among institutional traders,” McCourt noted, adding that ETH price has “more than doubled” since these contracts were introduced.
“Micro Ether futures will offer even more choice and precision in how they trade Ether futures in a transparent, regulated and efficient manner at CME Group,” he added.
Micro Ether futures will join CME Group’s growing offering of crypto derivatives, including Micro Bitcoin futures, which started trading in May 2021. With each contract worth 0.1 BTC, the company has traded over 2.7 million contracts so far. The original and the first Bitcoin futures contract by CME was launched on Dec. 17, 2017.
Updated: 11-3-2021
Novogratz’s Galaxy Assets Surge As Canadian Ether ETF Booms
Crypto billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd. saw its biggest cash influx ever last month as Bitcoin and Ether marched to all-time highs.
Galaxy controlled $3.2 billion at the end of October, a 45% jump from September, according to global asset management head Steve Kurz. The firm entered 2021 with less than $1 billion under management.
One of the main drivers behind the jump was inflows into the firm’s Canadian ETF lineup — particularly its Ether-focused fund.
The CI Galaxy Ethereum ETF (ticker ETHX) has already amassed over $1 billion after launching in April, with its price doubling during that period. Kurz expects that flood of cash to build as Ether continues to enter the mainstream, similar to Bitcoin’s ascent.
“Crypto’s becoming an asset class, not just an asset,” Kurz said in a phone interview. “From a market infrastructure and development of the asset class perspective, Ether is picking up steam, probably the way Bitcoin did a year-and-a-half ago.”
Ether has surged over 500% in 2021, fueled in part by the popularity of the Ethereum blockchain, which is the most-used network for applications such as decentralized finance and digital collectibles. Bitcoin — the world’s largest cryptocurrency — has rallied more than doubled this year.
The first Bitcoin futures ETFs began trading last month, but a physical fund — such as the Canadian Galaxy products — have yet to be approved by U.S. regulators.
Bloomberg Intelligence analysts forecast that U.S. investors are likely to see an Ethereum futures-based ETF launch before a fund that holds Bitcoin directly.
Hong Kong Regulator Re-Evaluates Retail Crypto ETFs Laws
The Securities and Futures Commission of Hong Kong has received many requests to approve crypto ETFs for trading.
The Securities and Futures Commission, or SFC, in Hong Kong is reviewing regulations surrounding virtual currency transactions, including whether individuals can invest in exchange-traded funds, or ETFs.
According to a report by South China Morning News on Wednesday, the 2018 regulations limited transactions of cryptocurrencies via funds or trading platforms to professional investors with at least HK$8 million ($1,028,624.00) to invest.
SFC’s deputy chief executive Julia Leung Fung-yee stated that the re-evaluation will be made “to see if it is still fit for purpose and whether modifications are required.”
Fung-yee, speaking at the 2021 Hong Kong Financial Technology Week conference, said that “virtual assets are edging toward traditional finance,” hence, the need to review the laws.
“More, [and] different types of virtual asset investment products are available and conventional exchanges overseas now offer cryptocurrency ETFs.”
Crypto ETFs are not available to Hong Kong-based investors, even though these financial instruments can be bought from other countries.
In the United States, at least 12 applications for these funds have been submitted to the SEC by firms wanting to provide speculators with a chance to dabble in cryptocurrencies. Several inquiries have been submitted to the Hong Kong regulator by companies wanting to provide such investments.
Since the SFC established these regulations three years ago, digital assets have grown massively in popularity, with Bitcoin (BTC) rising six-fold to $62,238 this week.
The rally was spurred by big investors and funds rushing into cryptocurrencies on the belief that they will soon be used in payments while retail investors joined the party for quick profits.
The SFC is collaborating with the de facto central bank, the Hong Kong Monetary Authority, or HKMA, to produce a unified circular after the evaluation.
According to Fung-yee, the SFC and HKMA will apply the principle of “same business, same risks and same rules” for banks, brokers and digital platforms conducting digital currency asset-related activities.
Direxion Withdraws Application For Short Bitcoin Futures ETF
The issuer of exchange-traded funds filed the application on Oct. 26.
Exchange-traded fund (ETF) issuer Direxion has withdrawn its application to the U.S. Securities and Exchange Commission (SEC) to list a fund that would have maintained short exposure to bitcoin futures contracts issued by the Chicago Mercantile Exchange.
* On Tuesday, Direxion requested that the SEC to withdraw the ETF application it made on Oct. 26.
* SEC staff had asked for the filing be withdrawn on the day it was filed.
* The Direxion Bitcoin Strategy Bear ETF would have maintained short exposure to bitcoin futures contracts – in essence, betting that the price of the cryptocurrency would fall.
* Shorting is a way of betting that a price will decline. An investor borrows a security and sells it in the hope the price will have dropped by the time the investor has to repurchase the security and return it to the lender. The borrower can then pocket the difference.
NYSE Arca Files With SEC To List Bitwise Bitcoin ETP Trust
Exchange-traded products with exposure to cryptocurrencies are increasingly gaining ground.
NYSE Arca, a subsidiary of the New York Stock Exchange (NYSE) Group, wants to list and operate a trust based on Bitcoin (BTC) exchange-traded products (ETP).
In a rule-change proposal with the United States Securities and Exchange Commission, NYSE Arca proposed to list shares of the Bitwise Bitcoin ETP Trust.
The proposal clarifies that each share of the trust will be represented by fixed “units of undivided beneficial ownership,” allowing the shares on the stock exchange to reciprocate their value in accordance with Bitcoin’s market price.
Moreover, the trust will be operated by two third-party associates serving as the trust’s custodian, administrator and transfer agent. According to the filing:
“Under normal circumstances, the Trust’s only asset will be bitcoin, and, under limited circumstances, cash. The Trust will not use derivatives that may subject the Trust to counterparty and credit risks.”
Upon the SEC’s approval for the rule change, NYSE Arca’s Bitwise Bitcoin ETP Trust will process all “ordinary fees in bitcoin (rather than cash), as a way of seeking to ensure that the Trust holds the desired amount of bitcoin-per-share.”
On Oct. 14, Bitwise had filed for a BTC ETF with NYSE Arca, which according to Bitwise chief investment officer Matt Hougan, holds “actual BTC.” The filing outlines Bitwise’s intent to register 1,000 shares of its Bitwise Bitcoin ETP Trust with an offering price of up to $25.
The company had first applied for a Bitcoin exchange-traded fund (ETF) registration with the SEC in January 2019, which was later withdrawn amid concerns raised by the commission:
“We are currently working hard on answering the questions that the SEC raised in its 112-page response to our initial filing. We remain fully committed to the development of a bitcoin ETP.”
The SEC is expected to announce its approval or disapproval for the rule change proposal in the next 45 days after soliciting and reviewing the comments based on the filing.
In September, SEC Chair Gary Gensler urged crypto businesses to register with the regulatory body, resulting in numerous proposal filings.
Despite years of resistance, the commission recently approved a Bitcoin Strategy ETF filed by Valkyrie on Oct. 26.
Congratulations to @ValkyrieFunds on the launch of its Bitcoin Strategy #ETF $BTF!
Learn more about the U.S.-listed Bitcoin futures ETF and how it invests in a new future: https://t.co/mDrWbHn0xI pic.twitter.com/rE5QibNWiB
— Nasdaq (@Nasdaq) October 22, 2021
Gensler said that crypto can be a “catalyst for change” within a set framework, which can be achieved through regulatory clarity:
“To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they qualify for an exemption.”
Updated: 11-3-2021
Congressmen Emmer And Soto To SEC Chair Gensler: “We Want BTC Spot ETFs”!
The bipartisan pair sent a letter to the securities regulator demanding spot ETF approval.
Representatives Tom Emmer and Darren Soto sent a bipartisan letter to United States Securities and Exchange Commission Chair Gary Gensler on Wednesday, strongly questioning why the agency has denied approval for the creation of a Bitcoin (BTC) spot exchange-traded fund (ETF) while allowing Bitcoin futures ETFs to begin trading.
In a spot ETF, the fund holds the actual commodity (in this case, Bitcoin), whereas in a futures ETF fund, it holds contracts to buy and sell the commodity at a future date at a specified price.
In A Press Release Announcing The Letter, Emmer Said:
“The SEC’s approach to cryptocurrency regulation has been unacceptable. […] If the SEC cannot outline the perceived material difference in risk profiles, then they should allow ETFs based on spot Bitcoin to be traded.”
Soto Affirmed In His Accompanying Statement:
“Cryptocurrency has proven to be a driver of economic growth in our society. Therefore, it is crucial for us to clearly regulate it in order to maximize the potential benefits and mitigate any risks. It’s important for us to come together to ensure that investors have consistency.”
In October, the ProShares Bitcoin Strategy ETF enjoyed the highest first-day natural volume of any ETF ever. Although the SEC was expected to lead the federal government’s efforts to regulate stablecoins, it appears that will not be the case. The securities regulator also recently shot down a proposed leveraged Bitcoin ETF.
Updated: 11-8-2021
BlockFi Files For Physically-Backed Bitcoin ETF
The Securities and Exchange Commission is scheduled to rule on another spot Bitcoin ETF application from VanEck by Nov. 14.
Cryptocurrency lending firm BlockFi has filed paperwork with the United States Securities and Exchange Commission, or SEC, to launch a physically-backed Bitcoin exchange-traded fund, kicking off what’s expected to be a big week for the crypto markets.
The Form S-1 filing for BlockFi NB Bitcoin ETF was submitted to the SEC on Monday, according to official documents. The filing states that BlockFi will serve as custodian and that the ETF’s investment objective is to reflect the underlying performance of Bitcoin as opposed to any futures or derivatives benchmark.
The filing further states that the “Trust will not purchase or sell bitcoin directly, although the Trust may direct the Custodian to sell bitcoin to pay certain expenses.”
News of the ETF listing circulated on Crypto Twitter amid speculation that the SEC may be nearing its first physical Bitcoin ETF approval as early as this week.
BlockFi has filed with the SEC to launch a spot #Bitcoin ETF pic.twitter.com/2F1s0D1N3W
— Dylan LeClair (@DylanLeClair_) November 8, 2021
As Bloomberg’s James Seyffart noted, the SEC’s decision on the highly anticipated VanEck spot Bitcoin ETF is due this coming Sunday. “It will be either approval or denial from SEC,” he said, which means “no more delays.
Here’s the current list of #Bitcoin and Crypto ETF filings with the SEC. Next big date is still 11/14/21 for VanEck’s spot Bitcoin ETF. It will be either approval or denial from SEC — no more delays. https://t.co/Z8phpVlsOK pic.twitter.com/g9ayoibmQN
— James Seyffart (@JSeyff) November 8, 2021
Last month, the U.S. securities regulator approved ProShares’ Bitcoin Strategy ETF, the country’s first BTC exchange-traded fund. However, the approval came with a caveat — the fund’s price is linked to BTC futures as opposed to the spot price.
Shortly after approving the ProShares fund, the SEC gave the green light to Valkyrie’s Bitcoin Strategy ETF, which is another futures-based product.
While the futures-based ETFs weren’t what Bitcoin purists were looking for, they have proven remarkably popular among investors. As Cointelegraph reported, ProShares’ ETF debuted with the highest-ever first-day natural volume of over $1 billion. By the end of October, institutional managers had purchased more than $2 billion worth of Bitcoin products during the month, largely thanks to the ETF approvals.
Updated: 11-9-2021
Investors Throw Cash At Any ETF With ‘Inflation’ In The Name
Endless demand to protect portfolios from rising prices is fueling an indiscriminate boom in one corner of the $7.2 trillion U.S. exchange-traded fund market.
Every single ETF with the word “inflation” in either its name or description has posted inflows so far this year, according to data compiled by Bloomberg — a rare degree of one-way conviction among the investing masses.
The 18 products — spanning asset classes and with strategies designed to outperform when prices rise — have so far lured $35.5 billion in new cash, the data show. That equates to 37% of their assets, making their organic growth rate more than three-times faster than the industry overall.
It’s another illustration of how fear of inflation and rising interest rates is tightening its grip on the investment world.
Federal Reserve officials have maintained for months that price pressures can be chalked up to transitory factors. Yet the worries run deep amid supply chain snarls, commodity pressures and labor-market challenges.
Short-term inflation expectations among U.S. consumers are at an all-time high, while yields on 30-year Treasury Inflation Protected Securities, or TIPS, hit a record low Monday as investors sought shelter.
“Most people see inflation with their own eyes in their lives and don’t buy the transitory line from the Fed,” said Eric Balchunas, senior ETF analyst for Bloomberg Intelligence. “If you look on the bond side, TIPS funds are among the best performers in a not-great year for bonds.”
The $37 billion iShares TIPS ETF (ticker TIP) is at the top of the flow leader-board with a nearly $10 billion haul so far — on course for a record year. It has returned 5.6% in 2021. All but four of the 18 “inflation” ETFs have delivered positive returns.
At the same time, some of the U.S. funds most vulnerable to rising prices and rates are bleeding cash. The $39 billion iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has shed nearly $15 billion, more than any other ETF, as it returned minus 0.7%.
Citigroup Inc. strategists led by Scott Chronert argue that while inflation prints should continue to climb over the next few months, the trend will likely peak in February 2022 as the Fed tapers its asset purchases and supply chain kinks work themselves out. As such, investors should start positioning for the decline, they wrote.
But financial advisors managing through the current environment likely aren’t thinking that way, according to Dave Nadig of data provider ETF Trends.
“Transitory or not, it’s real, it’s in advisors’ faces, and there aren’t a lot of great alternatives available for them to solving the inflation conundrum,” said Nadig, the firm’s chief investment officer. “Inflation management is really not about growth or investing, it’s just about preserving buying power.”
TIP was up for a fourth day as of 2:32 p.m. in New York, adding 0.5%. LQD was also up 0.5%.
Carbon-Neutral Crypto Spot ETFs To Launch In Canada
Purpose Investments will measure the carbon footprint associated with its portfolio and purchase carbon offsets accordingly.
Two carbon-neutral cryptocurrency-backed exchange-traded funds (ETF) are poised to launch in Canada, offering a greener alternative for institutional investors.
Canada-based asset manager Purpose Investments is preparing to launch two new crypto-based ETFs on the Toronto Stock Exchange on Tuesday, both of which offer investors a carbon offset.
Purpose will launch its Bitcoin (BTC) and Ether (ETH) ETFs under the BTCC.J and ETHH.J tickers. Unlike the funds recently launched in the United States, which are futures contract backed, these funds will be backed and settled using BTC as the underlying asset.
Tomorrow @PurposeInvest is launching new share classes for their #Bitcoin and #Ethereum ETFs — $BTCC and $ETHH. They will be “Carbon Offset” share classes and will be denoted “/J”. Pages below. pic.twitter.com/W9QYS4232U
— James Seyffart (@JSeyff) November 8, 2021
The Toronto-based firm has partnered with Patch, a firm that will help it measure the carbon footprint of the crypto portfolios and offer carbon-removal solutions.
Measuring the carbon footprint of crypto mining is no easy task, as there are so many variables, but the firm has detailed its efforts and the math in a white paper.
Purpose will then invest in vetted carbon offsetting projects with the aim to give clients carbon-neutral exposure to BTC. Some of the projects it will invest in include direct air capture, biomass, mineralization or carbon dioxide removal, forestry, ocean fertilization and soil management.
According to the firm’s prospectus, Purpose’s new BTC fund held 24,167 BTC (approximately $1.6 billion), while the Ether fund had 86,906 ETH (worth roughly $417 million) as of Monday.
The Purpose Bitcoin ETF (BTCC-B.TO) was North America’s first Bitcoin fund, which launched in February. It currently has more than $1 million in volume and has returned almost 20% over the past month, according to Yahoo Finance.
The Purpose Ether ETF (ETHH.TO) is not as popular, with just $210,000 in daily volume, but it has made a better return of 38% over the past 30 days.
The company also launched the first ETF that incorporates carbon offsetting in Europe in June. The fund is trading on the London Stock Exchange under the ticker ZERO and tracks the S&P Global Clean Energy Select Index.
Updated: 11-11-2021
Another Bitcoin Futures ETF Bites The Dust
Costs ended plans for launch of new crypto fund; move follows October cancellation by Invesco.
A second firm has halted the launch of a bitcoin futures exchange-traded fund, calling the products too costly for many investors.
Bitwise Asset Management late Wednesday withdrew its proposal to roll out a bitcoin ETF this month, the company said in a regulatory filing.
Matt Hougan, Bitwise’s chief investment officer, said the fund would have faced a number of fees and added expenses tied to rolling futures contracts from one month to the next, as well as supply problems within the futures market itself.
“These complications make it more difficult for both the fund provider and the end investor,” said Mr. Hougan. “This is the right decision for investors.”
Bitwise, which is based in San Francisco, was one of nearly a dozen firms expected to follow ProShares’s launch last month of the first bitcoin futures ETF.
The ProShares Bitcoin Strategy ETF raised more than $1 billion in its first two days of trading, a sign of demand for crypto products that trade like stocks. But the creation of further bitcoin futures ETFs is now in doubt because of the costs inherent in such funds.
All futures-based funds must roll their futures contracts monthly to maintain constant exposure to the assets they are supposed to track. Bitcoin futures get more expensive the further out in the future they are, a structure known as contango.
Contango eats into a fund’s returns. Mr. Hougan estimates that the rolling of bitcoin futures contracts would cost investors anywhere between 5% and 10% a year.
A major example of how roll costs can hurt a fund in the long term is the United States Oil Fund, a popular ETF that has grown so big that it often controls a significant portion of the most active oil-futures contract.
Over the past 10 years, it has lost 82% of its value, while crude oil prices declined 18%.
The other problem is that the ProShares bitcoin ETF, which goes by the ticker BITO, was so popular that it soaked up much of the capacity of firms in the futures market that act as middlemen, helping with trading and settlements.
Those firms, known as futures commission merchants, have raised prices in response, putting an additional cost on the backs of ETF issuers, Mr. Hougan said.
Bitwise joins Invesco Ltd. , one of the biggest ETF issuers in the country, in backing away from efforts to launch more bitcoin futures ETFs. Invesco didn’t elaborate on its decision last month, but a person familiar with the matter pointed to high costs and capacity constraints in the futures market as issues.
Another fund manager, VanEck, has delayed the launch of its bitcoin futures ETF. The fund was originally slated to launch in late October, but the firm held off on proceeding without saying why. A VanEck spokesman didn’t immediately comment on when or if the firm still plans to launch the ETF.
For now, Bitwise says it is focused on creating a physically backed bitcoin ETF, something Mr. Hougan says most investors would prefer. The SEC has said there first needs to be better surveillance and monitoring of crypto trading to root out potential fraud and manipulation.
“This has gotten more expensive than anyone anticipated,” said Mr. Hougan.
Bitwise Bullish On Pure Bitcoin ETF After Dropping Futures Filing
Bitwise’s chief investment officer explained why the firm has decided to drop its Bitcoin futures ETF and focus on the spot Bitcoin ETF.
Bitwise Asset Management has withdrawn its application for a Bitcoin (BTC) futures-based exchange-traded fund (ETF) amid a number of such products launching in the United States.
While dropping its futures-linked ETF, the firm is still bullish on a spot Bitcoin ETF, which is designed to track Bitcoin directly, Bitwise chief investment officer Matt Hougan announced on Wednesday.
Hougan said that Bitwise’s spot filing remains intact and that the firm will continue its efforts to launch such a product in the United States:
“Ultimately, what many investors want is a spot Bitcoin ETF. We think that’s possible. So Bitwise will continue to pursue that goal, and we will look for other ways to help investors get access to the incredible opportunities in crypto.”
Hougan emphasized that the first Bitcoin ETF application that was ever filed was a spot-based ETF by Gemini crypto exchange founders Cameron and Tyler Winklevoss.
Filed in 2013, the application was denied by the U.S. Securities and Exchange Commission in 2017. “For years, many have worked on this, including the team here,” he said.
Hougan went on to say that “any ETF is a big step,” referring to multiple Bitcoin futures ETFs receiving the SEC’s approval and starting trading in October. However, there are a number of reasons why Bitwise preferred to withdraw its own application.
The executive cited Bitwise analysis suggesting that the Bitcoin futures ETF contango — a situation where the futures price is higher than the spot one — would cost investors 5%–10% per year.
Hougan also noted that BTC futures ETFs have reportedly soaked up “all available capacity at futures commission merchants.” “This will ease over time, but for now, it’s added yet another expense. The result? Costs on top of costs, plus added complexity,” he said.
He stressed that “none of this means that futures-based ETFs are bad,” adding that products such as the ProShares Bitcoin Strategy ETF and the Valkyrie Bitcoin Strategy ETF are “thoughtful versions.”
As previously reported by Cointelegraph, Bitwise applied for a spot Bitcoin ETF in mid-October, planning to list the product on the electronic securities exchange NYSE Arca. The application came just a month after the firm filed for the Bitwise Bitcoin Strategy ETF in September.
ProShares Bitcoin Futures Fund In Top 2% Of All ETFs For volume
While BTIO is going from strength to strength with a total of $1.4 billion worth of inflows since late October, one expert thinks that VanEck’s Bitcoin spot ETF has a 200-to-1 chance of being approved by the SEC.
Since its launch on Oct. 19, ProShares’ Bitcoin (BTC) futures exchange-traded fund (ETF) has been a popular choice with traders, rising to the top 2% of all ETFs in terms of total trading volume.
Bloomberg senior ETF analyst Eric Balchunas noted on Thursday that the ProShares Bitcoin Strategy ETF (BITO) had $400 million worth of shares traded on Wednesday, with its average volume consistently putting it in the top 2% of all ETFs.
$BITO and $BTF both had their biggest volume days in about two weeks. $BITO with a $400m traded, which is not only a ton but = 25% turnover in one day- indicating its usage as a trading tool. pic.twitter.com/ukDGeSEa6F
— Eric Balchunas (@EricBalchunas) November 10, 2021
BITO has seen roughly $112.79 million combined inflows over the past nine days. While the figure pales in comparison to the first two days of the fund’s listing that saw $567.16 million and $489.51 million worth of inflows, respectively, Balchunas noted that “this kind of consistent flow-age is highly rare” for a newly launched ETF.
BITO launched on the New York Stock Exchange on Oct. 19 and has since accumulated more than $1.4 billion worth of assets under management.
Investor appetite for the fund remains high although the price of BITO has failed to surge and is currently sitting at $42.3, which is slightly below its initial listing price of around $43.2. Balchunas suggested that options volume may be the driving factor behind BITO at this stage.
There seems little hope of a Bitcoin ETF tracking the spot price being approved in the immediate future, with Balchunas suggesting that VanEck’s spot ETF would almost certainly be knocked back by the United States Securities and Exchange Commission on the Sunday, Nov. 14, deadline. The analyst put the odds at a “bleak” 200-to-1.
The SEC has 100 hours left until they have to approve or deny the VanEck spot Bitcoin ETF (my guess is they drop it Friday after mkt close but who knows). While our odds of approval are a bleak 200-1 the denial statement could offer some clues as to when it could happen @JSeyff https://t.co/Y2n3qPAvIp
— Eric Balchunas (@EricBalchunas) November 10, 2021
On Wednesday, ProShares investment strategist Leks Gerlak told U.S. News & World Report that BITO should have no issues with reflecting the value of Bitcoin as futures contracts play a key role in determining its spot value:
“There is no single reference price for Bitcoin, and the trading price of Bitcoin varies from one exchange to another, often between 1% to 2%, and sometimes by 4% to 5%. Expert research on this topic finds that the Bitcoin futures market dominates the price discovery process.”
“Over the past few years, Bitcoin futures and Bitcoin have historically provided very similar returns. Both correlation and beta have been very close to one to Bitcoin,” he added.
Updated: 11-12-2021
SEC Rejects VanEck’s Bitcoin ETF In Latest Spot-Listing Snub
The U.S. Securities and Exchange Commission rejected a proposal for an ETF that would directly hold Bitcoin, quashing hopes that a long-desired product would finally gain clearance after last month’s debut of the first funds linked to futures of the cryptocurrency.
In a widely expected move, the SEC denied VanEck approval for its Bitcoin exchange-traded fund to trade on Cboe Global Markets Inc., marking the first ruling on the subject since the initial Bitcoin futures ETFs launched.
In a Friday order, the regulator reiterated its long-stated concern that basing a product on the spot price of Bitcoin could violate securities rules because the market is too prone to abuse.
“The Commission has consistently required that the listing exchange have a comprehensive surveillance-sharing agreement with a regulated market of significant size related to Bitcoin, or demonstrate that other means to prevent fraudulent and manipulative acts and practices are sufficient,” the SEC said. “The listing exchange has not met that requirement.”
Bitcoin extended losses after the rejection, but recouped some of them in mid-afternoon trading. It was down 1.5% to $64,086 as of 3:46 p.m. in New York. The largest cryptocurrency had rallied to an all-time high of $68,991 this week.
“We are obviously disappointed in today’s update from the SEC declining approval of our physical Bitcoin ETF,” said Jan van Eck, chief executive of his namesake firm. “We continue to believe that investors should have the ability to gain exposure to Bitcoin through a regulated investment product and that a non-futures ETF structure is the superior approach.”
SEC Chair Gary Gensler has said he’s comfortable with futures-based ETFs because Bitcoin futures trade on highly regulated exchanges. That’s not the case with physical Bitcoin.
Though many analysts have been predicting an Ether-futures ETF will be the next iteration to reach the market, the physically backed Bitcoin ETF remains the Holy Grail product.
The first application was filed in 2013 by the Winklevoss twins, who are known for getting rich off of Facebook Inc.
October’s launch of two Bitcoin futures ETFs marked a major milestone for the industry. The first, the ProShares Bitcoin Strategy ETF, accumulated more than $1 billion in assets in just days, while the second, the Valkyrie’s Bitcoin Strategy ETF, saw a quieter but still-vigorous reception.
Their premieres built a lot of excitement about Wall Street acceptance toward crypto and raised optimism the SEC might be more amenable toward a physically backed Bitcoin fund this time around.
“The futures ETF approval made people focus on these announcements a little more,” Stephane Ouellette, chief executive and co-founder of crypto platform FRNT Financial Inc., said on Bloomberg’s “QuickTake Stock” streaming program.
“Prior to that approval, basically what had been happening is every three or four months, the SEC would push these crypto ETF applications down the road — so I think they’re just getting into that again with the physical ETF.”
Hester Peirce, a Republican SEC commissioner, said at a Bloomberg conference earlier this month that the regulator has been public about why it’s rejected a spot product. She has been a vocal critic of the agency’s refusal to sign-off on a physically backed fund.
“The reason is that the Bitcoin markets don’t look like our regulated securities markets,” she said at the summit on Nov. 4. “The thing that regulators are most comfortable with is markets that look like our own.”
SEC Rejects VanEck’s Spot Bitcoin ETF As BTC Price Falls Below $63K
The SEC claimed any rule change in favor of approving the ETF would not be “‘designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.”
The United States Securities and Exchange Commission, or SEC, has officially disapproved asset manager VanEck’s spot Bitcoin exchange-traded fund months after the firm submitted its application.
According to a Friday filing, the SEC rejected a proposed rule change from the Cboe BZX Exchange to list and trade shares of VanEck’s Bitcoin (BTC) Trust. Specifically, the SEC said any rule change in favor of approving the ETF would not be “‘designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.”
“The Commission concludes that BZX has 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 Section,” said the SEC, adding:
“It is essential for an exchange listing a derivative securities product to enter into a surveillance-sharing agreement with markets trading the underlying assets for the listing exchange to have the ability to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules.”
The regulatory body had a maximum of 240 days to approve or deny the offering following its publication in the Federal Register on March 19, giving the SEC until Nov. 14 to make a decision after extensions on April 28 and Sept. 8.
Industry expert Bloomberg senior ETF analyst Eric Balchunas said the SEC was highly unlikely to approve the VanEck fund given its track record of denying offerings from investment firms with exposure to crypto, a prediction which ultimately came to pass.
“[The SEC] address the inconsistency with not deeming CME a regulated mkt of sig size in spot denial but then approving futures ETFs,” said Balchunas. “It’s such a good point, but SEC doesn’t care. Not having it. Basically logic and reason are trumped by technical legality.”
Though the rejection may be a blow to many investors, the SEC has already approved ETFs linked to Bitcoin futures contracts. In October, shares of digital asset manager Valkyrie’s and ProShares’ BTC Strategy ETF launched on U.S. stock exchanges.
ProShares’ ETF has since risen to the top 2% of all ETFs in terms of total trading volume — roughly $400 million worth of shares traded on Nov. 10.
The impact on the price of Bitcoin saw the crypto asset briefly dip to $62,300 before returning to more than $63,000. The price marks a 9.7% fall since Bitcoin reached a new all-time high of $69,000 on Nov. 10.
BlackRock iShares Exec Says Firm Has ‘No Current Plans’ To Launch Crypto ETFs
BlackRock iShares executive Salim Ramji said the asset manager is holding back in launching crypto ETFs due to “opaque” regulatory framework and liquidity concerns.
BlackRock global head of iShares and index investments Salim Ramji, said in an interview the $9.5 trillion firm has “no current plans” to launch cryptocurrency exchange-traded funds (ETF).
* “I personally think crypto – things like stablecoins and certainly things like distributed ledger technologies – are a disruptive technology,” Ramji told the Financial News in an interview.
* However, Ramji, who sits on BlackRock’s global executive committee, also said the asset manager is holding back on launching cryptocurrency ETFs due to the “opaque” regulatory framework and liquidity concerns.
* In May, BlackRock CEO Larry Fink said the asset manager is studying the potential of cryptocurrencies to serve as long-term investments though it’s too early to tell if they’re “just a speculative trading tool” due to their volatility.
* In October, the Securities and Exchange Commission (SEC) approved the first bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO), which is listed on the New York Stock Exchange.
* “I also think that before we wrap or put our brand on it, we want to be certain that clients are going to be happy with us five years from now, 10 years from now,” Ramji told the publication.
Updated: 11-13-2021
Bitcoin Halts Losses Amid Criticism ETF Rejections Have Cost Investors ‘12,700% Gains’
It’s been a costly business denying spot Bitcoin ETF products a market, reactions claim, while Bitcoin price action steadies.
Bitcoin (BTC) tapered losses on Nov. 13 as the market showed little interest in United States regulators refusing to allow a spot exchange-traded fund (ETF).
ETF Rejection Causes Few Market Headaches
Data from Cointelegraph Markets Pro and TradingView showed calm conditions for BTC/USD into the weekend, the pair acting within a $1,000 corridor.
News that the U.S. Securities and Exchange Commission had declined to approve VanEck’s spot ETF product saw a dip toward $60,000 support but failed to spark significant volatility.
The first of multiple decisions regarding spot ETFs, the VanEck episode came as little surprise to many, but the firm expressed “disappointment” in the result.
“We are disappointed in today’s update from the SEC declining approval of our physical bitcoin ETF,” Jan van Eck responded on Twitter.
“We believe that investors should be able to gain BTC exposure through a regulated fund and that a non-futures ETF structure is the superior approach.”
Other commentators were more vocal, with Matias Dorta, vice president of marketing at asset manager Roundhill Investments, noting the disadvantages to investors from eight years of SEC rejections.
“The SEC first rejected a $BTC ETF in 2013. They successfully protected investors from +12,700% gains,” he argued.
Weekly Close Keeps Everyone Guessing
Moving on from the rejection, traders, meanwhile, focused on the weekly close.
BTC/USD needed to remain above range resistance in play since the initial $64,900 from April, popular trader Pentoshi said, this forming the key feature in the coming days.
2 days left but basically what I’ll be watching for
— Pentoshi Won’t Dm You. hates Dm’s. DM’s are scams (@Pentosh1) November 12, 2021
Fellow analyst Rekt Capital, meanwhile, maintained a firmly bullish perspective on longer-term price potential.
“All data science models suggest that BTC will peak much higher than $100,000 in this cycle,” he said in one of a series of tweets Friday.
Others pointed to the lack of evidence to suggest the bull market had ended or was even under threat at its current stage.
Updated: 11-15-2021
VanEck Bitcoin Futures ETF To Launch On CBOE On Nov. 16
After years of efforts, VanEck is finally launching a Bitcoin exchange-traded fund based on BTC futures.
VanEck, one of the first United States-based asset managers to file for a Bitcoin (BTC) exchange-traded fund (ETF), is finally launching its Bitcoin futures ETF.
According to an official notice by the Chicago Board Options Exchange (CBOE), VanEck’s Bitcoin Strategy ETF will start trading on CBOE under the ticker symbol XBTF on Tuesday.
VanEck’s new ETF is joining the growing number of BTC futures-based ETFs launched in the U.S., including the ProShares Bitcoin Strategy ETF, which became the first Bitcoin futures ETF to start trading on the New York Stock Exchange on Oct. 19. Valkyrie’s Bitcoin Strategy ETF started trading on Nasdaq under the BTF ticker in late October.
CBOE’s listing of XBTF comes just a couple of days after the U.S. Securities and Exchange Commission officially rejected VanEck’s spot Bitcoin ETF application.
The SEC argued that the proposed rule change to list the ETF did not meet standards to “prevent fraudulent and manipulative acts and practices” or “protect investors and the public interest.”
Launched back in 1955, VanEck is a U.S. asset manager specializing in thematic and gold-based ETFs and mutual funds. VanEck is known in the crypto community as one of the first U.S. firms to ever file for a Bitcoin futures ETF.
The firm has submitted multiple BTC ETF filings with the SEC since then but has only managed to get its futures ETF approved to date.
VanEck did not immediately respond to Cointelegraph’s request for comment.
As previously reported by Cointelegraph, SEC Chair Gary Gensler previously hinted that the SEC would be more open to accepting ETFs based on cryptocurrency futures rather than through direct exposure.
However, some companies, such as Bitwise Asset Management, remain bullish on a potential pure Bitcoin ETF, with the firm even deciding to drop its futures ETF filing last week. “Ultimately, what many investors want is a spot Bitcoin ETF.
We think that’s possible. So Bitwise will continue to pursue that goal, and we will look for other ways to help investors get access to the incredible opportunities in crypto,” Bitwise chief investment officer Matt Hougan said.
Updated: 11-16-2021
The SEC Still Doesn’t Like Spot Bitcoin ETFs
The latest rejection shows how far the bitcoin ETF war has left to go.
The U.S. Securities and Exchange Commission (SEC) put the kibosh on VanEck’s latest attempt to launch a spot bitcoin exchange-traded fund (ETF).
When (Spot) ETF?
The Narrative
Staffers at the SEC shanked yet another spot bitcoin ETF application last Friday, ending VanEck’s hopes to one-up those shiny new futures ETFs with a physically backed product.
Why It Matters
Investors have long seen a spot bitcoin ETF as a milestone in crypto’s breakthrough to mainstream investing.
October’s rack of futures-linked ETF launches may have already captured headline pizazz (and billions of dollars to boot) but that ultimate goal, and its promise of more efficient returns, remains elusive. The reason? SEC staffers are just as skeptical of market manipulation on spot bitcoin as ever.
Breaking It Down
Was anyone surprised that the SEC denied another bitcoin ETF application?
I certainly wasn’t. When the the SEC rejected VanEck’s application last Friday, it followed a longstanding tradition of stonewalling any and every physically backed crypto ETF product. That history began in summer 2018 with the Winklevoss twins falling flat. Three plus years later and the song remains the same.
Has it, though? Not quite. For starters, other countries like Brazil have jumped ahead of the U.S. by green-lighting their own bitcoin ETFs; Canada even has an ether product. And there are any number of crypto exchange-traded products in Europe.
U.S. investors haven’t been left entirely in the dark. Last month’s bitcoin futures ETF launches capped a multi-year battle to bring bitcoin exposure to the investing masses. All it took was a crypto-savvy SEC chair spelling out exactly what kind of product could hope to make it through.
But the war is far from won. Critics of the bitcoin-linked ProShares and Valkyrie funds – by happenstance VanEck launches its own today, too – will argue the products are inefficient and expensive mechanisms through which investors gain bitcoin price exposure.
Quirks of the futures market and regulatory concerns hamstring their usefulness. In short, they’ve got nothing on the real thing.
Something is better than nothing, though. Getting even an inefficient and pricey bitcoin vehicle through the SEC’s gates is a watershed for crypto.
It shows the regulator slowly warming to the reality that people want bitcoin exposure. It shows a regulator accepting that it can make that reality happen and still exercise super-tight control.
Last week’s rejection shows a true blue bitcoin ETF is far, far from approval for all the same reasons – It represents a lack of control. The SEC spelled it out in the VanEck denial letter: Bitcoin markets are too prone to market manipulation to let an ETF tracking spot prices go live.
They’ve said it all before; their arguments have not changed. Like a vindictive professor flunking a student, the SEC gave VanEck’s latest spot application – which the regulator at times called repetitive, illogical and poorly sourced – a resounding F.
It’s doubtful that another hopeful issuer could soon succeed where VanEck floundered. The SEC is simply too suspicious of the bitcoin markets and their potential for manipulation to let it slide.
Anyone arguing that bitcoin’s decentralization makes the token uniquely resistant to funny business (proving this quality is one way around the blockade) takes on a Sisyphusian task. Avenue 2 – establishing a “surveillance sharing agreement” – seems equally unlikely to win any time soon.
For a bitcoin ETF to win the day its issuer must establish what the SEC calls a “surveillance sharing agreement” with another major, compliance-minded market upon which the asset trades. It’s a simple argument, really.
Any would-be manipulator would need to influence one market to reap gains on the other. If both those markets share data, then better the chances to catch the crook.
CME’s bitcoin futures market would seemingly fit this model. Trading over one billion dollars in bitcoin futures contracts daily, it’s a major, heavily regulated outpost for the crypto markets. But it’s a drop in the bucket of bitcoin’s global footprint.
According to the SEC, it’s far too small to matter; it doesn’t lead the market. Spot ETF application DENIED.
And yet here we are mid-November 2021 with a rather odd assortment of facts. CME futures contracts are good enough to be an ETF benchmark, but not good enough for a separate product’s behind-the-scenes role.
It all makes you think: How much longer will the largely pliant crypto industry play nice?
“I wonder how long before one of the spot bitcoin ETF sponsors gets sick of arguing with a brick wall & decides to sue the SEC for an APA violation,” tweeted Jake Chervinsky, a crypto law veteran who is now head of policy for industry lobbyist The Blockchain Association.
“I get why nobody did this before, but the case is stronger now with futures ETFs live, & the incentive to play nice is much weaker.”
Updated: 11-20-2021
Bitcoin-Linked Fund From ProShares Logs Worst Weekly ETF Performance As Crypto Prices Slump
This retail ETF is up 60% so far in 2021. Is it too late to own?
Another Dimension Of ETFs
Bloomberg writes that quant-investing fund provider Dimensional Fund Advisors is deepening its suite of ETF offerings, with a plan to unfurl a number of new funds that could bring it to nearly two dozen offerings.
Updated: 11-22-2021
ProShares Bitcoin Futures ETF Wins ‘First Mover Advantage’ As VanEck Launch Falls Flat
The ProShares ETF has $1,4 billion in assets, compared with $8.7 million for the VanEck fund.
VanEck investments’ newly listed bitcoin futures exchange-traded fund (ETF) saw limited uptake when it launched last week. Some analysts say that’s unsurprising because a rival bitcoin futures ETF launched by ProShares several weeks earlier appears to have enjoyed a first-mover advantage.
As of Friday, the ProShares Bitcoin Strategy ETF (stock ticker BITO) had net assets of $1.4 billion. In October, it was the first bitcoin futures ETF to go live in the U.S. after it won regulatory approval from the U.S. Securities and Exchange Commission.
Those assets dwarf the $57 million for Valkyrie’s bitcoin futures ETF (ticker BTF), launched a few days later, and the $8.7 million reported for the VanEck ETF, which didn’t come to market until last week.
The ProShares ETF held onto its dominance even though it’s a more expensive investment vehicle, with a net expense ratio, compared with VanEck ETF’s.
“It is harder to gain traction when you come to market weeks later,” Todd Rosenbluth, the head of ETF and mutual fund research at CFRA Research, told CoinDesk.
ProShares $1 Billion
The first-mover advantage is evident based on trading volume.
When VanEck’s bitcoin futures ETF started trading last week on the Chicago Board Options Exchange, it drew only around $5 million of first-day trading volume.
The ProShares ETF, by contrast, hit a trading volume of about $1 billion by the end of its first day.
Deborah Fuhr, managing partner and founder of ETFGI, which tracks the ETF industry, said that “there is a significant first-mover advantage in the ETFs and ETPs (exchange-traded product) business.
“First mover takes most of the assets and trading volume,” she said. “This is a phenomenon that has existed in the U.S. for many years.”
Bitcoin ETFs
The cool reception for XBTF looks like a double disappointment for the sponsor, because VanEck’s application for a spot bitcoin ETF – which is backed by actual units of the cryptocurrency rather than by futures contracts – was rejected by the SEC on Nov. 12.
Valkyrie Funds CEO Leah Wald said the Van Eck ETF launch may have simply been a victim of bad timing as it began trading during a broad sell-off in digital asset markets. Bitcoin (BTC) prices fell about 10% in the seven days through Sunday, the biggest weekly decline in two months.
The ProShares ETF, by contrast, started just as bitcoin was pressing toward a new all-time high of just below $69,000.
“The factors that contributed to the down market had nothing to do with them and can be chalked up to nothing more than a bit of bad luck,” Wald said. “Let’s not forget that other much larger asset managers were unable to achieve launching such a product. Bringing a BTC futures fund to market is a victory on its own. Unlike those firms, Van Eck at least has a seat at the table.”
She stressed that creating an ETF is about much more than just day one, adding that Valkyrie Funds continues to see “robust demand in BTF.”
“Since the moment we launched our fund, we expected this to be about more than launch day, and continue to believe that is the case,” Wald said.
She added that there clearly is demand for exposure to bitcoin in a regulated vehicle and doesn’t expect that enthusiasm to wane anytime soon.
“Winning hearts and minds is a long-term effort,” Wald said. “We are still in the top of the first inning.”
Key Bitcoin Price Level at $60K
The launch of VanEck’s bitcoin futures ETF was “unexpectedly later than announced,” and so it’s possible that investors who were interested in a bitcoin futures ETF had already placed their bets, said Laurent Kssis, director of CEC Capital, a crypto trading advisory firm.
“This is a temporary glitch coupled with the higher volatility of bitcoin, which has scared new and existing investors as BTC dropped from its high and broke below the important $60K level,” he said. “So for now, new investors are holding back on what could lead to further downward pressures.”
Invesco Exec Reveals Reasons For Dropping Bitcoin Futures ETF
Invesco withdrew its Bitcoin Strategy ETF due to the inability to offer exposure to a mix of futures swaps and spot Bitcoin.
After dropping a filing for a Bitcoin (BTC) futures exchange-traded fund (ETF) in October, United States $1.6-trillion asset manager Invesco has disclosed the reasons behind its decision.
Anna Paglia, global head of ETFs and indexed strategies at Invesco, said that the biggest reason for dropping the filing was that the U.S. Securities and Exchange Commission only approved Bitcoin ETFs with 100% exposure to Bitcoin futures.
The Invesco Bitcoin Strategy ETF was designed to ideally be a mix of futures swaps, physical Bitcoin and private funds in the Bitcoin industry, Paglia said in a Sunday interview with the Financial Times. Such a composition would help protect investors in the event of a liquidity crisis, she stated, adding:
“We thought that CME futures were going to be a very effective element of the portfolio. We never thought they would be effective when they would be 100% of the product.”
Paglia said that Invesco realized that there are better ways of providing this particular exposure instead of giving investors something they didn’t need. She also cited concerns related to capacity and liquidity in the futures market.
Invesco originally filed for its Invesco Bitcoin Strategy ETF in early August, planning to invest its assets in Bitcoin futures and exchange-traded products, as well as Bitcoin-linked private investment trusts such as the Grayscale Bitcoin Trust.
According to Paglia, Invesco filed for the ETF within 24 hours of SEC Chair Gary Gensler hinting the regulator might be open to approving Bitcoin futures ETFs traded on the Chicago Mercantile Exchange.
“It was easier to say ‘yes’ and see how it goes than ‘no’ and explain the decision. We had to make this hard choice and own the decision. I would do the same again,” Paglia noted.
Paglia’s remarks come soon after Bitwise Asset Management became another firm to drop its Bitcoin ETF application in early November despite the launch of Bitcoin futures ETFs such as the ProShares Bitcoin Strategy ETF and the Valkyrie Bitcoin Strategy ETF.
Bitwise chief investment officer Matt Hougan noted that the Bitcoin futures ETF contango — a situation where the futures price is higher than the spot one — could be costly for investors.
Hougan added that the company will continue its efforts to launch a spot Bitcoin ETF in the U.S. as no such products have been launched since Gemini crypto exchange founders Cameron and Tyler Winklevoss first filed for such a product back in 2017.
Updated: 11-29-2021
Invesco Launches Spot Bitcoin ETP On Deutsche Borse
Invesco’s spot Bitcoin ETN joins 25 other similar products on Deutsche Boerse’s digital exchange, Xetra.
oon after dropping a filing for a Bitcoin (BTC) futures exchange-traded fund (ETF) in the United States, asset manager Invesco is launching a spot BTC exchange-traded note (ETN) in Europe.
On Nov. 29, German stock market operator Deutsche Boerse officially announced the listing of the Invesco Physical Bitcoin ETN on its digital stock exchange, Xetra. The new product will trade under the ticker symbol BTIC.
Admitted to the regulated market of the Frankfurt Stock Exchange, the new ETN product is physically backed by Bitcoin and is centrally cleared via Eurex Clearing. “Through central clearing, investors benefit from significantly reduced risks in the settlement of transactions,” the announcement notes.
According to a report by the ETF-focused publication ETF Stream, custody of Bitcoin held on behalf of BTIC will be provided by Standard Chartered’s crypto custody platform, known as Zodia.
Northern Trust, a co-investor in Zodia, will reportedly act as the administrator for BTIC. Launched in late 2020, Zodia is registered with the United Kingdom’s Financial Conduct Authority.
Major European digital asset manager CoinShares is a known partner of Invesco and will serve as both the index sponsor and execution agent for the new ETN. BTIC is tracking the CoinShares Bitcoin Hourly Reference Rate index, delivering the price performance on the underlying asset minus fees.
The news comes shortly after Invesco withdrew its filing with the U.S. Securities and Exchange Commission for a Bitcoin futures-based ETF in October in order to provide investors with better investment options rather than just a 100% BTC futures ETF.
“Physical bitcoin is a more observable marketplace. One of our concerns was the depth of synthetic liquidity as well as what that may do to valuations over time and that is something we were not wholly comfortable with,” said Gary Buxton, head of ETFs and indexed strategies at Invesco. He added that Invesco has been working on the product “since the middle of 2018.”
Invesco’s entrance to the European industry of crypto exchange-traded products (ETP) comes as Deutsche Boerse actively expands the range of supported crypto derivatives products across its operated exchanges.
According to the firm, the Xetra exchange offers as many as 26 ETNs from seven providers on various cryptocurrencies including Bitcoin, Ether (ETH), Bitcoin Cash (BCH), Cardano (ADA), Litecoin (LTC) and others.
Both ETFs and ETNs are types of ETPs and they are fairly similar in that they track an underlying asset and trading on exchanges in a manner like that of other securities.
While an ETF presumes investment in a fund that holds the assets, an ETN is more like a bond, providing exposure to an unsecured debt note issued by an institution.
Updated: 11-30-2021
Kelly Strategic Management Files For Ethereum Futures ETF
Following Kelly Strategic Management’s filing for an Ether futures ETF, analysts questioned whether SEC chairman Gary Gensler is “mentally ready” to approve anything other than a BTC futures product.
Denver-based investment firm Kelly Strategic Management has filed for an exchange-traded fund (ETF) offering exposure to Ethereum (ETH) futures contracts.
The move comes just three months after VanEck and ProShares suddenly withdrew their ETH futures ETF applications on the same day in August.
According to a Monday filing with the U.S. Securities and Exchange Commission (SEC), the Kelly Ethereum Ether Strategy ETF will invest in cash-settled Ether futures contracts traded on the Chicago Mercantile Exchange (CME).
Bloomberg’s senior ETF analyst Eric Balchunas noted on Twitter on Tuesday that Kelly’s Ether ETF may have a s20% chance of getting approval, as he questioned whether the “SEC is ready for this new step.”
In Balchunas’ view, he thinks that SEC chairman Gary Gensler is “not mentally ready” to approve anything other than a Bitcoin (BTC) futures ETF at this stage:
“During the Bitcoin futures filing process in Aug, VanEck and ProShares filed for Ether ETFs too. SEC told them to withdraw them. It’s now 3 months (and 3 successful Bitcoin ETF futures ETF launches) later.”
Balchunas added that if the rumors were true that the SEC told VanEck and ProShares to withdraw their respective Ether ETF filings as they provided exposure to crypto assets other than BTC, Kelly’s ETF would have a 1% chance of approval.
Just had quick chat with @JSeyff and our early, rough odds of approval of this ETF is about 20% unless this @twobitidiot rumor is correct, then we’d obv go way lower like 1% (altho we still see multiple ETFs holding $ETHE) https://t.co/Ba4yRMsGS6
— Eric Balchunas (@EricBalchunas) November 29, 2021
Researcher Jason Lowery commented, “I would be surprised if SEC approved an ETH ETF b/c it tacitly signals acceptance of ETH as not being an unregistered security.”
The SEC has approved multiple BTC futures ETFs in the latter half of 2021, but it appears that the regulatory body is currently not willing to sign off on any type of fund that offers exposure to crypto outside of CME BTC futures contracts.
Earlier this month, Anna Paglia the global head of ETFs and indexed strategies at Invesco highlighted as such, as she explained that her firm’s decision to pull its BTC Futures ETF was because the SEC only approves Bitcoin ETFs with 100% exposure to Bitcoin futures.
Invesco’s ETF had aimed to provide a mix of futures swaps, physical Bitcoin and private funds in the Bitcoin industry.
Updated: 12-1-2021
Michael Sapir, Bitcoin’s ETF Front-Runner
ProShares introduced the first one in October, and investors piled more than $1 billion into it in two days, the fastest that any exchange-traded fund has reached the milestone.
The first application for a Bitcoin ETF was filed with the U.S. Securities and Exchange Commission in 2013 by the tech and crypto entrepreneurs Cameron and Tyler Winklevoss.
But regulators had too many concerns about volatility, price manipulation, and liquidity to bless it, even as similar products traded in Europe and Canada in ensuing years.
Those worries appear to have faded in light of a new approach and a new SEC chairman. Sapir’s ProShares Bitcoin Strategy ETF tracks Bitcoin futures instead of holding the cryptocurrency itself, as the Winklevii (and others) once proposed, allowing it to trade under the same rules that mutual funds follow and thereby offer investors greater protections.
Sapir co-founded ProShares in 1997, close to the dawn of the now $7 trillion U.S. ETF industry, and the company now oversees more than $68 billion in assets.
His Bitcoin ETF tapped into pent-up demand from investors who want exposure to cryptocurrency without the inconvenience of mining it and the ups and downs of having it in their portfolios.
(Bitcoin’s last three full-year returns were a 74% loss followed by gains of 95% and 305%.) Sapir already has competition: Currently there are about a half-dozen pending applications for similar futures-based products in front of the SEC.
Grayscale Tells SEC ‘No Basis’ To Approve Bitcoin Futures ETFs And Not Spot ETFs
A letter to the secretary of the SEC outlines discrepancies in its rejection of Bitcoin spot ETFs and acceptance of Bitcoin futures ETFs.
Grayscale Investments has fired back at the U.S. Securities and Exchange Commission (SEC) over its recent rejection of VanEck’s spot Bitcoin ETF application.
The operator of the Grayscale Bitcoin Trust (GBTC) issued a letter to the secretary of the SEC, Vanessa Countryman, on Monday to argue the SEC is wrong to reject spot Bitcoin ETFs since it has now approved three Bitcoin futures ETFs, one each from VanEck, Valkyrie and ProShares.
Grayscale argues that the SEC has “no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not.”
It claims the SEC violated the Administrative Protections Act (APA) by failing to treat the two Bitcoin ETF products the same.
A Bitcoin futures ETF allows traders to speculate on the future price of Bitcoin (BTC) via derivatives, while a spot Bitcoin ETF would allow traders to trade on the current price of the asset, thereby functioning similarly to holding the asset.
Grayscale is hardly a disinterested party with an application filed in October to list GBTC as a Bitcoin spot ETF, with a decision possible as on Christmas Eve. On Nov. 12, the SEC rejected VanEck’s similar application on the grounds that it was not consistent with the requirements of the Securities Exchange Act of 1934 (Exchange Act).
Grayscale disagrees with those grounds for rejection.
“We believe this rationale failed adequately to take account of significant regulatory and competitive developments since 2017 when the Commission first considered, and denied, a national securities exchange’s application to list and trade shares of a spot Bitcoin ETP.”
In approving Bitcoin futures ETFs, Grayscale believes the SEC allowed applicants how to sidestep the requirements of Section 6(5)(b) under the Exchange Act, which Bitcoin spot ETF applicants must adhere to.
Section 6(5)(b) is designed to “protect investors and the public interest” by preventing fraud and market manipulation while also disallowing “unfair discrimination between customers, issuers, brokers, or dealers.”
Grayscale had predicted that its Bitcoin spot ETF could be listed as soon as July 2022, but it is unclear whether that prediction will become reality.
GBTC has about $37.1 billion assets under management with 692,370,100 shares outstanding.
Fidelity Canada Reportedly Launching Spot Bitcoin ETF
Fidelity Canada has launched a Bitcoin exchange-traded fund that will allow investors to buy and sell real Bitcoin rather than derivatives.
It’s been a bumpy ride for Bitcoin (BTC) investors. While waiting on the United States Securities and Exchange Commission (SEC) to make their decision about whether or not they will approve a spot Bitcoin exchange-traded fund (ETF), Canada-based investment firm Fidelity is reportedly launching a spot ETF in the country, subject to regulatory approval.
According to a tweet shared by Bloomberg senior ETF analyst Erick Balchunas, the fund “Fidelity Advantage Bitcoin ETF” is currently pending listing on a Canadian exchange. Balchunas also pointed out that if the new fund succeeds, it would become the largest asset management firm that offers Bitcoin services.
SEMI-SHOCK: Fidelity launching a spot bitcoin ETF in Canada this week. Didn’t know about this. Will easily be the biggest asset manager to date with a bitcoin ETF. pic.twitter.com/H2XJRBY3O6
— Eric Balchunas (@EricBalchunas) November 30, 2021
Fidelity’s decision to offer a spot ETF in Canada only adds fuel to fire, as one of the world’s largest asset managers with almost $4 trillion in assets is compelled to develop a service in Canada to satisfy customer demands.
Meanwhile, the SEC is still deliberating whether or not to approve a spot Bitcoin ETF, which according to many market experts will be a hit in the market.
Grayscale Investments has criticized the SEC’s recent refusal of VanEck’s spot Bitcoin ETF application, as reported by Cointelegraph.
The operator of the Grayscale Bitcoin Trust (GBTC) claims in a letter to Secretary of the SEC Vanessa Countryman that the SEC was wrong to reject spot Bitcoin ETFs since it has now permitted three such products based on Bitcoin futures.
Canada is no stranger to Bitcoin ETFs. The introduction of the FBTC might pave the way for additional spot ETFs in the Canadian market. This would be a significant victory for investors since it would allow them exposure to Bitcoin without having to go to the trouble of purchasing and storing it themselves.
Updated: 12-2-2021
SEC Rejects WisdomTree’s Application For Spot Bitcoin ETF
The Cboe BZX Exchange used the examples set by CME’s crypto futures products in its argument for approval, but the SEC rejected them.
The United States Securities and Exchange Commission, or SEC, has officially disapproved asset manager WisdomTree’s spot Bitcoin (BTC) exchange-traded fund (ETF) after deferring on a decision several times this year.
According to a Wednesday filing, the SEC rejected a proposed rule change from the Cboe BZX Exchange to list and trade shares of WisdomTree’s Bitcoin Trust.
Specifically, the SEC said any rule change in favor of approving the ETF would not be “‘designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.”
The SEC concluded that BZX had not met the requirements of listing a financial product under its rules in addition to the Exchange Act, saying the BTC ETF proposed would not allow the commission “to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules.”
In addition, the SEC said that the exchange had not provided sufficient means “to prevent fraudulent and manipulative acts and practices” in any potential listing.
Specifically, the agency claimed that BZX did not provide enough data to conclude the crypto market is resistant to manipulation, or address concerns about possible sources of fraud and manipulation, including wash trading and other risk factors.
While the exchange used the examples set by crypto futures products with the CME Group in its argument for approval, the SEC rejected them as evidence towards accepting a spot crypto ETF.
“The Commission cannot conclude, based on BZX’s statements alone and absent any evidence or analysis in support of BZX’s assertions, that it is unlikely that trading in the ETP would be the predominant influence on prices in the CME bitcoin futures market,” said the filing.
Since originally filing its application with the SEC on March 11, WisdomTree has seen the commission delay a decision on its spot Bitcoin ETF several times in 2021.
The SEC opened the application to the public for comment in April and designated longer periods of time to approve or disapprove the proposed rule change in May, July and September. Its reasoning for denying the offering from WisdomTree was similar to that for VanEck’s Bitcoin ETF, rejected in November.
However, across the pond, WisdomTree was able to list its crypto basket exchange-traded product on Euronext exchanges in Paris and Amsterdam. The investment product, trading under the ticker MEGA, is backed by physical crypto assets including Bitcoin (BTC) and Ether (ETH).
A separate ETF application for WisdomTree’s Ethereum Trust in the United States, first submitted to the SEC in May, is still under review. In addition, the agency will likely reach a decision on an exchange-traded fund offering exposure to Bitcoin from Kryptocoin, with the deadline expected on Dec. 24.
VanEck Files To Launch Digital Asset Mining ETF
The fund will invest at least 80% of its assets in digital mining firms.
Investment firm VanEck has filed with the SEC to launch an exchange-traded fund (ETF) focused on digital asset mining companies.
* The fund will invest at least 80% of its total assets in securities of digital asset mining firms that generate or have the potential to earn at least 50% of their revenues from mining activities or related technologies.
* The ETF’s holdings may include small- and medium-capitalization companies and foreign and emerging market issuers. It may also invest in depositary receipts and securities denominated in foreign currencies.
* The ETF won’t invest directly in digital assets, nor in initial coin offerings.
* The filing didn’t provide details of the planned ETF’s ticker, listing date or related fees.
* Other ETFs that are listed in the U.S. and have heavy exposure to crypto miners include Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ), which is up 45% since its inception in July, and Bitwise Crypto Industry Innovators ETF (BITQ), which has climbed 26% since launching earlier this year.
* VanEck launched a bitcoin futures ETF in mid-November, the third such fund to debut since U.S. Securities and Exchange Commission Chair Gary Gensler expressed his preference for bitcoin ETFs that invested in futures rather than directly in bitcoin itself. Its proposal for a spot bitcoin ETF was rejected by the SEC.
Fidelity Canada Officially Launches Bitcoin ETF And Bitcoin Mutual Fund
Holding such ETFs in registered accounts can either entirely offset or reduce capital gains tax liabilities for Canadian customers.
On Thursday, Fidelity Canada officially launched the Fidelity Advantage Bitcoin exchange-traded fund (ETF) and the Fidelity Advantage Bitcoin ETF Fund (mutual fund), marking the first such assets to be made available in the country and confirming earlier reports on the matter.
The funds have the tickers FBTC and FBTC.U, denominated in Canadian and United States dollars, and are listed on the Toronto Stock Exchange. Fidelity’s Bitcoin ETFs seek to track the performance of Bitcoin’s (BTC) spot price. Fidelity currently manages CA$208 billion ($162.27 billion) in assets in the country.
The ETFs will have an annual management fee of 0.4%. Operating expenses and trading costs are not yet available as the assets are still new. Over 98% of Bitcoin purchased by the funds is stored in cold wallets.
The implications are significant for Canadian retail investors who open government-registered accounts, such as the Tax-Free Savings Account (TFSA), and purchase Bitcoin ETFs. As the name implies, securities held in a TFSA are exempt from capital gains tax liabilities.
Since 2009, the annual contribution limit for a TFSA has ranged from CA$5,000 ($3,903) to CA$10,000 ($7,807). Unused contributions from the previous years are carried forward, making them cumulative. In addition, all realized profits accrued in the TFSA are added back into the contribution room.
Hypothetically, if an investor purchases $10,000 in a Bitcoin ETF and sells them for $20,000, then further capital appreciation from reinvesting the full $20,000, not $10,000, will be eligible for capital gains tax-exemption.
Updated: 12-3-2021
Ritholtz Latest to Push Into Crypto ‘Wild West’ Without Spot ETF
With U.S. regulators still opposed to exchange-traded funds that directly hold cryptocurrencies, asset managers and fund issuers are finding workarounds for financial advisers clamoring to offer clients exposure to the booming sector.
Ritholtz Wealth Management teamed up with WisdomTree Investments Inc. to unveil the RWM WisdomTree Crypto Index — backed by cryptocurrencies held in storage by Gemini Trust Co. — on Friday, which advisers can funnel client cash into via Onramp Invest’s technology platform.
The Fidelity Advantage Bitcoin ETF, which can invest in the cryptocurrency directly, began trading in Canada on Thursday.
Both products are an offshoot of the U.S. Securities and Exchange Commission’s reticence to approve an ETF that directly holds cryptocurrencies. While SEC chairman Gary Gensler allowed the first U.S. derivatives-linked Bitcoin funds to launch in October, futures contacts roll costs and tracking errors have seemingly kept financial advisers at bay.
Instead, that’s led ETF issuers to Canada — which has embraced Bitcoin ETFs — and lead managers such as Ritholtz to take matters into their own hands.
“This was really driven by client demand,” said Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management. Ritholtz is a contributor to Bloomberg Opinion and podcaster. “Gary Gensler could have saved us a year of serious work if there was an ETF for this.”
The ProShares Bitcoin Strategy ETF — the first of its kind — quickly ranked as one of the most successful launches on record amid a flood of pent-up demand for crypto exposure in an ETF wrapper.
However, that initial enthusiasm has cooled. Inflows have stalled, while BITO has slumped roughly 13.5% since its debut. Meanwhile, the world’s largest cryptocurrency has dropped about 11% from an all-time high in that time.
For years, institutional investors and advisers flocked to the physically-backed $37 billion Grayscale Bitcoin Trust (ticker GBTC). However, the fund has been mired in a persistent discount to its net asset value for months, given that shares of the trust can’t be destroyed in the same way as they can in an ETF.
Grayscale applied to the SEC to convert GBTC into an ETF, but U.S. regulators have yet to publicly signal that their stance on physically-backed funds has changed.
Fidelity made the case in September in a private meeting with the SEC to urge approval, before the Boston-based issuer ultimately launched their ETF in Canada this week.
Managers will continue to get creative as the SEC demurs on spot ETF approval, according to Bloomberg Intelligence’s Eric Balchunas. Even with its famous volatility, Bitcoin has delivered returns of nearly 6,000% over the past five years, stoking demand.
“ETF or no ETF, advisers are going into what Gensler calls the wild west of crypto,” said Balchunas, senior ETF analyst. “The pressure from advisers is almost boiling over. A lot of advisers feel like they have to do something to service a client base that’s demanding crypto in their portfolio.”
Updated: 12-8-2021
US Is ‘Unquestionably’ Behind The Curve On Crypto ETFs, Says Brian Brooks
Brian Brooks proposed regulators treat crypto in much the same way as traditional financial institutions rather than creating an entirely new body to create a single framework for digital assets.
Bitfury CEO and former Acting Comptroller of the Currency Brian Brooks has hinted the regulatory environment in the United States could drive many crypto firms outside the country, and has already stymied companies attempting to offer a variety of financial products.
Speaking at a Wednesday hearing on Digital Assets and the Future of Finance with the House Committee on Financial Services, congressperson Ted Budd said he feared the current policy of regulation by enforcement in the U.S. could “force the next generation of financial tech to be created outside of our country.” Speaking on behalf of Bitfury, Brooks said:
“There are some products that are legal in other countries and are just not legal here,” said Brooks. “One of the things that makes crypto risky is that consumers may not understand the difference between one token and another token, so they may want to diversify […] we don’t allow that in the United States — we do allow it in Canada, we allow it in Germany, Singapore, Portugal and a number of other places.” He added:
“If you’re a developer of [exchange-traded funds], there’s no fuzzy line, it’s super clear: You cannot do that here, so you have to go abroad.”
Brooks placed the lack of exchange-traded funds, or ETFs, in the U.S. on the Securities and Exchange Commission. Though the regulator has recently approved ETFs with exposure to Bitcoin (BTC) futures from investment managers ProShares and Valkyrie, it has yet to give the green light for BTC or other crypto ETFs.
In contrast, many U.S. companies with operations in Canada have successfully applied with local regulators for ETFs with direct exposure to crypto.
However, the former OCC head suggested the lack of approval of crypto investment products was more of a result of the United States’ “fragmented approach to regulation,” given the number of bodies overseeing banks, finance and now digital assets.
Brooks proposed a solution in which traditional financial institutions would be treated in much the same way as crypto.
“When I hear people talk about the idea that we need one regulator for crypto, I would say we should first have one regulator for banks, but we have three of them,” said Brooks. “The last thing we need to do is add another regulator to a system that’s already got dozens of regulators.
“If I’m a crypto lending platform, I should probably be regulated by the FDIC. If I’m a crypto trading platform, I should probably be regulated by the CFTC and SEC, but somehow we treat crypto, because it’s new, as different than everything else. I’m gonna argue that crypto is just a step function improvement in the system.”
CEOs from Circle, FTX, Bitfury, Paxos, Stellar Development Foundation and Coinbase Inc. are currently fielding questions from U.S. lawmakers on the state of digital assets in the country.
Cointelegraph reported earlier on Wednesday that House representatives have expressed concerns over token projects exerting centralized control over many users’ assets.
Updated: 12-9-2021
WisdomTree Amends Bitcoin ETF Application, Naming US Bank As Custodian
U.S. Bank launched crypto custody services for institutional investors in October as part of a partnership with New York Digital Investment Group.
New York-based asset manager WisdomTree has amended its filing for a Bitcoin exchange-traded fund (ETF) with the Securities and Exchange Commission to name U.S. Bank as its custodian.
In a Wednesday filing, WisdomTree listed U.S. Bank National Association as the custodian for shares of its Bitcoin (BTC) trust. The filing is an amendment to its March 11 registration for a spot Bitcoin exchange-traded fund submitted to the SEC prior to U.S. Bank offering crypto custody services for institutional investors.
On Dec. 2, the SEC rejected a proposed rule change from the Cboe BZX Exchange to list and trade shares of WisdomTree’s Bitcoin Trust.
It’s unclear if the recent amendment is aimed at resetting the clock on a new spot Bitcoin ETF application, given WisdomTree waited 265 days between its initial filing and the SEC rejection. A separate ETF application for WisdomTree’s Ethereum Trust submitted to the SEC in May is still under review.
With more than $76 billion in assets under management, WisdomTree has also launched four cryptocurrency indices in the United States and Europe to provide diversified portfolio exposure to investors.
In addition, the company already has an exchange-traded product with exposure to a basket of cryptocurrencies on Euronext exchanges in Paris and Amsterdam.
Regulators in the United States have yet to approve a cryptocurrency exchange-traded fund. However, the SEC gave the green light to products linked to crypto futures, including BTC futures ETFs from investment managers ProShares and Valkyrie. Other U.S. firms, including Fidelity, have successfully applied with Canadian regulators for ETFs with direct exposure to crypto.
Updated: 12-15-2021
Valkyrie Launches ETF To Track Bitcoin Balance Sheet Stocks
Long on MicroStrategy, the actively managed ETF brings another crypto-tinted product to Wall Street’s ranks.
A new exchange-traded fund (ETF) from crypto manager Valkyrie invests in companies with big bitcoin bags, according to a regulatory filing published Wednesday.
Balance Sheet Opportunities ETF, trading as VBB on Nasdaq, is long on MicroStrategy, Square, Tesla and other crypto industry bulls. An actively managed thematic ETF, it steers clear of bitcoin futures, sticking only to equities that invest in the coin.
The ETF is the latest example of mainstream financial instruments with a crypto tilt and comes at a time when about $70 billion worth of bitcoin is sitting on corporate balance sheets.
VBB probably won’t command the billion-dollar inflows that U.S. bitcoin futures ETFs garnered in their watershed November debut, Steve McClurg, Valkyrie’s chief investment officer, told CoinDesk. Still, he said the more traditional structure has a “bigger market” to tap.
“Futures mostly appeal to hedge funds and momentum traders,” McClurg said in an interview. “The reality is there’s a lot of financial advisors that can’t actually use it in their platform” in part because of futures market-specific quirks, like contango.
An ETF that invests in the stock of bitcoin-forward companies might be more palatable, McClurg said.
BlackRock, Mastercard, Robinhood, PayPal, Overstock, BTCS and Coinbase round out VBB’s top 10 holdings at launch.
Not all of those corporations invest directly in bitcoin. BlackRock, the world’s largest asset manager, has publicly disclosed investments in bitcoin futures. McClurg said its inclusion helps VBB maintain a diversification that he said actually helps it track closer to bitcoin.
Updated: 12-17-2021
Valkyrie Counters BIS, Says Concern On Bitcoin ETF Front-Running Is Misplaced
Bitcoin’s volatility makes front-running the ETF monthly rolls unviable, one observer said.
Bank for International Settlements (BIS) concern over speculators exploiting the monthly rollovers of bitcoin futures-based exchange-traded funds (ETFs) from one contract to another is overdone, according to ETF manager Valkyrie.
It’s recognized that the funds are exposed to contango bleed, an over-time drawdown in performance due to end-of-month rollovers of long positions from expiring short-term contracts. The problem, however, can be exacerbated by speculators exploiting the monthly rollovers, according the BIS.
“The predictable rebalancing behavior of the ETF may also give rise to ‘front-running’ incentives, motivating investors to purchase longer-dated bitcoin futures in anticipation of the ETF rolling into those contracts,” BIS Economist Karamfil Todorov noted in a blog spot on Dec. 6.
While such front-running has had a significant bearing on traditional market ETFs’ performance in the past, there are no signs of traders employing a similar strategy in the crypto market yet, according to Valkyrie.
“We haven’t noticed any front-running specifically related to rolling the BTF futures,” Bill Cannon, head of ETF portfolio management at Valkyrie Investments, told CoinDesk. “Liquidity has been healthy, and there haven’t been any issues with execution.”
Valkyrie’s bitcoin futures ETF went live on Nasdaq under the ticker BTF on Oct. 22. The ProShares Bitcoin Strategy ETF debuted on the New York Stock Exchange on Oct. 19. The VanEck Bitcoin Strategy ETF, also futures-based, began trading last month.
These ETFs gain exposure to bitcoin through regulated futures contracts trading on the Chicago Mercantile Exchange (CME) rather than owning the cryptocurrency. So, unlike ETFs that invest in stocks and gold, these futures-based ETFs must keep moving long positions from one expiry to another in a bid to mimic the cryptocurrency’s price performance.
That leaves the door open for traders to buy the next month’s contract and sell the expiring contract ahead of orders from ETFs. The funds end up paying more to buy the next month’s contract and receive less for selling the current month, leading to a bigger rollover loss.
The ETF Roll And Potential Front-Running
As of Thursday, Valkyrie’s ETF held 215 contracts (each representing 5 BTC) of December futures expiring at the end of the year. Some time before expiry, it will sell 215 December futures contracts and buy 215 contracts in January or longer-dated expiry.
The Proshares ETF currently holding 3,803 December futures contracts, and VanEck holding 69 regular and 14 micro contracts will do the same.
The futures curve is in contango, meaning the longer-dated contracts are have higher prices than short-dated ones. The December contract is changing hands at $47,085 at press time, while the January contract is trading at $47,355, according to data tracked by TradingView. So, the ETFs will sell low and buy high during the rollover. That’s contango bleed.
According to BIS, had Proshares ETF been launched in 2018, it would have underperformed the spot price by 18% “on a cumulative basis over the following four years to date,” because of the bleed.
If traders front-run the roll by selling the expiring contract and buying the longer-dated one before the ETFs, the latter will become pricier. In other words, the contango will steepen, and the funds end up bearing a higher rollover cost than otherwise.
While it is difficult to estimate the exact figure of additional rollover loss caused by traders’ front-running ETFs, traditional market experience suggests the drawdown could be significant.
The U.S. Oil Fund LP trading on the NYSE under the ticker USO lost about $120 million while rolling 80,000 contracts from March to April maturities, according to a report by The Wall Street Journal. The United States Natural Gas ETF (UNG) became a target of front-runners a decade ago.
Easier Said Than Done
While the monthly ETF rollovers provide a window of opportunity for traders, taking advantage of it might not be so easy.
“To successfully front-run, you need to be able to predict the short-term price moves of the underlying [asset] with relative confidence; the volatility of bitcoin and the crypto asset-class makes that a particularly difficult task, fraught with risk,” Sui Chung, CEO of CF Benchmarks, said in a Telegram chat. “What makes crypto products unique, therefore, is that the volatility of the underlying essentially makes front running unviable.”
The three long futures-based ETFs discussed above are actively managed, meaning a manager or a team of experts decide on the allocations. So, predicting the exact timing of the rollover and whether the fund is rolling over to the next-month or longer-dated contract is a bit of a gamble.
The ETFs can always diversify their holdings into different contracts to avoid the usual front-runners.
“While such a pattern is not easy to identify, this type of trading anomaly could occur at a time of rebalancing leveraged and short futures-based ETFs, where rebalancing needs are directly impacted by volatility on certain days,” Valkyrie’s Cannon said.
One trader from a major crypto exchange, who asked not to be named because of employer-imposed restrictions on making public statements, said the ETFs have a way of keeping markets honest.
“If they think too many market makers and speculators are front running their open interest roll, they will maybe wait a day or two, or they will do a certain amount of volume over-the-counter,” the trader said. “This freaks out the speculators, and they actually end up crashing the spread down [by unwinding the front-running trade] themselves, thinking the fund is not going to have the ammo in this particular period. It’s a big game of poker.”
There Another Effect: If too many speculators pile into the next month’s contract, the impact on the fund could be less marked. That’s because, as the fund starts rolling, speculators start liquidating their longs, building up selling pressure that pulls down the futures price and narrows the contango.
“This kind of public front-running is SO heavily exploited it often actually backfires,” Dave Nadig, director of research at ETF Trends, said in a Twitter chat. “We see that in things like Russell index rebalancing front runs. We saw it in VIX [stock market volatility] futures ETF for a while too. It’s a huge mistake to think of it as free money.”
SEC Delays Decisions On Bitwise And Grayscale’s Bitcoin ETFs
The SEC now expects to decide whether to approve or disapprove Bitwise and Grayscale’s Bitcoin exchange-traded offerings in early February.
The United States Securities and Exchange Commission continues to delay decisions on Bitcoin (BTC) exchange-traded funds (ETF), issuing two fresh deadline extension notices.
On Wednesday, the SEC postponed two major Bitcoin exchange-traded offering proposals, including NYSE Arca’s “actual” Bitcoin ETF, named Bitwise Bitcoin ETP Trust, and Grayscale Bitcoin Trust’s Bitcoin ETF.
The SEC now expects to decide whether to approve or disapprove, or “institute proceedings to determine whether to disapprove” Bitwise’s BTC ETF and Grayscale’s BTC ETF on Feb. 1 and Feb. 6, respectively.
“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and any comments received,” the SEC wrote in both notices.
As previously reported, Bitwise Asset Management filed for a physical-backed Bitcoin ETF on Oct. 14, planning to provide exposure to “actual BTC” rather than derivatives like Bitcoin futures or other indirect exposure.
The firm subsequently dropped its own Bitcoin futures-based ETF application in November, as many of such products were launching in the United States.
Grayscale is the world’s largest Bitcoin fund with total assets under management amounting to $45.6 billion. The company applied to convert its flagship Bitcoin product to an ETF on Oct. 19.
The latest news comes amid the SEC continuing to maintain its tough stance on physical crypto ETFs while approving a number of industry ETF with indirect exposure to crypto, including the BTC futures ETF by investment firm ProShares.
In early December, the SEC rejected a spot Bitcoin ETF by asset manager WisdomTree after previously delaying a decision in June.
In November, the SEC rejected a physical Bitcoin ETF by VanEck, one of the world’s first companies to ever file for a Bitcoin ETF. The company still opted to launch a Bitcoin futures ETF trading on the Chicago Board Options Exchange.
Updated: 12-22-2021
SEC Rejects Kryptoin Spot Bitcoin ETF Proposal
The decision comes about five weeks after the agency rejected VanEck’s application for a spot bitcoin ETF.
The U.S. Securities and Exchange Commission (SEC) rejected investment firm Kryptoin’s proposal for a spot bitcoin exchange-traded fund (ETF) in a letter on Wednesday.
* The decision comes roughly five weeks after the agency had rejected VanEck’s application for a spot bitcoin ETF.
* It was also not unexpected because SEC Chair Gary Gensler has stated his preference for a bitcoin futures ETF over an ETF that holds bitcoin itself.
* Two bitcoin futures ETFs, the ProShares Bitcoin Strategy ETF (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF), began trading in October.
* The SEC began officially evaluating the Kryptoin application in April.
* Bitcoin’s price was down slightly in Wednesday afternoon trading.
Updated: 12-23-2021
Are Spot Crypto ETFs Really Worth The Wait?
Many advisors and investors seem to be waiting for spot crypto ETFs before diving into digital assets. But they have all the tools they need to begin investing in digital assets on behalf of clients right now.
Why are we waiting on cryptocurrency ETFs? Seriously.
I know there are now a few options to invest in bitcoin futures via an exchange-traded fund (ETF), and there are spot bitcoin ETFs available in Canada, but it seems like many financial advisors and writers are waiting with bated breath for a spot bitcoin ETF in the U.S. to suddenly open up the floodgates of digital asset investing to the entire world.
I think that a sizable cohort of ETF watchers is terribly misled – and even worse, is misleading others.
Advisors And Investors Have What They Need Now
The truth is that advisors and investors already have what they need to get started in crypto today. I’ve recently written about a recent proliferation in services that allow advisors to work with their clients’ digital assets, including Onramp Invest, BlockChange and Flourish.
There’s also no shortage of education and information services about digital assets, from this newsletter to a plethora of other sources, including blockchain developers themselves, who usually pride themselves on transparency.
Yet, the proponents of digital assets ETFs keep telling us that they will open access to new investors who either do not have the ability to learn about cryptocurrencies or who are prevented from accessing them by regulations.
The Continuing Appeal Of A Spot ETF
“In the end, being able to have direct exposure is most important,” said A.J. Nary, the founder of HeightZero, a technology platform intended to allow advisors and wealth managers gain direct exposure to and manage digital assets for their end clients, providing reporting for portfolio management and tax reporting systems.
“A spot ETF would be attractive to some investors who just want something that trades on a traditional exchange and understand how it works.
It’s really no different than investors who buy shares of a publicly traded company that holds a lot of bitcoin on its balance sheet as a way to get exposure to the asset. I think the interest is primarily coming from family offices and institutional investors.”
Currently, HeightZero permits access to bitcoin and ether, only because Nary and his partners believe these two cryptocurrencies are commodities, not securities, and therefore not governed by custody rules, which for the time being allows advisors to co-custody digital assets with their clients. (The custody question is one that has yet to be definitively answered by regulators.)
Another service, Swan Advisor Services, was launched by Swan Bitcoin. As its name suggests, it is focused solely on bitcoin, for reasons similar to HeightZero.
“We launched a third-party coin ownership service because an ETF, mutual fund, hedge fund or limited partnership structure is just a paper claim to the currency,” said Swan Advisor Services founder Andy Edstrom. “We think it’s important that clients have the ability to withdraw their holdings to self-custody and cold storage when they’re ready, and we’re prepared to help educate them on how to do it.
The expectation of ETF fans is that people are years or decades away from understanding self-custody or collaborative custody with an advisor or that for some it will never happen. But I think the industry is ready to educate them and help them do it themselves.”
Spot ETFs are enticing, however, because they plug so easily into existing financial infrastructure, whether it be advisors’ current portfolio management software or a client’s account aggregation dashboard on a portal or personal finance application.
The Current State Of Digital Assets Products
They also represent a noticeable improvement from existing digital assets products in the U.S., said Dan Eyre, the CEO of BITRIA, formerly Blockchange, a turnkey asset management platform for digital assets.
(A turnkey asset management program allows independent financial advisors, typically fiduciaries, to outsource the management of some or all of their clients’ assets.)
“The Grayscale Bitcoin Trusts and BitWise index products of the world are pretty inefficient, they have no mechanism to tie back into the net-asset value, so they have these wild swings where it might trade at a 30% premium one day and a few months later have a 21% discount to net asset value,” said Eyre. [Editor’s note: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.]
“You don’t have the same problem with a spot ETF. It’s a simple instrument that offers fairly efficient access to the speculative nature of bitcoin prices. It’s a starting point.”
Ben Cruikshank, the founder of fintech Flourish, feels similarly about the prospects of spot crypto ETFs, even though his platform is designed to enable collaborative custody.
“The needs of the crypto community are definitely different than the needs of the advisory community, because in the crypto community there’s a lot of mantras and thinking around self-custody,” said Cruikshank. “As an advisor, on average, one of my clients would forget their email password at least once a week, so how do I work with them on keeping their private keys safe?
People work with advisors because they want their financial lives to be simpler, and self-custody feels a lot more complex than outsourcing custody to a qualified custodian. We think that today, the clients of advisors will want to outsource custody.
“We think that, increasingly, people will look to outsource the custody of their digital assets,” Cruikshank said. “Remember that 40 years ago it was common to keep stock certificates and bearer bonds in a safe deposit box, but now custodians like Fidelity and Schwab keep those assets secure on our behalf. Fundamentally, we believe clients will want this to be simple.”
And this simplicity and security, more than anything else, may be why so many advisors feel like true spot cryptocurrency ETFs are going to be worth the wait.
Updated: 2-1-2022
SEC Asks Bitwise To Address Concerns About Proposed Spot Bitcoin ETF
The regulator’s concerns include possible share manipulation and liquidity.
The U.S. Securities and Exchange Commission has asked Bitwise to clarify how the investment firm will prevent share manipulation, fraud and other potential issues in its proposed spot bitcoin exchange-traded fund (ETF), according to a notice to the company on Tuesday.
* The agency also flagged its concerns about the Bitwise Bitcoin ETP Trust’s liquidity and transparency and requested more color on the “suitability” of bitcoin as the underlying asset for the fund.
* The SEC’s request veered from its serial denials to date of other proposed spot bitcoin exchange-traded products (ETP).
* Over the past two months, the agency has rejected spot bitcoin ETF applications from WisdomTree, Krypton, SkyBridge and Fidelity. It is weighing a number of other applications from investment firms.
* In December the SEC delayed a decision on the spot bitcoin applications of Bitwise and Grayscale, a unit of Digital Currency Group, which is also the parent company of CoinDesk.
* Bitwise will have 21 days to respond to the SEC’s concerns.
Updated: 2-4-2022
SEC Requests Comments On Concerns About Grayscale’s Spot Bitcoin ETF Proposal
The agency’s issues include possible share manipulation and the liquidity of bitcoin markets.
The U.S. Securities and Exchange Commission (SEC) has expressed concerns about how Grayscale will head off share manipulation, fraud and other possible issues in its proposal to convert its Grayscale Bitcoin Trust (GBTC) into a bitcoin spot exchange-traded fund (ETF), according to a notice Friday.
* The regulator also flagged its concerns about the liquidity and transparency of bitcoin markets, as well as the “suitability” of bitcoin as the underlying asset for the fund. Grayscale is a unit of Digital Currency Group, which is also the parent of CoinDesk.
* The SEC has asked the public to comment on these issues, and given them 21 days to do so, with an additional 14 days for responses to those comments.
* Earlier this week, the SEC requested investment manager Bitwise to respond to similar concerns about its own spot bitcoin ETF proposal.
* Grayscale initially filed an application with the SEC to convert its Grayscale Bitcoin Trust into a bitcoin spot ETF in October. In December, the SEC pushed off its review of Grayscale’s application by 45 days.
* Over the past couple of months, the agency has rejected spot bitcoin ETF applications from WisdomTree, Krypton, SkyBridge and Fidelity. It is weighing a number of other applications from investment firms.
My Email Confirmation From The SEC:
12:17 PM (2-7-2022)
“Thank you for submitting a comment to the U.S. Securities and Exchange Commission. This auto-reply message is your notification that we have received your comment letter. “
Email: rule-comments@sec.gov (Subject: Release No. 34-93504; File No. SR-NYSEArca-2021-90)
Updated: 2-7-2022
The SEC Wants To Know What You Think About Bitcoin ETFs
* U.S. Regulator Inquires Whether Funds Could Be Used For Fraud
* Notice Comes After Denial Of Six Similar Funds Since November
The U.S. Securities and Exchange Commission is seeking advice from the public about whether exchange-traded funds linked directly to the price of Bitcoin could be a vehicle for fraud, highlighting concerns about a submission from one of the biggest trusts holding the token.
The regulator issued a notice on Friday calling for members of the public to submit written comment regarding Grayscale Investments LLC’s application to turn its Grayscale Bitcoin Trust (ticker GBTC) into an ETF tied to Bitcoin’s spot price.
The SEC had done the same a few days earlier in a notice regarding another application to launch a Bitcoin ETF, this one submitted by Bitwise.
The notice requested feedback on whether the proposed ETFs would be susceptible to manipulation and fraud, and whether Bitcoin itself could be held to the same standard. The SEC has denied six similar applications since November including those from VanEck, WisdomTree and SkyBridge Capital.
Grayscale’s $27 billion fund has been a key way for financial institutions to gain exposure to crypto since its launch in 2013, which is why it has historically traded at a premium to Bitcoin’s actual price. However, GBTC now trades at a discount after the surge in crypto prices and the launch of ETFs backed by crypto derivatives on Wall Street.
Despite the recent price volatility, demand for an ETF tied to Bitcoin’s spot price may be sustained in the near term, analysis from Bloomberg Intelligence showed on Monday. BI’s Rebecca Sin and James Seyffart said trading volume among crypto ETFs remained stable in January, with relatively small flow declines.
“GBTC’s discount has weighed on shareholders for months but provides Bitcoin exposure at below-market prices,” they said in an earlier note. The gap would disappear if the SEC greenlights Grayscale’s ETF application on July 6, however, the analysts expect a denial.
Updated: 2-18-2022
Investors Stuck In Biggest Bitcoin Fund Flood SEC With Letters
* More Than 170 Letters On Grayscale GBTC Submitted This Month
* U.S. Regulators Have Repeatedly Denied Spot Bitcoin ETF Launch
U.S. Securities and Exchange Commission officials have nearly 200 new pen-pals.
More than 170 letters have been submitted to the agency in February following a tweet from Grayscale Investments LLC encouraging people to share their thoughts on the firm’s application to convert the $26 billion Grayscale Bitcoin Trust (ticker GBTC) into an exchange-traded fund. That compares to just 14 from when a filing was made in October for the change, through the end of January.
The common denominator across the 200 letters is the SEC’s reluctance to approve an ETF that physically holds Bitcoin. U.S. regulators allowed the first crypto derivatives-based products to begin trading this past October, but have repeatedly denied applications for a spot Bitcoin ETF. That’s exacerbated a persistent issue for GBTC — because it’s a trust, not an ETF, shares can’t be redeemed to align with shifting demand. GBTC has traded at a discount to the value of its underlying Bitcoin for months.
Great question.
If you’re interested in sharing your thoughts with the SEC on whether $GBTC should be allowed to convert into an ETF, visit this link and click “Submit Comments on SR-NYSEArca-2021-90” https://t.co/JGsvclzRy1 https://t.co/NsujcPrt1K pic.twitter.com/IHYZcPvJw2
— Grayscale (@Grayscale) February 10, 2022
However, Grayscale Chief Executive Officer Michael Sonnenshein — and a large share of the individuals submitting comments to the SEC — believe that ETF conversion would quickly repair the discount.
“We have certainly encouraged investors to submit comment letters for the GBTC conversion to an ETF and we are really encouraged to see the outpouring of support for the conversion itself,” Sonnenshein said in a phone interview. “For us, a lot of of the letters have been echoing what we at Grayscale have been articulating for quite some time and continue to do so today — that investors have been patient and deserve a spot Bitcoin ETF.”
GBTC has plunged more than 17% so far in 2022, outpacing Bitcoin’s 13% decline. The trust’s price closed 25% below the value of the Bitcoin it holds on Thursday, after hitting a record-low discount of nearly 30% last month, according to Bloomberg data. The trust had been a favorite because it was one of the earliest ways to invest in Bitcoin indirectly and had allowed participants to exploit an arbitrage opportunity when the price was soaring.
The SEC solicits comments from interested members of the public on proposed rule change. In GBTC’s instance, the New York Stock Exchange filed with the U.S. regulator in October to amend its rules to allow shares to be listed and traded on the exchange — effectively converting the trust into an ETF.
The letters submitted so far run the gamut from completely anonymous submissions to self-described individual investors and financial advisors.
“As an investor, I don’t feel I’m being protected by the SEC,” wrote Clay Craven on Feb. 14. “It’s past time for the SEC to approve the GBTC ETF conversion and stop harming investors and the country by outsourcing capital to foreign countries where spot BTC ETFs are already trading and approved by regulators.”
Fellow letter author Nicole Jackson made a similar point on Monday.
“The BTC Spot ETF needs to be approved ASAP,” Jackson wrote. “It’s an absolute embarrassment that countries around us have a spot approved and we don’t.”
Accounting for delays, the SEC’s deadline to make a decision is in early July. In the eyes of The ETF Store’s Nate Geraci, the SEC’s comment period is little more than a “charade” and it’s extremely unlikely that the submitted letters will spur a change.
“It simply affords the SEC the opportunity to publicly present that they’re engaged and considering counterarguments to their repeated — and many would say unjustified — denial of a spot Bitcoin ETF,” said Geraci, president of investment-advisory firm. “SEC Chair Gensler has been crystal clear they won’t approve a spot Bitcoin ETF until there’s a robust regulatory framework in place around crypto exchanges.”
Updated: 3-28-2022
Bitcoiners Should Form A Class-Action Lawsuit Along With Grayscale Against SEC To Force Bitcoin ETF Approval
* CEO Sonnenshein Points To Futures ETF As Basis Of Argument
* Campaign To Convert Largest Bitcoin Fund Intensifies
Grayscale Investments LLC’s campaign to convert its almost $30 billion Bitcoin trust into an exchange-traded fund could end with legal action.
The Securities and Exchange Commission’s final deadline to rule on the digital-asset manager’s application to convert the Grayscale Bitcoin Trust (ticker GBTC) into a physically-backed ETF — a product not yet approved by U.S. regulators — is July 6. Should the SEC reject the filing, Grayscale would consider a lawsuit as part of its response.
“I think all options are on the table come July,” Grayscale CEO Michael Sonnenshein, said in an interview at Bloomberg News’s New York office on Monday.
The basis of the argument lies in the fact that the SEC has allowed Bitcoin derivatives-backed ETFs to trade, while continually denying spot ETF applications. Three Bitcoin futures ETFs were launched shortly after the SEC approval in late 2021.
Attorneys at Davis Polk on behalf of Grayscale submitted a comment letter to the SEC in late November arguing in favor of the spot Bitcoin ETF.
Investor interest in the battle to bring a spot Bitcoin ETF to market is high, with roughly 2,700 letters submitted to the SEC as part of a standard 240-day review period, according to Grayscale. Sonnenshein said it was “extremely encouraging” to see investors rally behind their effort and emphasized the issue at hand — investor protection.
Sonnenshein said that every day its flagship fund is not an ETF is a detriment to investors, arguing that the absence of spot ETFs forces investors into futures-based products. Sonnenshein also pointed to GBTC trading below its net asset value or NAV.
“GBTC today has been traded since 2015 and it’s been an SEC-reporting company since January of 2020, so every single day that it is trading and being bought and sold by investors and is not being folded into the familiarity and the protections of an ETF wrapper, we really don’t feel that the SEC is doing everything they can to actually protect investors,” he said.
The Grayscale Bitcoin Trust currently trades at a 20% discount to net asset value, according to data compiled by Bloomberg. Sonnenshein said that the NAV and price of the fund should converge when the fund is eventually converted.
Grayscale Investments has more than a dozen funds with almost $40 billion in assets under management. The firm recently launched the Smart Contract Platform Ex-Ethereum Fund, which holds Cardano, Solana, Avalanche as well as other alternative coins.
“It’s a matter of when, not a matter of if, a spot Bitcoin ETF is approved,” Sonnenshein said.
Updated: 4-20-2022
Optimism For US Spot Bitcoin ETF Grows With Approval of Teucrium Futures Fund
The Teucrium fund gained the SEC’s nod under laws that may apply to spot ETFs.
Given that the spot bitcoin ETF applications have all been filed under the 33 and 34 Act, however, some see the Teucrium decision opening the way for a spot ETF to win approval.
‘A Really Positive Step Forward’
“The SEC is now not only comfortable with futures-based ETFs regulated under the 40 Act and all the investment protections there, but also futures-based ETFs regulated under the 34 and the 33 Act, the same act that these spot-based ETFs will be regulated under,” said Craig Salm, chief legal officer for Grayscale Investments, which is trying to get its Bitcoin Trust (GBTC) converted into a spot bitcoin ETF.
The U.S. Securities and Exchange Commission’s approval in early April of a bitcoin futures exchange-traded fund (ETF) from Teucrium based on different laws has given hope to crypto investors and fund issuers that a spot bitcoin ETF will finally get the green light soon.
Many bulls had given up on the possibility of a spot bitcoin ETF getting approved this year given the SEC’s numerous rejections based on concerns about the lack of investor protections and appropriate market surveillance.
Applications from Bitwise, WisdomTree, Fidelity and Ark 21 Shares, among others, have seen nothing but rejections or extensions of their applications.
But Teucrium filed its successful application under the “33 Act” (or the Securities Act of 1933) and the “34 Act” (or the Securities Exchange Act of 1934), rather than the “40 Act” (the Investment Company Act of 1940) that the SEC approved all previous bitcoin futures ETFs under.
As CoinDesk’s Nikhilesh De pointed out last week, SEC Chairman Gary Gensler said last year he felt more comfortable with 40 Act funds because of the investor protections enshrined within the law, as well as the market surveillance tools overseeing the futures market.
The bulk of the trading volume is on the Chicago Mercantile Exchange, a traditional exchange with well-established surveillance tools in place.
Digital Currency Group, Grayscale’s parent company, also owns CoinDesk.
“It’s a really positive step forward on the path of ultimately getting approval for spot-based ETFs,” Salm added.
Dave Abner, who is the head of global business development for crypto exchange Gemini and who previously spent 20 years focused on expanding the ETF industry, also said he was encouraged by the latest development.
“Approving Teucrium is a very clear sign that there’s no slowing this movement. I think one will be approved by the third quarter,” Abner told CoinDesk recently.
With over $25 billion in assets under management, GBTC is the most closely watched spot bitcoin ETF application. Grayscale is awaiting the end of a 240-day comment period issued by the SEC, in which the commission will decide by July 6 if its application will be approved.
For GBTC and its investors, an approval would be welcome news for its discount to net asset value, which sits at around 23%. The discount represents the difference between the price of the underlying bitcoin assets and the value that’s implied from the price of the trust’s shares.
This has widened as the odds of it converting to a spot ETF have declined, while other avenues to gain bitcoin exposure have increased, including equities and spot bitcoin ETFs in Canada.
“We believe this discount should close decisively if/when GBTC converts to an ETF,” Michael Graham, an equity research analyst at Canaccord Genuity, told clients in a recent note.
‘Crawl, Walk, Run’
Investment firm Bitwise also has a spot bitcoin ETF application pending review with the SEC, with a final deadline of June 29.
While declining to address the fund’s specific chances of being approved because the review is ongoing, Matt Hougan, Bitwise’s chief investment officer, said “we’re making progress.”
“We’re sort of in a crawl, walk, run series,” Hougan said, adding that the Teucrium approval is no guarantee that the industry will see a spot bitcoin ETF approved soon. “But it doesn’t guarantee that we won’t either,” he said.
Others in the investment community see the need for a political shakeup before spot bitcoin ETFs come into play.
Under that view, shared by George Sutton, institutional research analyst at Craig-Hallum, a spot bitcoin ETFs will eventually be approved but that may first require a change of administration.
“We believe pro-crypto politicians will appeal to a large number of single-issue, young, tech-centric voters, and that change will come, but it will likely require patience,” Sutton said.
Updated: 5-5-2022
Valkyrie’s Bitcoin Futures ETF Gets SEC Approval, Following Teucrium Nod
The approval came as the firm used a different exchange act application, which also helped Teucrium get the green light for a similar product.
Valkyrie’s XBTO Bitcoin Futures Fund is the latest crypto exchange-traded fund (ETF) to win approval from the U.S. Securities and Exchange Commission (SEC).
Valkyrie filed its application using the Securities Exchange Act of 1934, filing a 19b-4 form with the SEC. Most of the previously approved bitcoin futures ETFs filed by other companies were under the Investment Company Act of 1940, which follows a slightly different regulatory pathway to approval.
Valkyrie is the second ETF to win approval with the older law, following Teucrium. Both companies also filed under the so-called “33 Act.”
SEC just approved a 2nd #Bitcoin Futures ETF filed under the “33 act”.
All spot ETF applications have been filed under this act…perhaps some light at the end of the tunnel.
— Bitcoin Archive (@BTC_Archive) May 6, 2022
The firm now offers investors the Valkyrie Bitcoin Strategy ETF (BTF), which mainly invests in bitcoin futures contracts. Additionally, the Valkyrie Bitcoin Trust (VBTC) is available only to accredited investors and invests in bitcoin.
In a filing dated Thursday, the SEC said it sees it as “unlikely that trading in the proposed ETP would be the predominant influence on prices in the CME bitcoin futures market.”
In the Teucrium order, the SEC said that the Chicago Mercantile Exchange bitcoin futures market has sufficiently developed to support exchange-traded products seeking exposure to bitcoin by holding CME bitcoin futures contracts.
Spot bitcoin ETF applications are uniformly filed under the “33 Act,” and have been dismissed without exception by the SEC as being too risky for investors for various reasons. The approval of what is now two 33 Act bitcoin futures ETFs will raise industry hopes that a spot bitcoin ETF approval isn’t far behind.
Updated: 5-10-2022
Three New Crypto ETFs To Begin Trading In Australia This Week
Australians will soon have five options for cryptocurrency exchange-traded funds as the delayed funds from Cosmos and 21Shares launch this week, along with 3iQs in the future.
Australians will soon have more options for spot cryptocurrency exchange-traded funds (ETFs) after a previous hold-up was given the green light this week and new funds entered the ETF market.
The latest update came late on Monday as Cboe Australia issued a round of market notices that three funds previously delayed are expected to begin trading on May 12. They include a Bitcoin (BTC) ETF from Cosmos Asset Management, plus BTC and Ether (ETH) spot ETFs from 21Shares.
Cboe Australia and Cosmos did not immediately respond to a request for comment, but a spokesperson from 21Shares confirmed to Cointelegraph:
“We’re listing on May 12, this Thursday. The downstream issues are resolved.”
On April 26, a day before three of the first crypto ETFs were set to launch, the Cboe Australia exchange delayed the listing of all three funds due to what it said were “standard checks.”
21Shares said to Cointelegraph at the time that a “service provider downstream” needed more time to support the launch of the products, which was believed to be a prime broker or other major financial institution.
The listing date comes just in time as a new competitor stepped into the ETF race. 3iQ, the Canadian firm with Bitcoin and Ether spot ETFs listed on the Toronto Stock Exchange (TSX), submitted two offer notices to the Australian Securities Exchange (ASX) on April 28.
The notices revealed plans for the firm to offer units of its Bitcoin and Ether ETFs on the Cboe Australia exchange. It will provide exposure to the crypto assets by purchasing units of the existing funds on the TSX, similar to Cosmos’ ETF, which purchases the Canadian Purpose Bitcoin ETF.
It’s unclear when the funds from 3iQ will be listed, but with the announcement of the Cosmos and 21Shares funds listing this week, it’s unlikely 3iQ will win the competition of being the first Australian crypto ETF, the prize of which it’s believed could be over $1 billion in inflows.
Updated: 5-12-2022
Aussie Crypto ETFs See $1.3M Volume So Far On Difficult Launch Day
The trio’s launch marks the first crypto ETFs to go live in Australia, with two of them focused on offering exposure to BTC, and the other focused on ETH.
With crypto markets tanking, three crypto-focused exchange-traded funds (ETFs) picked a difficult day to commence trading on local exchange Cboe Australia today.
The trio’s launch marks the first crypto ETFs to go live in Australia, with two of them focused on offering exposure to Bitcoin (BTC), and the other focused on Ether (ETH).
So far, the three ETFs have generated more than $1.3 million between them, and it has been estimated that they could see around $1 billion worth of inflows moving forward.
The Cosmos Purpose Bitcoin Access ETF (CBTC) from Sydney-based crypto investment firm Cosmos Asset Management offers a relatively indirect route to BTC, as it “approximately tracks the performance of the USD denominated ETF non-currency hedged units (Purpose ETF Units) in the Purpose Bitcoin ETF.”
The other two ETFs were developed by ETF Securities in partnership with major Switzerland-based exchange-traded products (ETP) provider 21 Shares. The funds are called the Bitcoin ETF (EBTC) and Ethereum ETF (EETH). They both track the Australian dollar (AUD) value of their respective assets.
According to Cboe data at the time of writing, 21 Shares of EBTC and EETH have seen 125,271 and 142,206 shares trade hands, which accounts for roughly $519,874 and $416,663 in volume, respectively.
Cosmos Asset Management’s fund has had a relatively slower start at 51,572 shares traded for a total of $398,135. However, activity could soon pick up, given that the firm has waived fees on CBTC for two months to attract institutional interest.
Speaking on the launch with Cointelegraph, ETF Securities head of distribution Kanish Chugh noted that while it was a difficult time to launch amid the crashing crypto market, it also provides investors with a reasonable chance to get some skin in the game:
“Given how volatile markets are now in the short term, it will be hard to determine how Bitcoin and Ether will perform. What we are seeing, though, is with Bitcoin coming off more than 50% from its 2021 high, investors are considering the current volatility as providing them with an opportunity to invest.”
“Our crypto ETFs are physically backed and tracks the underlying price of Bitcoin and Ether and we have high hopes that EBTC and EETH will be a success in the long term,” he added.
In a public announcement, ETF Securities chairman Graham Tuckwell also emphasized the significance of launching crypto ETFs in a local context, given the stature of BTC and ETH.
“The market capitalization and trading volumes for these two leading cryptocurrencies are now larger than any company listed on the Australian stock exchanges, yet investors have not been able to gain access to them in a regulated manner,“ he said.
Not everyone was as bullish despite the landmark moment, however, as Kraken’s managing director for Australia Jonathon Miller hailed this “significant milestone for the maturation of the digital assets space” while pointing out that investors could already buy Bitcoin:
“However, it isn’t necessarily a watershed moment for accessibility. We must remember that individual investors can already buy Bitcoin directly and each layer of abstraction away from the underlying asset can add risk and cost.”
Updated: 6-7-2022
Grayscale Bolsters Legal Team With Top Obama Lawyer Ahead of Spot ETF Decision
Grayscale has hired Donald B. Verrilli Jr. as the firm continues its push to get its bitcoin trust converted into a spot bitcoin ETF.
Grayscale Investments LLC has strengthened its legal team with the addition of Donald B. Verrilli Jr. as the digital asset firm continues its mission to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (Grayscale’s parent company Digital Currency Group is also the owner of CoinDesk, which is run as an independent subsidiary).
Verrilli’s career includes previously serving as a solicitor general for the U.S. from 2011-2016 under the Obama administration. During that time, Verrilli was the top lawyer representing the government’s side in dozens of U.S. Supreme Court cases, and he’ll now work as additional counsel for Grayscale.
For Grayscale, the move comes as the firm approaches a July 6 deadline for the Securities and Exchange Commission (SEC) to make a decision on Grayscale’s application to convert GBTC to a spot bitcoin ETF. The firm initially applied for the conversion in October 2021.
“It’s paramount that Grayscale has the strongest legal minds working on our application to convert GBTC to an ETF, and we are thrilled that Verrilli will join our outstanding legal team,” a Grayscale spokesperson said, underlining Verrilli’s long experience before the high court, including major wins defending the Affordable Care Act and legal recognition of same-sex marriage.
The firm said in May it had a “productive” meeting with the SEC in which it made its case for an approval.
“Grayscale has an unwavering commitment to converting GBTC to an ETF,” the spokesperson added. “To that end, Grayscale has been preparing for all scenarios: We have ensured that GBTC is operationally ready to convert to an ETF and have been exploring options should the SEC not allow GBTC to convert to an ETF.”
The firm said in May it had a “productive” meeting with the SEC in which it made its case for an approval.
Grayscale has been actively encouraging its customers to share their support for GBTC’s conversion with the SEC.
Updated: 6-27-2022
Grayscale Reports 99% Of SEC Comment Letters Support Spot Bitcoin ETF
“The approval of each and every Bitcoin-linked investment product strengthens our arguments about why the U.S. market deserves a spot Bitcoin ETF,” said CEO Michael Sonnenshein.
Digital asset manager Grayscale reported overwhelming support in public comments for its application to launch a spot Bitcoin exchange-traded fund.
In a Monday letter to investors, Grayscale said that of the more than 11,400 letters the United States Securities and Exchange Commission, or SEC, had received in regards to its proposed Bitcoin (BTC) investment vehicle, “99.96 percent of those comment letters were supportive of Grayscale’s case” as of June 9.
According to Grayscale, roughly 33% of the letters questioned the lack of a spot BTC ETF in the U.S., given the SEC had already approved investment vehicles linked to Bitcoin futures, as was the case for ProShares and Valkyrie.
“The SEC’s actions over the past eight months […] have signaled an increased recognition of and comfort with the maturity of the underlying Bitcoin market,” said Grayscale CEO Michael Sonnenshein. “The approval of each and every Bitcoin-linked investment product strengthens our arguments about why the U.S. market deserves a spot Bitcoin ETF.”
A message from @Sonnenshein for $GBTC investors, on everything we’ve done and everything we’re ready to do: https://t.co/j1FpuLCpKY pic.twitter.com/6vQKVT97V4
— Grayscale (@Grayscale) June 27, 2022
The regulatory body is currently reviewing Grayscale’s application allowing the firm to convert shares of its Bitcoin Trust (GBTC) into a physically-backed fund, which, if approved, would be the first spot BTC ETF offering in the United States. The application is nearing the end of a 240-day review process, which started in November 2021 and ends on July 6.
Though Grayscale’s campaign to encourage public comments with the SEC has been ongoing since February, many industry experts have suggested the regulatory body approving such an offering was unlikely. The SEC rejected similar applications from NYDIG, and Global X as recently as March, and One River Digital in May.
SEC chair Gary Gensler has often pivoted in interviews when questioned as to when the commission could approve a spot Bitcoin ETF, saying in February that he would give the matter “careful consideration.”
“[In my opinion] the chances of GBTC being allowed to convert to an ETF next week are 0.5%,” said Bloomberg ETF analyst Eric Balchunas. “About the same odds the NY Jets have of winning the Super Bowl.”
Fidelity has a 1-3% bitcoin allocation in their “All-in-One” asset allocation funds in Canada, using spot bitcoin ETFs. The “Conservative” version is posted below.
When and if this become the norm for portfolios in the US, wow… @scottmelker pic.twitter.com/1NgoKhzf2b
— Matt Hougan (@Matt_Hougan) February 7, 2024
It’s unclear what moves Grayscale may make if the SEC denies its application next week. The firm said it was “unequivocally committed” to converting its BTC trust to an ETF, hiring a former U.S. Solicitor General in June to work as a senior legal strategist for its application.
In May, the digital asset manager launched a crypto-linked ETF on the London Stock Exchange, Borsa Italiana and Deutsche Börse Xetra.
Updated: 6-30-2022
Grayscale’s Legal Challenge To SEC Sparks Response From The Community
From accusing the SEC of suppressing Bitcoin to suggesting alternatives, the community responded in various ways to Grayscale’s legal challenge against the SEC.
After Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into a Bitcoin (BTC) exchange-traded fund (ETF) was denied, the firm launched a legal challenge against the United States Securities and Exchanges Commission.
Following these events, the community responded with various reactions, from accusing the SEC of price manipulation to suggesting different solutions.
Redditor u/ThatsMRcurmudgeon2u, who introduced themself as a securities lawyer, weighed in on the matter. According to the Redditor, many anticipated the lawsuit, as SEC Chair Gary Gensler has made it clear that he wants exchanges to register with the SEC. The Redditor also accused the SEC of “holding GBTC hostage.”
Lawyer Jake Chervinsky tweeted that the ETF denial was “deeply disappointing” and defies federal law and common sense. He pointed out that the SEC’s role should be to protect investors and argued that an ETF is a better product for them.
According to Twitter user Ann, given that the SEC approved an ETF that shorts Bitcoin, it may be working to “suppress the price of Bitcoin.” Ann argued that this is not the role of the SEC.
“On the other hand, Bitcoin advocate and author Vijay Boyapati suggested a different route. Boyapati said that a better move would be to “wind down the fund” and return the Bitcoin to investors. The author criticized Grayscale’s 2% fees and urged the firm to “do the right thing.”
A much better solution would be to wind down the fund and return the underlying #bitcoin to investors, who are currently being milked for an outrageous 2% per year. Do the right thing, Grayscale.
— Vijay Boyapati (@real_vijay) June 30, 2022
Redditor u/Percyheckendorf argued that the SEC’s move to deny the ETF is bad for pensioners, as pension funds will be “stuck buying equities,” which do not have as much potential as Bitcoin.
In a letter to investors on Monday, Grayscale announced that the SEC received 11,400 letters related to the proposed Bitcoin ETF. According to the firm, 99% of the letters were in support of the ETF. Despite these letters of support, it was still not approved.
Grayscale Launches Legal Challenge To Bitcoin Spot ETF Rejection
Grayscale CEO Michael Sonnenshein on Wednesday said the company was “deeply disappointed” and “vehemently disagree” with the SEC’s decision to deny their application.
We’ve filed a lawsuit against the SEC. $GBTC
— Sonnenshein (@Sonnenshein) June 30, 2022
Grayscale Investments has launched a legal challenge against the United States Securities and Exchange Commission (SEC) after being denied its application to convert its Grayscale Bitcoin Trust (GBTC) into a spot-based Bitcoin (BTC) exchange-traded fund (ETF).
On Wednesday, it announced that its senior legal strategist, former U.S. solicitor general Donald B. Verrilli Jr., had filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit.
Verrelli stated that the latest decision shows that the SEC is acting “arbitrarily and capriciously” by “failing to apply consistent treatment to similar investment vehicles” and will be pursuing a legal challenge based on the SEC’s alleged violation of the Administrative Procedure Act (APA) and Securities Exchange Act (SEA).
Grayscale Investments, which has $12.92 billion of assets under management in its GBTC, had been waiting on a decision from the SEC to convert its flagship Bitcoin trust into a spot-based ETF since filing its application to the regulator on October 19, 2021.
According to a filing from the securities regulator on Wednesday, the application was disapproved “to protect investors and the public interest” because the proposal failed to demonstrate how it is “designed to prevent fraudulent and manipulative acts and practices.”
The decision came out a full week before the July 6 deadline and came on the same day as a similar rejection of Bitwise’s Bitcoin exchange-traded product (ETP).
Michael Sonnenshein, Grayscale’s CEO, in a statement on Wednesday, said they were “deeply disappointed” and “vehemently disagree” with the SEC’s decision to deny their application.
“We will continue to leverage the full resources of the firm to advocate for our investors and the equitable regulatory treatment of Bitcoin investment vehicles,” he said.
Addressing his 19,400 Twitter followers, James Seyffart, an ETF analyst at Bloomberg Intelligence, said that while the lawsuit has been filed, a court ruling on the matter is not expected until Q3 2023 to Q1 2024, meaning that we may not see the GBTC going forward any time soon.
Gonna retweet this because Grayscale has already filed their APA lawsuit for the $GBTC denial. Here is our *estimated* timeline of events courtesy of @NYCStein. But things are moving fast. https://t.co/ql8a43W5vs
— James Seyffart (@JSeyff) June 30, 2022
Grayscale had been gearing up its legal team for a potential spat with the SEC. Earlier this month, the firm hired Donald B. Verrilli Jr., a former U.S. solicitor general, to join its legal lineup.
Other attorneys in Grayscale’s legal line-up include attorneys at Davis Polk & Wardwell LLP and its in-house counsel, including Craig Salm, who serves as chief legal officer.
Updated: 7-1-2022
Custodia Bank’s CEO Says Bad Actors And Regulators Caused Crypto Crash
Caitlin Long said the use of leverage spelled trouble for the industry.
The crypto crash was foreseeable, Custodia Bank CEO Caitlin Long said on CoinDesk TV’s “All About Bitcoin.”
The signs of leveraging bitcoin and cryptocurrencies have been around since 2018, Long said Thursday, and while she wishes the lesson of leveraging digital assets had been heeded, regulators are still to blame for not cracking down on bad actors sooner and for not approving good companies and products in the industry.
“They [regulators] haven’t been greenlighting the good players as they needed to be,” Long said. “And also, they haven’t been prosecuting the bad guys as they needed to be.”
Long said that Grayscale Bitcoin Trust (GBTC), one of the few Securities and Exchange Commission (SEC)-approved funds for investors to gain exposure to bitcoin via their brokerage accounts without the need to buy, store or safeguard their BTC, ultimately “brought in a whole bunch of hedge fund money and wreaked havoc on the industry and really destroyed value.”
Greyscale is owned by Digital Currency Group, which also owns CoinDesk.
In that situation, because of an imbalance between supply and demand, GBTC’s price traded far above bitcoin’s (BTC) market price, acting like a hedge fund that brought in significant amounts of leverage, Long said.
Retail investors bought in, but only until the SEC approved competing products. Once competition creeped in, closed-in funds like GBTC reversed course and began to trade at a discount to their net asset value.
On Friday, Grayscale filed a lawsuit against the SEC after the agency rejected Grayscale’s application to convert GBTC into an exchange-traded fund.
“My gut tells me that there are some folks at the SEC who wish that had never happened because it took them over six years to greenlight another product to compete,” Long said. “Therefore that premium sat out there and a lot of mom-and-pop investors got hurt by the whipsaw, as did the whole industry.”
While Long cannot pinpoint exactly what the SEC’s next move will be, she noted distortions in the market are caused by regulatory decisions.
She cited cryptocurrency market maker and lending firm Genesis Global Trading, as it faces nine-figure losses because of its exposure to crypto hedge fund Three Arrows Capital, which now faces collapse. (Genesis is owned by Digital Currency Group.)
And while questions remain surrounding companies that are still leveraging bitcoin, Long said that it could be good for the industry to “say good riddance to all of it.”
“I’d rather see it all go away,” she said, and instead, “rebuild it [the industry] based upon a non-leveraged business model.”
Updated: 7-11-2022
Grayscale Legal Officer Says Bitcoin ETF Litigation Could Take Two Years
Grayscale argues that the differences between futures and spot Bitcoin ETFs have no correlation to approvals because prices are based on the same spot Bitcoin markets.
Asset management firms continue to fight for a spot Bitcoin (BTC) exchange-traded fund (ETF) in the United States as regulators remain skeptical of the idea.
Craig Salm, chief legal officer at asset manager Grayscale, discussed the firm’s lawsuit with the United States Securities and Exchanges Commission (SEC) regarding the conversion of the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.
Salm explained the basis for Grayscale’s argument against the SEC while answering the most-asked questions regarding the lawsuit.
According to the legal officer, the SEC’s denial of the spot Bitcoin ETF separates futures and spot trading for Bitcoin ETFs and draws a distinction between the two.
However, Grayscale argues that the differences have no correlation with Bitcoin ETF approvals, as both futures and spot Bitcoin ETF prices are based on the same spot Bitcoin markets.
Thus, the Grayscale legal team believes that the disapproval of spot Bitcoin ETFs amid the approval of Bitcoin futures ETFs can be considered “unfair discrimination.” Salm claimed that this violates several laws including the Administrative Procedure Act and the Securities Exchange Act of 1934.
After explaining Grayscale’s arguments, Salm also answered the most common question among those following the lawsuit’s developments: When will a spot Bitcoin ETF finally be approved?
According to Salm, while there is no certainty about the exact timing — due to many factors — he estimates that it could take from one to two years.
Despite the potential length of the lawsuit, Salm said that Grayscale firmly believes in its arguments and is positive that the courts will rule in its favor.
When Grayscale launched its legal challenge to the SEC, community members rallied behind the firm. Many were disappointed with the decision to disapprove the spot Bitcoin ETF while approving an ETF that shorts Bitcoin. A Twitter user alleged that the SEC’s move aims to “suppress the price of Bitcoin.”
Updated: 7-12-2022
Suing SEC Is a Possibility, Bitwise Chief Compliance Officer Says
“It’s about getting answers to some of the technical questions,” Katherine Dowling told CoinDesk TV’s “All About Bitcoin.”
Suing the U.S. Securities and Exchange Commission (SEC) to learn why the regulator rejected Bitwise’s bitcoin exchange-traded fund filing is a possibility, according to Chief Compliance Officer Katherine Dowling.
Dowling told CoinDesk TV’s “All About Bitcoin” program the company has had active and positive dialogue with the regulatory agency since it rejected Bitwise’s spot bitcoin ETF proposal in 2019. Still, Bitwise is considering litigation.
If it goes to court, Bitwise will be following the lead of CoinDesk sister company Grayscale Investments, whose spot bitcoin ETF application was denied by the SEC several weeks ago. The company promptly filed suit in the federal district court in Washington, D.C.
“This type of litigation is really about answering technical questions,” Dowling said about any possible Bitwise lawsuit. “I would not put it off the table.”
As a former federal prosecutor for the U.S. Attorney’s Office for a decade, Dowling said she does not think that “litigation is ever the most efficient approach.”
However, she does see litigation as a potential way crypto players like Bitwise can get clarity from regulators into their thinking.
“I think it’s more productive if you can engage in a dialogue, figure out what the obstacles are and answer those questions together in a productive manner,” she said. “But that isn’t always the approach that is going to work.”
Updated: 1-27-2023
Bitcoin Miner ETF’s 100% Surge Puts It Atop Best-Performers Race
* WGMI Leads The Crypto ETF Rally Since The Start Of The Year
* But ETF Fell 80% Last Year As Crypto Coins, Industry Suffered
If any ETF is living up to its ticker in 2023, it’s WGMI.
The tiny Valkyrie Bitcoin Miners ETF — whose ticker is a popular acronym standing for “We’re Gonna Make It” — is so far the year’s best-performing fund after surging more than 100% in January. That run puts it roughly 25 percentage points ahead of the next-best advancer among US equity funds and makes WGMI a standout after a harrowing 2022 where it lost more than 80%.
The fund counts mining companies like Digihost Technology Inc., Bitfarms Ltd, Marathon Digital Holdings Inc., Hive Blockchain Technologies Ltd and Riot Platforms Inc. among its top holdings, all of which have shot to the moon since the start of the year.
“Bitcoin is up 40% year to date, so that is boosting the demand for the underlying stocks,” said Mohit Bajaj, director of ETFs at WallachBeth Capital. Plus, many of those stocks are thinly-traded, “so when there is excess buying, it will cause some higher price deviations.”
It’s a promising start for ETFs tracking companies linked to digital assets after a brutal 2022, when such funds were among the year’s biggest losers. Bitcoin, the largest digital currency by market value, has raced ahead this year — after its second-worst annual performance on record in 2022 when it fell 64%. On Friday, the coin traded little changed at about $23,000, far below its 2021 highs near $69,000.
A resurgence in optimism — tinged with FOMO sentimentality — has brought a bunch of crypto holdings higher. Other crypto-related funds including the VanEck Digital Assets Mining ETF (DAM), the VanEck Digital Transformation ETF (DAPP), the Global X Blockchain ETF (BKCH) and the Bitwise Crypto Industry Innovators ETF (BITQ) have all also posted rallies north of 60%.
Still, plenty of those who watched crypto and crypto-adjacent assets surge during the early pandemic years — and then crash in 2022 — are wary that any monster moves could be sustained. Crypto miners last year tanked along with just about everything else in crypto.
Some investors were into the “picks and shovels” types of companies within the space, including miners, as a way to get access to crypto, said Kara Murphy, chief investment officer at Kestra Investment Management. Though it allowed them to be part of the infrastructure, what happened to the miners “is a great example where that play didn’t work either.”
“When you have an asset that’s falling dramatically and being called into question, everybody gets pulled down along with it,” Murphy said in an interview. “Bitcoin’s been rallying, so it’s not completely dead and forgotten, but the miners have been impacted by the asset decline and questioning about the infrastructure.”
The slew of bad news has been relentless for the industry —from companies filing for bankruptcies to those laying off large chunks of their staff. Still, crypto faithfuls maintain belief in the coin even as the industry grapples with one of its darkest stretches yet amid the fallout from the FTX implosion.
Updated: 3-6-2023
What To Watch As Grayscale And SEC Face Off Over ETF Conversion
* Oral Arguments In Grayscale Investments’s GBTC Suit To Start
* Trust Has For Two Years Been Trading At A Discount To Holdings
The crypto world’s eyes will once again turn to Washington on Tuesday as oral arguments begin in Grayscale Investments’s lawsuit against the US Securities and Exchange Commission. The case is being argued in the D.C. Court of Appeals.
The drama centers on the $14.8 billion Grayscale Bitcoin Trust (ticker GBTC), which has for two years been trading at a steep discount to the cryptocurrency it holds. That dislocation has been a point of pain for a beleaguered industry, and at times sparked a wave of distress among leveraged investors who piled into the trust to exploit a once-widely used trade.
Over the past five years, GBTC has lost more than 25% compared with a 126% gain for Bitcoin, according to data compiled by Bloomberg. Since the end of 2015, the year it listed, the trust is up more than 19-fold on a total return basis.
The lawsuit is also key for Grayscale’s parent company, Digital Currency Group, which is contending with bankruptcy in another part of its universe. GBTC holds roughly 3.3% of all the Bitcoin in circulation, according to a recent filing, and took in millions of dollars in fees in 2022.
How We Got Here
Grayscale filed plans with the SEC in October 2021 to convert GBTC, the world’s biggest Bitcoin investment vehicle, into an exchange-traded fund. While the regulator has allowed futures-backed crypto products to exist, it has repeatedly withheld approval for spot products.
The SEC in June rejected Grayscale’s bid to convert the product into an ETF, citing Bitcoin fraud and manipulation concerns.
Grayscale sued the regulator within hours of the rejection in the US Court of Appeals for the District of Columbia Circuit, arguing that the agency was “failing to apply consistent treatment to similar investment vehicles” given that futures-backed Bitcoin ETFs exist.
GBTC Discount
If the SEC were to approve ETF conversion for GBTC, it would solve a persistent issue for the manager: the trust’s roughly 46% discount to its underlying Bitcoin.
The structure of an ETF allows shares to be created and redeemed to keep pace with shifting demand, meaning that a fund’s price typically stays aligned with its net-asset value.
GBTC, however, isn’t allowed to redeem shares under the current guidelines. That’s effectively turned it into a closed-end fund, which can be prone to such dramatic dislocations.
Grayscale said at the end of last year that it was considering appealing the SEC for permission, via a tender offer, to buy back shares of its Bitcoin trust.
The double-digit discount has been the subject of a spate of recent lawsuits against Grayscale. Digital-asset manager Osprey Funds at the start of the year filed a lawsuit against its rival. Fir Tree Capital Management has also sued Grayscale.
Grayscale has said the Osprey lawsuit is “frivolous” and that approval of a spot-Bitcoin ETF would benefit its peers.
In response to Fir Tree’s action, the company has said that it’s always had the intention of converting GBTC into an ETF when permitted to do so by US regulators, and that it believes that is the best long-term product structure for GBTC and its shareholders.
To Samara Alpha Management’s Wilfred Daye, the discount at least partly also reflects investors’ collective thinking around the probability of the lawsuit ending in Grayscale’s favor.
“The market reflects that it’s doubtful that Grayscale could be successful in converting GBTC into a spot-Bitcoin ETF in the near future,” he said.
Grayscale says that as with all its products, “GBTC was structurally designed to achieve the status of an exchange listing as an ETF.”
“Currently, the price at which GBTC trades in the public market is subject to market forces,” a spokeswoman said. “We are confident that converting GBTC into an ETF is the best solution to the current GBTC discount. At that time, we would expect the arbitrage mechanism inherent in the ETF structure to remove any premium or discount on GBTC’s share price.”
Grayscale’s Perspective
Grayscale has long argued that it was looking to convert GBTC into an ETF. In a Bloomberg interview in 2021, Chief Executive Officer Michael Sonnenshein said such a conversion “has been the plan from Day 1.”
The company also said in May of last year that a conversion could unlock as much as $8 billion in value for investors.
Grayscale has made its stance known through various media appearances as well, and it last year encouraged investors to submit letters for the GBTC conversion, a push that yielded thousands of comments as of the end of February, according to the SEC website.
“There is appetite for a spot-Bitcoin ETF,” said James Seyffart at Bloomberg Intelligence. “A spot-Bitcoin ETF would be the preferred option for Bitcoin exposure for anyone using the traditional financial rails. It’s the most efficient way to get exposure and it will actually hold the asset.”
Meanwhile, Donald Verrilli, a lawyer representing Grayscale, said last year that in rejecting the application, the SEC was “failing to apply consistent treatment to similar investment vehicles” in violation of federal law.
Verrilli has a prestigious legal background, having previously worked in the Obama administration, where he successfully argued the government’s position in landmark Supreme Court cases on same-sex marriage and the Affordable Care Act.
“The conversion of GBTC to an ETF is the best long-term product structure for Grayscale’s investors,” said the Grayscale spokeswoman. “We are confident in our common sense, compelling legal arguments and we look forward to presenting our arguments in front of the D.C. Court of Appeals on March 7, 2023. We expect to have a final decision from the Court by Fall 2023.”
SEC’s Argument
Recent regulatory crackdowns could weigh on the Grayscale’s case “immensely,” in the eyes of Max Schatzow, partner and co-founder at RIA Lawyers.
“The reason the SEC has given for denying the application is, ‘Look, there’s just not a market that we believe is trustworthy enough to approve the spot-ETF product.’ You point to FTX, you point to all these other failed exchanges and I think you can start believing the SEC’s argument,” Schatzow said.
“I would say it has less than a one-in-four chance, if you ask me. You never know in courts, but winning any case against the SEC is difficult.”
Grayscale faces an “uphill battle” in its fight with the SEC, according to Elliott Stein, senior litigation analyst with Bloomberg Intelligence.
That’s because the SEC has articulated a standard for approving Bitcoin-based ETFs that BI says should pass the “arbitrary and capricious” test, namely “does the exchange have a surveillance agreement with a regulated market of significant size, making fraud less of a concern.”
Bloomberg Intelligence gives the asset-manager a 40% chance of winning, according to Stein. But if Grayscale “defies those odds and wins,” it could unlock billions of dollars in value for GBTC investors, Stein wrote in a February report.
Updated: 3-7-2023
Grayscale-SEC Fight Could Clear The Way For Anybody To Speculate On Bitcoin
* Court To Hear Grayscale Bid To Convert Crypto Trust To An ETF
* Regulators Say Bitcoin Too Ripe For Fraud, Manipulation
The risks of creating a new way for retail investors to pour money into cryptocurrency markets are at the heart of a court fight Tuesday between Grayscale Investments LLC and a top US financial regulator.
Grayscale wants to convert its $14 billion Bitcoin Trust, the largest investment vehicle tied to the No. 1 cryptocurrency, into an exchange-traded fund.
But the Securities and Exchange Commission rejected the plan in June, saying cryptocurrency markets are too ripe for fraud and manipulation. Grayscale sued, asking a federal appeals court to overturn a decision the company called arbitrary.
The legal battle before a three-judge panel in Washington has big implications for the crypto industry because it could clear the way for similar ETFs, fueling a major expansion of the market by making it easier for everyday investors to bet on the success or failure of digital assets.
“Allowing an ETF means anybody with a brokerage account — which is basically available to anybody who can fog a mirror in the US — can now speculate on Bitcoin,” said James Angel, an associate finance professor at Georgetown University. Angel signed on to one of the amicus briefs in support of Grayscale.
Arguments at the DC Court of Appeals will hinge on whether ETFs backed directly by Bitcoin are any riskier than ETFs already approved by the SEC that are linked to cryptocurrency futures contracts. Grayscale claims there’s little difference, while the government says futures, unlike spot Bitcoin, are traded on a public exchange with federal oversight.
The court case is a major test for the SEC, which has taken an aggressive stance toward the crypto industry, including through increased enforcement following the collapse of several companies, including FTX, last year. The SEC has claimed that most digital assets are securities that have to be registered with the agency.
US regulators are concerned the next crypto disaster might have greater repercussions if digital-asset businesses grow large enough to affect the broader financial system, which was mostly insulated from the current crisis.
For Grayscale, the stakes are high. The trust has effectively operated as a closed-end fund that didn’t redeem shares when prices fell, which left the trust trading at discounts of more than 40% to its underlying Bitcoin.
The structure of an ETF allows shares to be created and redeemed to keep pace with shifting demand. A conversion could unlock $6 billion in value, according to Elliott Stein, senior litigation analyst with Bloomberg Intelligence.
The steep discount on the Bitcoin trust, which trades under the symbol GBTC, has been at the center of recent lawsuits. Rival Osprey Funds claims Grayscale misled investors by saying the conversion to an ETF was a “forgone conclusion.” Investment firm Fir Tree Capital Management claims there’s no legal reason that stops the trust from allowing investors to exit.
Grayscale called the Osprey suit “frivolous” and said in response to Fire Tree that it remains “100% committed to converting GBTC to an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders.”
‘Preventing Redemptions’
Alameda Research, the bankrupt trading arm of FTX, also sued this week, alleging “exorbitant management fees” and accusing Grayscale of “improperly preventing redemptions” from the Bitcoin and Ether trusts it manages. Grayscale said the claim was “misguided” and that it “has been transparent in our efforts to obtain regulatory approval” for the conversion to an ETF.
The case against the SEC is also important for Grayscale’s parent company, Digital Currency Group, which has a separate business unit that’s going through bankruptcy proceedings.
Grayscale is a lucrative part of the DCG empire, raking in millions of dollars in fees each year. Its Bitcoin trust holds about 3.3% of all Bitcoin in circulation as of Dec. 31, according to a company filing.
In court filings, Grayscale accused the SEC of being “arbitrary and capricious,” as well as discriminatory, for rejecting the Bitcoin ETF when the regulator already allows ETFs based on futures contracts. Both Bitcoin and the futures derive their pricing from the same underlying markets, the company said.
“It’s just a classic case of taking like cases and treating them differently,” Don Verrilli, Grayscale’s lawyer, told reporters last week in a preview of his argument.
The SEC argued that an ETF based on Bitcoin, which trades on unregulated markets, doesn’t meet the same standards for oversight as funds based on futures, which trade on the Chicago Mercantile Exchange.
The CME is regulated by the government and “performs extensive surveillance of the trading activity on its market,” SEC lawyers said in court filings.
Close Case
Stein, the Bloomberg Intelligence analyst, predicted Grayscale had just a 40% chance of prevailing in the case.
“The court will be somewhat loath to substitute its own view for that of the SEC’s,” Stein said. “Though a surveillance-sharing agreement with a regulated futures market like the CME is sufficient to help detect fraud and manipulation affecting a related futures-based ETF, it’s not clear to us that it would do the same for a spot-based ETF, even though Bitcoin spot prices underlie both types of ETFs.”
Grayscale’s team remains confident they can persuade the judges to overturn the SEC ruling.
“The more you get into the specifics, the stronger our case gets,” said Verrilli, who was US solicitor general during the Obama administration and successfully argued the government’s position in landmark Supreme Court cases on same-sex marriage and the Affordable Care Act.
The DC Circuit judges are likely to reach their decision in the coming months, meaning a resolution could come as early as this summer. Even then, however, the case could be far from over as Grayscale has indicated it’s willing to appeal all the way to the US Supreme Court if needed.
The case is Grayscale v. SEC, 22-1142, US Court of Appeals for the District of Columbia Circuit.
Updated: 8-24-2023
Bitcoin Spot ETF vs. Bitcoin Futures ETF: What’s The Difference?
TL;DR
* A Bitcoin ETF, or Exchange Traded Fund for Bitcoin, allows investors to gain exposure to the price movements of Bitcoin without actually owning or managing Bitcoin directly.
* The key differences between Bitcoin Spot ETFs and Bitcoin Futures ETFs include their underlying assets, performance drivers, liquidity needs, potential price divergence, and exposures.
* Bitcoin ETFs have emerged as a bridge, allowing traditional investors a taste of the cryptocurrency world.
* Financial institutions including BlackRock, Invesco, Ark Invest, and Fidelity have submitted applications for Bitcoin Spot ETFs. There could potentially be more Bitcoin ETFs available for investors if these get approved.
What Is An ETF?
An Exchange Traded Fund (ETF) is a type of investment fund that’s traded on stock exchanges, much like stocks. These funds usually hold a variety of assets such as stocks, commodities, or cryptocurrencies and aim to track the performance of a specific index or asset.
For example, an S&P 500 ETF holds shares of the companies listed in the S&P 500 index, seeking to mimic the performance of the index. If the index changes its components, the ETF manager adjusts the fund’s holdings to reflect those changes in order to continue tracking the index’s composition and performance.
Unlike mutual funds, which have their net asset value (NAV) calculated once at the end of each trading day, ETFs are traded on stock exchanges and can be bought and sold throughout the trading day at market prices that fluctuate based on supply and demand.
Although the NAV of ETFs is calculated multiple times during the trading day, it’s the market price that investors use for trading. This provides investors with greater liquidity and flexibility compared to mutual funds.
Moreover, investors can employ various trading strategies such as short selling or buying on margin with ETFs, options that aren’t typically available with mutual funds.
What Is A Bitcoin ETF?
Bitcoin ETFs have emerged as a crucial financial instrument in the evolving landscape of cryptocurrency investments. A Bitcoin ETF, or Exchange Traded Fund for Bitcoin, allows investors to gain exposure to the price movements of Bitcoin without actually owning or managing Bitcoin directly.
This kind of exposure is preferred by some investors.
The Bitcoin ETF holds Bitcoin or contracts related to Bitcoin’s price, and it trades on traditional stock exchanges, much like shares of a company.
As the cryptocurrency market matures, there’s been a surge in interest, particularly towards two main types of Bitcoin ETFs: Bitcoin Spot ETFs and Bitcoin Futures ETFs. Each caters to different investment strategies and risk appetites.
What Is A Bitcoin Spot ETF?
A Bitcoin Spot ETF is a type of Exchange Traded Fund that directly holds Bitcoin as its underlying asset. This means that the performance of a Spot ETF is directly linked to the real-time value of the Bitcoins it holds.
When investors buy shares of a Spot ETF, they are essentially buying a representation of actual Bitcoin, even though they do not hold the cryptocurrency personally.
For instance, imagine a Bitcoin Spot ETF named “BTC-one”. If BTC-one claims to hold 10,000 Bitcoins and has issued 1 million shares, each share would theoretically represent 0.01 Bitcoin. This means that the performance of BTC-one is directly linked to the real-time value of the Bitcoins it holds.
Benefits And Drawbacks of Bitcoin Spot ETFs
Investing in a Bitcoin Spot ETF offers several advantages. First, it provides exposure to Bitcoin’s price movements without the need to manage or store the cryptocurrency, eliminating concerns about security or digital wallets.
Additionally, as these ETFs trade on conventional stock exchanges, they bring Bitcoin into a regulatory framework, potentially providing a layer of trust to a wider audience.
Finally, investing in a Bitcoin Spot ETF can be more straightforward for traditional investors, as it operates within the familiar structure of stock trading.
However, like any investment, there are potential risks. The value of a Bitcoin Spot ETF will fluctuate with the volatile price of Bitcoin. Moreover, the ETF may not always perfectly match Bitcoin’s performance due to fees or administrative issues.
While ETFs bring Bitcoin closer to traditional finance and regulatory oversight, the broader cryptocurrency market remains somewhat unpredictable. Finally, ETFs are more costly to trade than spot crypto because of additional fees charged by the ETF.
Fees of ETFs could go as high as 2.5%, compared to crypto spot trading fees that are usually much lower.
Note that Ethereum Spot ETFs or any other crypto Spot ETFs work in similar ways to Bitcoin Spot ETFs. They share similar benefits and drawbacks.
What Is A Bitcoin Futures ETF?
A Bitcoin Futures ETF is a type of Exchange Traded Fund that doesn’t hold Bitcoin directly. Instead, it invests in Bitcoin futures contracts, which are agreements to buy or sell Bitcoin at a predetermined price on a set future date.
This allows investors to speculate on the future price movements of Bitcoin without owning the cryptocurrency itself.
Let’s imagine a Bitcoin Futures ETF called “BitFutures”, whose primary objective is to track the future price of Bitcoin by buying Bitcoin futures contracts. A financial institution establishes and manages the BitFutures ETF.
Say BitFutures plans to buy 1,000 Bitcoin futures contracts that each represent the right to buy one Bitcoin at $55,000 three months from now.
In order to raise the capital to buy these contracts, “BitFutures” issues 10 million shares that represent a claim on the profits (or losses) that these futures contracts might generate. That means each share represents a claim of 0.0001 portion of each futures contract.
Investors can then buy shares of BitFutures on regular stock exchanges, just like they would buy shares of any company. If the market believes Bitcoin will be worth much more than $55,000 in three months, the shares might trade at a premium.
Conversely, if the market is pessimistic, the shares might trade at a discount.
Let’s say BitFutures is trading at $10 per share. An investor who believes that Bitcoin prices will rise over the next three months buys 1,000 shares for $10,000.
In three months, if the futures contracts are profitable, the value of BitFutures shares would likely increase. If the investor’s belief was correct and the price of each share rises to $12, their investment would now be worth $12,000, netting a $2,000 profit.
In essence, when you buy shares of a Bitcoin Futures ETF like BitFutures, you’re indirectly betting on the future price of Bitcoin without holding the cryptocurrency or the futures contracts directly.
Instead, you’re buying a piece of a fund that owns these contracts. Note that Ethereum Futures ETFs work in similar ways.
Benefits And Drawbacks of Bitcoin Futures ETFs
Bitcoin Futures ETFs share similar benefits to Bitcoin Spot ETFs. They offer a way for investors to gain exposure to Bitcoin’s price movements without having to buy or manage the actual cryptocurrency.
They also operate within a regulated environment, meaning they adhere to the standards set by financial regulatory bodies.
Furthermore, they provide more liquidity than other investment vehicles, allowing investors to buy or sell shares of the ETF on traditional stock exchanges easily.
The drawbacks or risks of Bitcoin Futures ETFs include no direct Bitcoin exposure. Investors in a Bitcoin Futures ETF do not own Bitcoin itself but instead own shares in a fund that invests in futures contracts.
These ETFs can also be complex, as the performance of Bitcoin Futures ETFs is tied to the futures market, which can be complex.
Aside from additional management fees that could reduce returns, the value of Bitcoin Futures ETFs may not always move in tandem with the price of Bitcoin. Lastly, these ETFs face counterparty risks as the counterparty in the futures contract may fail to uphold their end of the deal.
Key Differences Between Bitcoin Spot ETFs And Bitcoin Futures ETFs
The key differences between Bitcoin Spot ETFs and Bitcoin Futures ETFs can be summarized in the table below. Note that these differences are similar if the underlying assets are Ether or other assets.
What Bitcoin ETFs Are Available To Investors?
There are numerous Bitcoin ETFs and Ethereum ETFs available in the market to invest and you can easily find a list of these funds on trustworthy sources.
If you are interested in investing in these ETFs, make sure to read the fund details carefully to understand its fee structure, the fund manager, and liquidity.
Different ETFs come with varying fee structures and you need to be aware of the management fees, trading fees, and any other costs that could potentially reduce your returns. Always take into account the reputation and track record of the ETF provider.
Established fund managers with solid track records can be a safer bet. Examine the liquidity of the ETFs. Those that enable seamless buying or selling of shares without notable price fluctuations are typically more advantageous.
Moreover, some Bitcoin ETFs might offer diversified exposure to other cryptocurrencies as well. If you’re looking to diversify your crypto investments, consider ETFs that hold a basket of digital assets.
A number of prominent financial institutions including BlackRock, Invesco, Ark Invest, and Fidelity have submitted applications for Bitcoin Spot ETFs as of 2023. There could potentially be more diversified Bitcoin ETFs available for investors in the future if they get approved.
Who Should Consider Investing In Bitcoin ETFs?
It’s essential to distinguish between Bitcoin Spot ETFs and Bitcoin Futures ETFs and their respective ideal investors.
The ideal investor for Bitcoin Spot ETFs is someone seeking direct exposure to the real-time price movements of Bitcoin without the need to manage or secure the digital asset.
This individual might be someone who believes in the long-term value proposition of Bitcoin and wants an investment that closely tracks its market price. They might also be attracted to the simplicity of Spot ETFs over the complexities of futures trading.
On the other hand, the Bitcoin Futures ETFs cater to more experienced investors not just interested in Bitcoin’s price but also comfortable navigating the nuances of the futures market.
They might be looking to hedge other investments or seek opportunities in short-term price fluctuations, leveraging the futures market dynamics.
Additionally, this investor might be willing to accept the potential risks and rewards associated with futures trading, including the intricacies of contract rollovers.
Closing Thoughts
Bitcoin ETFs have emerged as a bridge, allowing traditional investors a taste of the cryptocurrency world. Bitcoin Spot ETFs give direct exposure to the actual Bitcoin price movements by holding the cryptocurrency, while Bitcoin Futures ETFs provide exposure through futures contracts predicting Bitcoin’s future price.
However, as with all investments, it’s imperative to exercise caution. The world of Bitcoin and its associated investment vehicles is filledwith potential pitfalls. Before making a decision, aspiring investors should immerse themselves in thorough research.
Perhaps most importantly, consulting with a trusted financial advisor who can provide insights tailored to individual financial goals and risk tolerance.
Updated: 11-5-2023
Hong Kong Mulls Allowing Spot Crypto ETFs In Pursuit Of Asia Hub
* SFC Head Says Hong Kong Open To Wider Access To Digital Assets
* City Also Trying To Foster An Ecosystem For Tokenized Products
Hong Kong is assessing whether to allow exchange-traded funds that invest directly in crypto as officials step up efforts to create an Asia-Pacific digital-asset hub while tackling the fallout of the JPEX scandal.
The city is weighing retail-investor access to such spot ETFs providing regulatory concerns are met, Securities and Futures Commission Chief Executive Officer Julia Leung said.
“We welcome proposals using innovative technology that boosts efficiency and customer experience,” Leung said in her first interview with international media since taking office on Jan. 1. “We’re happy to give it a try as long as new risks are addressed. Our approach is consistent regardless of the asset.”
The crypto sector sees ETFs as a way of making digital assets more mainstream since the funds are readily available to a variety of investors. Bitcoin has surged 110% this year partly on expectations that the likes of BlackRock Inc. will soon win permission to start the first US spot ETFs for the token.
ETF Outlook
Both Hong Kong and the US currently allow futures-based crypto ETFs, but the take-up has been modest compared to the overall size of the fund industry. The Asian city current lists the Samsung Bitcoin Futures Active, CSOP Bitcoin Futures and CSOP Ether Futures ETFs. They have combined assets of about $65 million.
Just how popular spot funds will be is an open question following the 2022 digital-asset rout and the conviction of Sam Bankman-Fried for the multibillion dollar FTX fraud, which damaged crypto’s reputation.
Hong Kong rolled out a dedicated virtual-asset regulatory framework in June, part of an effort to restore its luster as a cutting-edge financial center. The rules seek to woo companies but also focus on investor protection — a need underlined by the alleged HK$1.6 billion ($204 million) fraud that recently erupted in the city at the unlicensed JPEX crypto exchange.
“The incident underscores the requirement for a robust, comprehensive regulatory framework,” Leung said. The SFC has enhanced transparency over applications for virtual-asset exchange licenses, she said.
The JPEX blowup ensnared some 2,600 people and a police investigation is ongoing. Leung declined to comment on the details of the probe.
Tokenization
Under the SFC’s digital-asset regime, retail investors can trade major tokens like Bitcoin and Ether on licensed exchanges. BC Technology Group Ltd.’s OSL and HashKey Exchange are the only platforms with Hong Kong crypto permits at the moment. Mandatory rules for stablecoins — crypto tokens that are meant to hold a constant value — are due by 2023-2024.
Officials are also exploring tokenization, or digital representations of real-world assets.
The segment has long been touted as a potentially key use of crypto’s underlying blockchain technology. Hong Kong sold its inaugural digital green bonds in February and the SFC just updated its regulatory guidance to open a path to tokenized products for retail investors.
“As the crypto ecosystem evolves step-by-step to the point where we’re comfortable, then we’re happy to open up more access to the wider investing public,” Leung said in the Nov. 2 interview.
The SFC latest circulars released the same day provided a road map for issuing tokenized funds and bonds to retail investors. Leung said she expects to see experimentation with “different levels of tokenization” initially.
Security Tokens
A restriction on security token offerings limiting them to professional investors has been removed based on the latest circular. Tokenized securities are basically traditional securities with a tokenization wrapper, according to the regulator.
The City’s Central Bank, The Hong Kong Monetary Authority, Is Looking Into
providing guidance for banks on providing digital-asset custodial services. Such services would be one of the keys to developing a digital-asset ecosystem.
Citigroup Inc. estimates that by 2030, there will be as much as $5 trillion of tokenized private-sector securities and funds, spanning everything from corporate debt and financing collateral to alternative assets such as real estate, private equity and venture capital.
Hong Kong is one of a number of jurisdictions trying to develop digital-asset hubs as the industry slowly recovers from last year’s $1.5 trillion market crash. Competitors include Singapore, Dubai and the European Union, whereas the US has imposed a clampdown.
Updated: 11-6-2023
China ‘Does Not Want To Miss Out’: Community Reacts To HK Spot Bitcoin ETF News
Despite regulatory clarity, Hong Kong has failed to pick up the pace regarding futures-based cryptocurrency ETFs so far.
The cryptocurrency community is excited about the Hong Kong government reportedly weighing the launch of a spot cryptocurrency exchange-traded fund (ETF) amid the ongoing regulatory pushback against such products in the United States.
Hong Kong’s potential entrance into spot crypto ETFs could be a significant development in the context of the economic confrontation between the U.S. and China, BitMEX co-founder Arthur Hayes believes.
Hayes took to X (formerly Twitter) on Nov. 6 to express excitement over competition between the two economies, emphasizing that this competition will eventually be good for Bitcoin “Competition is amazing. If the U.S. has its proxy asset manager, BlackRock, launching an ETF, China needs its proxy asset manager to launch one, too,” he wrote.
Cryptocurrency brand Coin Bureau was also quick to react to the potential spot crypto ETF launch in Hong Kong. According to the Coin Bureau, the U.S. Securities and Exchange Commission (SEC) might be getting some pressure amid other jurisdictions like Hong Kong jumping on the bandwagon of a spot Bitcoin ETF.
“It’s a cursory tale to the SEC that if they continue to stifle capital market innovation in the United States, other countries are going to fill the void,” Coin Bureau wrote on X.
Crypto influencer Lark Davis also stressed that the latest spot crypto ETF news from Hong Kong shows that the Chinese government doesn’t want to miss out on crypto opportunities.
“Hong Kong going to get spot Bitcoin ETFs now! Chinese money does not want miss out,” Davis stated.
Hong Kong is considering allowing retail investors to access spot ETFs linked to cryptocurrencies like Bitcoin, providing regulatory concerns are met, Securities and Futures Commission CEO Julia Leung said, according to a Bloomberg report on Nov. 5. The SFC did not immediately respond to Cointelegraph’s request for comment.
Hong Kong’s potential move into spot Bitcoin ETFs comes as at least a dozen investment firms in the U.S. seek to launch similar products in the country despite long-running pushback from the Securities and Exchange Commission.
Although both Hong Kong and the U.S. have permitted crypto ETFs linked to futures contracts, the jurisdictions are yet to approve a spot crypto ETF. Unlike a futures Bitcoin ETF, which tracks futures contracts to replicate BTC prices, a spot Bitcoin ETF directly holds BTC, allowing investors to gain exposure to the asset.
The U.S. was the first to launch futures-linked crypto ETFs in 2021, with Hong Kong following in its footsteps in late 2022 with the launch of CSOP cryptocurrency futures products.
Combined with the Samsung Bitcoin Futures Active ETF, Hong Kong has about $65 million in crypto ETF assets, according to Bloomberg. The futures crypto ETFs have seen low demand in Hong Kong, with their share still being tiny compared to other global crypto funds.
Hong Kong and Shanghai Banking Corporation — the biggest bank in Hong Kong — reportedly enabled its customers to buy and sell Bitcoin and Ether-based ETFs in June 2023.
Updated: 1-18-2024
BlackRock’s Bitcoin ETF Is First To Cross $1 Billion Threshold In Inflows
* Fidelity Is Close Behind With About $880 Million In Assets
* Grayscale Fund Remains The Largest Even With Outflows
BlackRock Inc.’s Bitcoin exchange-traded fund passed $1 billion in investor inflows, making it the first in the group of nine new ETFs directly holding the cryptocurrency to surpass the milestone since the funds started trading last week.
Investors deposited $371 million in the fund on Wednesday, pushing IBIT past the milestone, data compiled by Bloomberg show. Fidelity Investments is close behind.
The company’s FBTC Bitcoin ETF saw $358 million in inflows yesterday — the highest single day tally since the fund launched a week ago.
In total, about $880 million have flowed into Fidelity’s fund. BlackRock and Fidelity have driven early consolidation in the new asset, with the two firms receiving 68% of all inflows across the nine new ETFs on the market, totaling nearly $2 billion.
“Considering it’s BlackRock, I don’t think that’s surprising – they have the resources,” said Todd Sohn, an ETF strategist at Strategas. “But it shows how serious they are about this as an asset class. There’s too much opportunity to not have some power behind the launch.”
A significant portion of inflows are coming from investors leaving Grayscale Investment’s GBTC fund after the U.S. Securities and Exchange Commission approved the ETFs, according to Bloomberg Intelligence. Grayscale’s Bitcoin Trust, which was created in 2013, had over $28 billion in assets under management when it converted to an ETF, but has seen about $1.6 billion in outflows since trading started.
Grayscale’s Bitcoin ETF has a sector-high management fee of 1.5%. Management fees at BlackRock and Fidelity are a fraction of GBTC’s cost, but they do not have the lowest fees in the group of new Bitcoin ETFs — that title goes to Franklin Templeton with its 0.19% management fee.
Despite its industry-low fee, Franklin has received less than 2% of inflows across the broader Bitcoin ETF group.
The two group-leading firms may capture more market share moving forward as a result of their institutional and retail distribution networks, according to Bloomberg Intelligence.
BlackRock is seeing interest from “day one” retail investors, but they are also focused on attracting investors who are new to the asset class, according to Rachel Aguirre, iShares head of US product at BlackRock.
“We’re really seeing flows come from a number of different directions,” Aguirre said. “Clearly, the interest we’re seeing is both from retail, from self-directed investors and there are some who were ready to invest on day one but we’re also focused on those investors who are also just now beginning to look at this new asset class and we’re very excited about that.”
Updated: 1-19-2024
How To Choose Which Bitcoin ETF To Buy
The funds that started trading recently are all designed to track the price of the largest cryptocurrency, but experts say investors should consider a few factors before picking one.
Bitcoin ETFs are finally here in a landmark moment for the crypto industry.
Offerings from BlackRock Inc., Invesco Ltd., Ark Investment Management LLC, Fidelity Investments and a handful other firms launched last week.
But unlike most ETFs, which differ in terms of the composition of their underlying holdings, all the new spot Bitcoin ETFs aim to track the price of the largest cryptocurrency by holding it.
That means deciding which one to purchase can get confusing since the differences between funds are slim.
“I think assets will continue to flow into the space, but a lot of financial advisors are going to want to see these products out in the wild before allocating to one of them,” said Nate Geraci, president of The ETF Store, an advisory firm.
Here’s What You Should Consider:
Fees
The easiest way to differentiate between funds is looking at costs.
Right now, the most expensive product is the Grayscale Bitcoin Trust (GBTC), which converted from a closed-end fund into an ETF. That product currently has an expense ratio of 1.50%, or 150 basis points, which is essentially $15 in annual fees for every $1,000 you invest.
This compares to just 20 basis points for the Bitwise Bitcoin ETF (BITB). But complicating matters is that many issuers, in a bid for more customers, are offering “fee waivers” for a certain amount of time or until the fund reaches a specific asset threshold.
Bitwise Asset Management Inc., WisdomTree Inc. and Ark, for instance, all have zero fees for the first six months, up to a certain asset threshold.
Meanwhile, BlackRock’s iShares Bitcoin Trust (IBIT) has the longest fee waiver at 12 months, during which it will charge 12 basis points for the first $5 billion in assets, and then 25 basis points thereafter.
Fee structure, however, is more important for long-term investors, than short-term traders, explained Geraci. The latter may may be willing to pay up for certain technical advantages.
Technicals
How well a fund operates can be just as important as how much it costs.
For ETFs, it’s all about how well the product tracks the price of an underlying index, or asset in this case. Some active managers behind one fund might be better at that than others.
So if the price of an ETF is higher than the value of its holdings, buyers are essentially paying a premium for access.
Currently, the new spot ETFs are doing a good job tracking the underlying price of Bitcoin, said James Seyffart, an ETF analyst at Bloomberg Intelligence. But it’s worth keeping an eye on.
Another technical to watch is the funds’ liquidity, or how easy it is to convert shares into cash. Typically, the more trading volume a fund has, the more liquid it is.
This is especially important for short-term traders, whose bets can be affected by how quickly and efficiently they can get their money into and out of positions.
Right now, Grayscale’s ETF has the most liquidity, Seyffart said. But its high fee means investors have to pay up for it.
Branding
Like with any consumer product, brand loyalty can be a deciding factor. Big names like BlackRock, Fidelity and Franklin Templeton Investments might be more familiar for mainstream investors and therefore seem safer, said Daniel Sotiroff, a senior analyst at Morningstar Inc. Others may prefer a firm that positions itself as a crypto expert like Bitwise.
The bigger firms will likely have an easier time attracting assets, since they have a more extensive network of financial advisors and clients.
The size of an ETF usually isn’t that important for investors, but it could matter in this case — with so many Bitcoin ETFs on the market, there’s a chance that at least a few won’t survive.
When an ETF closes, investors still get all their money back, but a closure could trigger a taxable event at an inopportune time, Geraci said. Right now, Grayscale’s GBTC has the most assets with about $23 billion, while BlackRock’s IBIT and Fidelity’s FBTC each have about $1 billion.
Custodian
One difference among the spot ETFs is their custodian, or the platform where the actual Bitcoin used in the funds is stored. Eight of the new ETFs are using Coinbase Global Inc., while the VanEck Bitcoin Trust is using Gemini, and Fidelity is using its own digital-asset unit to safeguard the crypto for its fund.
Some argue that having so many funds dependent on Coinbase creates a dangerous concentration of risk. Although the US Securities and Exchange Commission greenlit the funds, the regulator is currently in a separate legal battle with Coinbase after accusing it of running an unregistered exchange for tokens the regulator deemed as securities. Seyffart said that he expects some ETFs will diversify their custodians over time.
To be sure, the custody services offered by Coinbase are under a separate entity from its exchange. But what a potential bankruptcy could mean for spot Bitcoin ETF customers is unclear.
“If investors want to dive deeper into the ETF due diligence process, evaluating custodians can certainly be on the checklist,” Geraci said. “But it may come down to perception more than anything.”
Updated: 2-3-2024
Wall Street Gets Laser Eyes In Bid For Bitcoin ETF Bucks
Financial firms embrace the crypto subculture.
Listen to firms on Wall Street these days, and you might think you’re knocking down beers with a gaggle of crypto bros.
Larry Fink, chief executive of BlackRock, the world’s largest asset manager, told CNBC last month that he was a big believer in bitcoin.
A few days later, Howard Lutnick, the CEO of financial-services firm Cantor Fitzgerald, predicted that bitcoin would rally this year. He also praised Tether Holdings, the firm behind the widely used stablecoin tether.
“Holding a dollar in a token is amazing,” Lutnick, whose firm manages much of Tether’s bond portfolio, said in a televised interview from Davos, Switzerland.
In 2021, Tether’s creators reached a $41 million settlement with U.S. regulators over allegations that they misled investors about whether the coin was fully backed by dollars. Tether didn’t admit wrongdoing.
After years of tiptoeing around the world of cryptocurrencies, huge financial firms are racing to lure Main Street investors into these mostly unregulated markets, seeking a fresh source of revenue.
The stampede has been prompted largely by January’s heavily anticipated launch of exchange-traded funds that directly hold bitcoin.
Bitcoin proponents hope the ETFs will boost the price of the digital currency by opening it to a wider investor base, but many outsiders question whether these highly speculative assets belong in the average individual’s portfolio.
Some asset managers backing the new ETFs have flaunted their bitcoin bona fides on social media, dropping memes and lingo familiar to the crypto community, though perhaps obscure to everyone else.
For example, you might not know that Jan. 3 was the 15th anniversary of the first bitcoin transaction, but Invesco made it clear that it did: The $1.6 trillion asset manager wished bitcoin a happy birthday on its official X account.
“BOOORN TO BITCOIN,” investment-management firm VanEck tweeted on Jan. 16. The fund manager later tweeted at Merriam-Webster, asking why its dictionary didn’t include “HODL,” a term used by bitcoin investors to mean never selling one’s coins despite wild volatility.
Franklin Templeton, a 77-year-old asset-management company, was named after Benjamin Franklin because he “epitomized the ideas of frugality and prudence,” according to its website.
In January, the firm tweaked its official X profile picture to show the U.S. founding father with laser eyes, a meme popular with bitcoin bulls.
“In crypto, speculation is a feature, not a bug,” Franklin Templeton tweeted on Jan. 17, during a roughly 90-minute stunt in which the firm’s digital-assets team took control of the X account.
In other posts, Franklin Templeton cited the “massive potential” of some blockchain networks and circulated a meme that appeared to endorse adding bitcoin to a traditional 60/40 portfolio of stocks and bonds.
“We’re always trying to stay fresh and current,” said Roger Bayston, head of digital assets at Franklin Templeton.
The firm recently removed the laser eyes from Benjamin Franklin’s image on its main X account. It also deleted a crypto-themed post featuring a meme with images of former WWE boss Vince McMahon after an ex-employee filed a lawsuit accusing him of sex trafficking.
McMahon has denied the allegations. “Given the allegations at that time, we felt that removing the tweet was the most appropriate course of action,” a Franklin Templeton spokeswoman said.
Some crypto skeptics said Wall Street’s embrace of bitcoin rang hollow, calling it a thinly disguised attempt to cash in on an emerging asset class.
“Fee revenue is the name of the game on Wall Street. This is a new opportunity to get fees,” said Lee Reiners, a lecturing fellow in economics at Duke University.
To be sure, some of the biggest players in traditional finance are still wary. Vanguard Group has refused to provide access to bitcoin ETFs via its brokerage platform, saying they don’t align with its philosophy of enabling long-term, buy-and-hold investing.
And Jamie Dimon, CEO of JPMorgan Chase, has maintained his personal skepticism of bitcoin even as the bank has agreed to facilitate trading in BlackRock’s bitcoin ETF.
Bitcoin is a useless “pet rock,” Dimon told CNBC on Jan. 17. “My personal advice is don’t get involved, but I don’t want to tell any one of you what to do. It’s a free country.”
There are risks for regulated financial firms that get too enthusiastic in marketing crypto. Last month, the Financial Industry Regulatory Authority released the results of a 2022 review of more than 500 crypto-related communications from 11 brokerage firms.
More than 70% of the messages were potentially in violation of a Finra rule that prohibits false or exaggerated communications with the public, Finra said.
Not long ago, the crypto community viewed Wall Street as an ideological enemy. Bitcoin’s anonymous creator, Satoshi Nakamoto, originally envisioned his invention as a way to make payments without relying on banks, and many early bitcoiners were libertarians bent on creating a financial system outside of government control.
In turn, most financial firms kept their distance from the unruly world of digital currencies.
Now, in much the same way that high fashion co-opted rebellious subcultures such as punk and grunge, the financial industry is echoing the messaging of crypto.
“Bitcoin may help guard against the government devaluing your money,” VanEck said in a recent television commercial for its new bitcoin ETF.
In an interview, CEO Jan van Eck said the firm had a long history of offering products to help investors protect against inflation.
Updated: 2-5-2024
BlackRock And Fidelity Bitcoin ETFs Rocket Into Top Ten, Attracting $4.8 Billion Inflows In First Month
The spot Bitcoin ETF (exchange-traded) products launched by BlackRock and Fidelity last month ranked among the top ten largest ETFs in the US in January with inflows of $4.8 billion.
The BlackRock iShares Bitcoin Trust (IBIT) ETF ranked eighth with around $2.6 billion in net inflows while Fidelity’s Wise Origin Bitcoin ETF (FBTC) ranked tenth with $2.2 billion in inflows.
Two spot bitcoin ETFs among top 10 of *all* ETF inflows in January…
Never thought I’d see the day.
via @MorningstarInc pic.twitter.com/o7L5CEu5Ef
— Nate Geraci (@NateGeraci) February 3, 2024
The data shows what a roaring success spot Bitcoin ETFs have been such their launch on Jan. 11, as BlackRock and Fidelity dominate over two-thirds of inflows. ETF Store President Nate Geraci says the Wall Street giants are contending in a “two-horse race.”
Conversely, Bitcoin ETFs offered by crypto-native companies such as ARK Invest and Galaxy Invesco lag in inflows. The ETFs have seen total flows of $683 million and $293 million in January, respectively, according to BitMEX data.
Bitcoin Spot ETF Flow data
Up to 2nd Feb 2024 pic.twitter.com/gN2GKLedxn
— BitMEX Research (@BitMEXResearch) February 3, 2024
Geraci is optimistic that these ETFs will attract more inflows soon and hit $1 billion.
Grayscale Bitcoin ETF Outflows Hit $5.7 Billion In January
Bitcoin ETF products are also ranking among the largest in terms of outflows. The Grayscale Bitcoin Trust had the second-highest outflows of around $5.7 billion in January. The ETF had the highest single-day outflow of $640 million on Jan. 22.
Grayscale has posted consistent outflows since its GBTC ETF started trading on January 11. However, the outflows are easing because with only $145 million exiting on February 2, its second lowest since the second day of trading.
Grayscale’s $GBTC Bitcoin outflows are consistently decreasing.
Today this ETF saw an outflow of -$145M, the lowest figure since day 2 of launch.
The outflow of -$145M is already lower than Blackrock’s $IBIT brought in yesterday (+$164M).
Most people who would have wanted… pic.twitter.com/zzSwebscAW
— Sinz 🗝️⚡ Bitguide (@Sinz_Bitguide) February 3, 2024
Bloomberg ETF analyst Eric Balchunas said that the ETFs have recovered from the January 22-25 outflow mayhem, indicating the products will continue amassing interest.
Updated: 2-8-2024
‘Big Volume Day’ For BlackRock As Bitcoin ETFs Notch $1B Volume
BlackRock’s IBIT fund is leading the spot Bitcoin ETF pack as Feb. 7 tops a billion dollars in trading volume.
Total daily trading volume for spot Bitcoin exchange-traded funds (ETFs) topped a billion dollars on Feb. 7, with BlackRock leading the pack.
Bloomberg Intelligence analyst James Seyffart described it as a “big volume day” for BlackRock’s iShares Bitcoin Trust (IBIT), which saw a daily trading volume of $341.2 million, eclipsing the Grayscale Bitcoin Trust’s $296.5 million in volume, according to Seyffart.
Meanwhile, Fidelity’s FBTC fund came in third with $200 million in volume, and the remaining seven funds had $188 million in daily volume — bringing the total for the day to more than a billion dollars.
Seyffart, however, commented that crossing $1 billion “isn’t that big of a deal” for the Bitcoin ETFs” as “it’s a tick-up from recent days but still far below the first couple of weeks of trading.”
Big volume day for $IBIT. Total volume over $1 billion for the group. https://t.co/Fv8G4P7cvb pic.twitter.com/EGzt431oOr
— James Seyffart (@JSeyff) February 7, 2024
Spot Bitcoin ETFs Rake It In Sans GBTC
Meanwhile, inflows into spot Bitcoin ETFs have continued to outpace bleeding from GBTC for the ninth day in a row.
According to preliminary data from Farside, GBTC notched $81 million of outflows on Feb. 7, while the other nine spot Bitcoin ETFs brought in $226 million of inflows, bringing net flows to $145 million.
BlackRock saw an inflow of $56 million, while Fidelity’s fund increased by $130 million, and Bitwise’s inflows were $21 million.
On Feb. 8, investor and author Fred Krueger observed that the combined BTC holdings of the newly launched nine ETFs were about to exceed those of the largest corporate holder of the asset, MicroStrategy.
The ETF funds hold around 187,000 BTC as of Feb. 7, whereas MicroStrategy holds 190,000 coins after snapping up another 850 BTC in January, increasing its total holdings to a value of more than $8 billion.
“ETFs are eating the world. They ate every other asset class, and they’re having Bitcoin for dessert,” he commented.
Tomorrow is the day the Green (187 BTC) switches places with the Orange (190 BTC).
It will have taken less than 30 days for the New9 to overtake MSTR in Bitcoin Holdings.
ETFs are eating the world. They ate every other asset class, and they’re having Bitcoin for desert. pic.twitter.com/sJDMMxg8sl
— Fred Krueger (@dotkrueger) February 8, 2024
It was also reported that Fidelity is now allocating spot Bitcoin to their All-in-One Conservative ETF.
“If they’re adding to conservative, that’s probably a good sign,” commented ETF analyst Eric Balchunas.
Spot Bitcoin ETF ‘Superior’ To Gold ETF — Core Scientific Founder
Physically backed Bitcoin ETFs, like the Bitwise Bitcoin ETF, are safer than any other ETFs due to their unique accounting system, Core Scientific founder Darin Feinstein believes.
With the arrival of spot Bitcoin exchange-traded funds (ETF), traditional traders in the United States has obtained a unique investment tool with features that have never been seen before, according to one industry observer.
Spot, or physically-backed, Bitcoin ETFs are superior to other commodities-based ETFs like gold ETFs because a spot Bitcoin ETF verifiably holds BTC, according to Darin Feinstein, founder of multiple blockchain firms, such as Core Scientific and Blockcap.
Unlike any other ETF, a spot Bitcoin ETF is running on an immutable ledger, which is the “best accounting system that’s ever been available to humanity,” Feinstein said in an interview with Cointelegraph.
“A Bitcoin ETF proves via the Bitcoin network that it holds the Bitcoin – that’s a much safer investment, in my opinion, than investing in any other ETF, such as a gold ETF, where you have no way to know on a real-time basis if its really holding the gold or if it’s been authenticated,” Feinstein stated.
The Bitcoin advocate referred to spot Bitcoin ETF providers like Bitwise, which publicly released the address holding the underlying BTC for its Bitwise Bitcoin ETF a few days after it launched.
The Bitcoin network also enables the tracking of all transactions and addresses in real time, which allowed the blockchain intelligence platform Arkham to independently locate the addresses of spot ETFs like the Grayscale Bitcoin Trust ETF, BlackRock’s iShares Bitcoin Trust and others.
Unlike any other commodity, the Bitcoin network offers transparency regarding the total amount of Bitcoin in circulation and the remaining amount yet to be mined, with its total supply capped at 21 million coins.
This distinguishing feature is absent in commodities such as gold.
According to Feinstein, there is no reliable method to verify the storage, verification, auditing and authentication processes for all existing physical gold, including details on its location and management control.
“It is said that there is $11 trillion in physical gold on Earth,” the Bitcoin advocate said, arguing that all the federal gold hasn’t been publicly audited for as much as 70 years.
“Investments that self-audit, self-authenticate, prove reserves and are publicly viewable 24 hours a day have never existed until the Bitcoin ETF,” Feinstein stated, adding:
“All ledgers have been corrupted by the humans that keep the records, either on purpose through fraud or by accident, through error. And so, for the first time in human history, Bitcoin purported to have this immutable ledger, which I thought was impossible until I studied Bitcoin. Bitcoin’s ledger is unalterable.”
Despite the Bitcoin network offering a high level of transparency, some industry observers previously expressed concerns that spot Bitcoin ETFs could potentially create “millions of unbacked Bitcoin.”
On the other hand, Bloomberg ETF analyst Eric Balchunas expressed confidence that holding Bitcoin is in the “best interest” of spot ETF issuers, stating that spot Bitcoin ETFs are essentially the “same thing” as physically backed gold ETFs.
Updated: 2-9-2024
Bitcoin Shorts Should Brace To ‘Get Squeezed’ As BTC Price Eyes $50K
Bitcoin may be consolidating after 6% daily gains, but the potential for runaway BTC price upside is there, says analysis.
Analysis Warns Bitcoin Shorters Play A Risky Game
Data from Cointelegraph Markets Pro and TradingView showed BTC price trajectory retracing after reaching $47,700.
The move, driven by spot markets, barely stopped for breath overnight as successive Asia and United States trading sessions posed little problem for bulls.
At the time of writing, $47,400 formed a focus as volatility remained, with Bitcoin still sizing up its highest levels since late 2021. The week’s performance additionally marked Bitcoin’s strongest since last October.
$BTC Spot Delta
As you can see it is mostly spot driven.
Every strong push up hasn’t retraced, but rather kept on going higher. pic.twitter.com/js8VUQbm0i
— exitpump (@exitpumpBTC) February 9, 2024
“Strong bounce from the midrange, attacking $48,000 again, as expected,” popular trader Jelle wrote in part of his latest analysis on X (formerly Twitter).
“Last hurdle for Bitcoin to overcome, not much standing in the way of new all-time highs once it breaks.”
Jelle additionally described the current price range as a “moment of truth.”
Fellow trader Skew, meanwhile, warned that the entire day would likely stay “pretty volatile.”
$BTC
Market still driven by taker flow primarily, looking for absorption of sellers here for actual drive higherlikely pretty volatile today pic.twitter.com/uTAxbEiXrE
— Skew Δ (@52kskew) February 9, 2024
More sober on the immediate outlook was Keith Alan, CEO and co-founder of trading resource Material Indicators, who observed significant sell-side liquidity immediately below the two-year range highs and $50,000.
“Something to consider before you FOMO into BTC at this level. There is ~$175M in BTC ask liquidity (aka resistance) stacked between here and $50k, and only ~$50M in bid support down to $43k,” part of his own X post read.
Alan nonetheless suggested that a weekly close above $45,000 would be beneficial to bulls, with whales easily able to take the market higher should $50,000 appear — to the detriment of short positions.
“If you are considering a short, be prepared to get squeezed. IF whales manage to push above $50k there is currently very little friction up to $55k,” he concluded.
An accompanying chart laid out buy and sell liquidity and cumulative volume delta, or CVD, on the BTC/USDT order book of the largest global exchange, Binance.
Spot Bitcoin ETF Inflows Impress
The day’s flows among the newly launched U.S. spot Bitcoin exchange-traded funds (ETFs), meanwhile, continued an encouraging narrative for bulls.
The Grayscale Bitcoin Trust (GBTC) saw outflows in line with expectations, while the previous day’s cumulative netflows among the remaining nine ETFs were the third-largest since their Jan. 11 launch, per data uploaded to X by Bloomberg Intelligence ETF analyst James Seyffart.
This is the 3rd biggest inflow day for the group since their launch. First day was +$655 mln and 1/17 was +$453. Still a big day. pic.twitter.com/peUszfnrfZ
— James Seyffart (@JSeyff) February 9, 2024
As Cointelegraph reported, the ETFs from BlackRock and Fidelity Investments recorded the most successful first month’s trading of any ETF product in the past thirty years.
BlackRock, Fidelity Bitcoin ETFs See Largest Debut Month Of Any ETF In 30 Years
Of 5,535 “newborn” ETFs launched in the United States over the last 30 years, only two have acquired over $3 billion in assets in the first month.
BlackRock and Fidelity’s spot Bitcoin exchange-traded funds have tallied more assets in their first month of trading than any ETF launched in the United States over the last 30 years.
Bloomberg Intelligence data shows BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) have each secured more than $3 billion in assets in the first 17 trading days, the only ones to do so out of a list of over 5,500 ETFs.
IBIT and FBTC are in a “league of [their] own,” said Bloomberg ETF analyst Eric Balchunas in a Feb. 8 post on X.
Here’s a look at the Top 25 ETFs by assets after 1 month on the market (out of 5,535 total launches in 30yrs). $IBIT and $FBTC in league of own w/ over $3b each and they still have two days to go. $ARKB and $BITB also made list. pic.twitter.com/Yyi1nxukUk
— Eric Balchunas (@EricBalchunas) February 8, 2024
Before the launch of spot Bitcoin ETFs, BlackRock’s iShares Climate Conscious & Transition MSCI USA ETF, which launched on June 8, 2023, was the leader with the most assets under management in its debut month at $2.2 billion.
Balchunas said BlackRock and Fidelity’s Bitcoin ETF results are even more impressive, as most other ETFs that ranked on the list were “Bring Your Own Assets” type of ETFs — meaning one investor was behind all of the ETF’s assets under management.
BlackRock and Fidelity’s ETFs, on the other hand, have seen inflows every single trading day since launch, which Balchunas described as “Literally unprecedented.”
The ARK 21Shares’s spot Bitcoin ETF and Bitwise Bitcoin Fund also made the top 25, landing 20th and 22nd, respectively. ProShares Bitcoin Strategy ETF — launched as a futures product in October 2021 — also made the list in seventh place.
Balchunas noted that Bloomberg Intelligence data filtered out ETFs that underwent a conversion, such as Grayscale’s Bitcoin Trust (GBTC), as well as about 100 mutual funds that converted to ETFs.
“There won’t be any demand.”
Spot bitcoin ETFs now represent *4* of top 25 ETF launches after 1mo on market in 30+yr industry history.
IBIT & FBTC now #1 & #2 overall. https://t.co/Z6yrbgWRGk
— Nate Geraci (@NateGeraci) February 8, 2024
Balchunas acknowledged the mass outflows from Grayscale’s Bitcoin ETF have been a factor in the flow performance of the spot Bitcoin ETFs and that some of those ETFs may have had seed funding, but that that’s not enough to “write any of this off.”
“I think the real unseen force here is competition. 10 ETFs launching on same day w/ some stud issuers just made everyone hustle their ass off.”
Meanwhile, IBIT and FBTC’s performance also stands out against some of the largest ETFs by flows in 2024.
According to Bloomberg data, BlackRock’s Bitcoin ETF sits in fifth place, according to figures from Feb. 5. FBTC isn’t far behind either, sitting in eighth position.
Only three broad index funds tracking the S&P 500 and Vanguard’s Total Stock Market ETF have surpassed IBIT.
Bitcoin ETFs Record Third-Largest Inflow Day As BTC Price Rises Above $46,000
The third-largest inflow day for spot Bitcoin ETFs came on the same day the BTC price crossed $46,000 to record a new multiweek high.
On Feb. 8, spot Bitcoin exchange-traded funds (ETFs) experienced their third-largest influx, totaling $403 million. The large inflows came despite over $100 million exiting the Grayscale Bitcoin Trust (GBTC).
The total inflow into spot Bitcoin ETFs has already exceeded $2.1 billion since their launch on Jan. 11, indicating a strong demand for BTC in the market.
The third-largest inflow day for spot BTC ETFs came as BTC price crossed $46,000 to record a new multiweek high just $2,000 short of new yearly highs.
BlackRock iShares Bitcoin Trust (IBIT) leads the ETF flow chart with an inflow of $204 million, Fidelity had $128 million, ARK 21Shares had $86 million and Bitwise had $60 million.
The other seven ETFs combined saw $27 million in inflows, with GBTC recording another $102 million in outflows.
IBIT also became the first ETF to exceed GBTC’s daily trading volume. However, the total trading volume of all 11 spot Bitcoin ETFs fell below $1 billion for the first time since they launched.
Bloomberg senior analyst Eric Balchunas highlighted that BlackRock overtaking Grayscale in terms of trading volume is a big feat, considering it usually takes about five to 10 years for a new fund to overtake the category’s “liquidity king.”
Normally it takes 5-10yrs for a newborn to get even close to toppling a category’s liquidity king(s). $IBIT did it in under a month- trading more than both $GBTC and $BITO today. They’ll all go back and forth for a bit each day but over time the gap will grow. https://t.co/mml4KpFiPy
— Eric Balchunas (@EricBalchunas) February 8, 2024
Market pundits view the positive flow into Bitcoin ETFs as a sign of appetite and growing demand from investors. The net flows into the ETFs mean around $403 million, or roughly 8,698 BTC, was taken off the market and sent into cold storage.
Spot Bitcoin ETFs acquired United States Securities and Exchange Commission approval for listing on Jan. 10 and started trading the next day.
Since their launch, spot BTC ETFs have seen record trading volume, with over a billion dollars being traded daily, indicating a strong investor interest.
The next Bitcoin halving is coming in less than 70 days, which will see the market supply of BTC cut in half from 6.25 BTC per block to 3.125 BTC. With the growing demand from institutional investors, the diminishing supply could help BTC hit new market highs.
Bitcoin ETFs Lead Top 25 Global ETF Asset Inflows: ‘Start Of A Bull Cycle,’ Says Analyst
Spot Bitcoin (CRYPTO: BTC) ETFs recorded the third-biggest day of inflows since their launch on Jan. 10, 2024 as two spot Bitcoin ETFs topped the chart for all ETF inflows after one month.
Each ETF crossed $3 billion in total assets.
What Happened: Bloomberg Senior ETF analyst Eric Balchunas highlighted BlackRock’s iShares Bitcoin Trust (NASDAQ:IBIT), and Fidelity’s Wise Origin Bitcoin Fund (BATS:FBTC) as leaders among the Top 25 ETFs by asset inflows one month into their launch.
IBIT boasts of $3.75 billion in assets, while FBTC stands at $3.16 billion. Notably, both ETFs have reported inflows on all days since their launch.
Other spot Bitcoin ETFs that made the list are ARK 21Shares’ spot Bitcoin ETF (BATS:ARKB) and Bitwise Bitcoin Fund (NYSE:BITB), with total assets of $845.2 million and $791 million, respectively.
Cointucky Derby Update. BIG net inflow day of over $400 mln. With almost 8 of the newborn nine took in money yesterday. $FBTC officially crossed $3 billion in AUM. $GBTC outflow streak continues with -$101.6 mln out pic.twitter.com/4RX4RsVxki
— James Seyffart (@JSeyff) February 9, 2024
Why It Matters: On Thursday, spot Bitcoin ETFs experienced their third-largest day of inflows ($4.5 billion) since their launch. The top two inflow days thus far are Jan.30 ($6.86 billion) and Jan. 19 ($4.81 billion).
The strong demand has contributed to push Bitcoin over the $47,000 mark for the first time after the Spot Bitcoin ETF approval, recording its biggest weekly surge in four months.
Balchunas noted that for a newly launched ETF, it typically takes five to 10 years to surpass the previously leading ETFs in terms of liquidity. However, spot Bitcoin ETFs have done so in less than a month.
Crypto investor Fred Krueger highlighted that the nine new Bitcoin ETFs have surpassed MicroStrategy in Bitcoin holdings, indicating their growing influence in the market.
The New9 have overtaken MSTR.
Buh Bye. pic.twitter.com/CIogqLl8MD
— Fred Krueger (@dotkrueger) February 8, 2024
Cryptoslate lead analyst, James Van Straten states that he is impressed with Bitcoin ETF flows coming at a time when retail investors think Bitcoin is dead. He also expects inflows to ramp up even further after the halving.
What’s Next: Technical analyst Michael van De Poppe thinks the Bitcoin ETFs inflow would be even higher if the outflow of Grayscale, which was forced by FTX liquidation, decreases. He sees the current price surge as the “start of a bull cycle and a Bitcoin of $250,000+.”
Looking ahead, the upcoming halving event in April 2024 may further contribute to the price rally, as high demand meets a supply shock.
Bitcoin Prices Surge Past $48,000 As ETF Demand Drives Gains
Bitcoin prices rallied today, climbing north of $48,000 as strong demand for bitcoin exchange-traded funds fueled compelling gains in the world’s most prominent digital currency.
The cryptocurrency reached roughly $48,060.00 this afternoon, CoinMarketCap figures show.
At this point, it had climbed more than 6% over the last 24 hours and was trading at its highest price in almost a month, additional Coinbase data reveals.
When explaining bitcoin’s latest gains, several analysts highlighted the substantial impact the recent approval of spot-based ETFs is having on digital currency markets.
Marc P. Bernegger, a serial entrepreneur who serves as the cofounder of crypto fund of funds AltAlpha Digital, summed the situation up nicely.
“The approval of Bitcoin ETFs is bringing new capital into the market with constant buying orders every day which increases the demand for Bitcoin significantly,” he stated, referring the U.S. Securities and Exchange Commission’s recent decision to “green light” several applications for spot-based bitcoin ETFs.
Joshua de Vos, Research Lead at CCData, also focused on this key development when offering his assessment of the digital currency markets.
“The prices of crypto assets have rebounded to range highs after the drawdown following the approval of spot Bitcoin ETFs,” he claimed.
“The softening of the outflows from the Grayscale Bitcoin Trust (GBTC) and the continuing strength of the spot ETFs, which have now reportedly accumulated over 200,000 BTC in less than a month, has shifted sentiment within the market,” the analyst claimed.
“With TradFi Indices continuing to make new all-time highs, Bitcoin is likely to see its strength continue after the idiosyncratic events earlier in the month,” he stated, offering an optimistic outlook for the cryptocurrency.
Joe Lee, Founder and CEO of DefiDive, also weighed in, pointing to several developments that have contributed to bitcoin’s recent strength.
“In the lead up to the rally a number of moves have occurred signalling a bull market run,” he stated.
“First observation we made earlier in the week was a slowing of net asset outflows of the Grayscale’s Bitcoin ETF (GBTC).
The Grayscale ETF accounts for a majority of market volume in the Bitcoin ETF space which was seeing a huge volume of selling since the middle of January,” said Lee, a technology entrepreneur who has been involved with the crypto space for over a decade.
“The selloff triggered a dip in Bitcoin’s price on the spot market as liquidity left the space,” he claimed.
“Following the observation of net asset outflows was a second fundamental indicator, the arbitrage or price differential between the GBTC ETF and Bitcoin’s spot market,” the market observer noted.
“On Thursday 1st February, it was reported by Bloomberg that GBTC was trading at 0.02% premium over net asset value signalling the ETF finally reached parity with spot,” stated Lee, citing news reported in a Bloomberg article.
“Following that we saw sideways movement in the search of a breakout,” he said.
“Our analysts have observed that a consolidation of liquidity and a subsequent surge has come from liquidity in the institutional markets,” Lee emphasized.
“All eyes for capital inflows are now increasingly being dictated by institutional money,” he stated, speaking to the growing role of major players.
“ETF related volatility will continue as traditional money markets discover how to risk balance their portfolios with a new asset type.”
“However for us, eyes are on the next volatility trigger, the Bitcoin halving. At DefiDive, we anticipate a continued growth in liquidity sources and have a bullish forecast for 2024,” he concluded.
Updated: 2-10-2024
Bitcoin ETFs Hit $10B Milestone Just One Month After Approval
The nine spot Bitcoin ETFs reached a significant milestone of $10 billion in assets under management on Feb. 9.
The recently launched spot Bitcoin exchange-traded funds (ETFs) completed their first 20 trading sessions, hitting the $10 billion milestone in assets under management (AUM).
According to data from BitMEX Research, net flows for the nine ETFs reached $2.7 billion on Jan. 9, led by BlackRock’s iShares Bitcoin Trust, which currently holds Bitcoin worth $4 billion.
The second position is claimed by Fidelity’s Wise Origin Bitcoin Fund, with over $3.4 billion in BTC under management.
The ARK 21Shares Bitcoin ETF also reached the billion-dollar milestone, holding about $1 billion worth in its portfolio.
Meanwhile, Grayscale Bitcoin Trust (GBTC) outflows amounted to $6.3 billion over the past 30 days. The fund recorded $51.8 million in outflows on Feb. 9, its smallest daily volume of capital withdrawals since conversion.
“I thought the Nine would get a bit weaker as GBTC outflows subsided but they’re getting stronger,” noted Bloomberg analyst Eric Balchunas on X.
Bitcoin ETF Flow – 9th Feb
All data out. Strong day at $541.5m of net inflow
Invesco had an outflow, the first non-GBTC product to have an outflow day pic.twitter.com/UCFDVAaKD3
— BitMEX Research (@BitMEXResearch) February 10, 2024
Over the next few months, Bitcoin ETF flows are expected to increase as trading firms complete their due diligence on the investment vehicles.
Bitcoin’s price consolidated above technical support in January, “including its 200-day moving average ($29,902) and on-chain mean ($33,487),” according to a recent analysis from ARK Invest. Over the month, the cryptocurrency price rose 0.6% to $42,585.
ARK Invest’s bullish view is that Bitcoin is replacing gold as a risk-off asset. “Bitcoin’s price relative to that of gold has increased twenty-fold in the last 7 years.
In January 2024, Bitcoin could buy ~20 troy oz of gold, compared to 1 troy oz in April 2017,” notes the analysis. “We believe this trend should continue as Bitcoin increases its role in financial markets.”
Considering the macroeconomic environment, the asset manager predicts that “as inflation cools and real rates rise, Bitcoin should remain antifragile as banks continue to lose deposits.”
The United States Securities and Exchange Commission (SEC) approved Bitcoin ETF applications from ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock and Grayscale on Jan. 10, more than a decade after Cameron and Tyler Winklevoss applied to launch the Winklevoss Bitcoin Trust in 2013.
Updated: 2-11-2024
Bitcoin Eyes Longest Winning Run In A Year As ETFs Attracts Inflows
(Bloomberg) — Bitcoin is flirting with a winning run last seen a year ago, aided by the record-breaking debut of US exchange-traded funds for the token.
The digital asset rose about 1% to $48,436 as of 9:50 a.m. Monday in Singapore, poised for a seventh straight daily gain that would mark the longest such streak since January 2023 if the advance holds, data compiled by Bloomberg show.
Nine new spot Bitcoin funds began trading in the US on Jan. 11 and have attracted more than $9 billion of investor inflows so far.
Two of the offerings, from BlackRock Inc. and Fidelity Investments, rank as the most successful ETFs launched based on assets garnered after a month on the market, Bloomberg Intelligence analysts Eric Balchunas and James Seyffart wrote in a note.
There are indications of an “increasing movement of institutional money into the asset class,” Caroline Bowler, chief executive officer at crypto platform BTC Markets Pty, said on Bloomberg Television.
The more than decade-old Grayscale Bitcoin Trust, the largest portfolio dedicated to the token, converted into an ETF the same day the new funds went live.
A more than $6 billion outflow from the Grayscale vehicle has slowed. The batch of 10 ETFs have attracted a net $2.8 billion overall.
Hype over the ETFs fueled a Bitcoin revival last year, briefly taking the token past $49,000 on the day they began trading. A multiday, $10,000 selloff then ensued as investors booked profits and waited to see how the ETFs fared.
The subsequent rebound has brought $50,000 into view, a level last seen in 2021.
Optimism about the quadrennial Bitcoin halving due in April is also filtering across crypto. Halving cuts the quantity of Bitcoin that miners receive for operating the powerful computers that verify transactions on the blockchain.
The event is often viewed a support for prices based on historical precedent.
Aside from ETF inflows, sentiment toward Bitcoin is “typically positive” during the Lunar New Year holidays that are currently underway in Asia, Fundstrat Global Advisors wrote in a note.
Bitcoin remains about $20,000 below the record high the token hit in 2021, during a pandemic-era bull run oiled by easy money.
Updated: 3-1-2024
Wall Street Turbocharges Bitcoin’s Wild Rally And Rakes In Cash
Traditional financial firms are now married to crypto (for better or worse).
To Jamie Dimon, it’s no better than a “pet rock.” To the late Charlie Munger, longtime lieutenant to Warren Buffett, it’s “massively stupid.” And to US Senator Elizabeth Warren, it’s a great tool if you’re a terrorist, drug dealer or fraudster.
Perhaps. But here’s something else about Bitcoin: It’s not going away anytime soon. And what was once almost universal resistance to it on Wall Street is disappearing day by day.
As the cryptocurrency skyrocketed in recent weeks back to lofty levels that had shocked the old guard years earlier — first $40,000, then $50,000, then, just days later, $60,000 — it became clear to many pundits that the underlying demand from people young and old, rich and poor, is simply too robust and steady to allow Bitcoin to collapse as the cornerstone of an asset class.
Not even the rapid rise in US interest rates — long seen as a potential death knell for Bitcoin — was enough to curb the enthusiasm for long.
“Doesn’t matter what Jamie Dimon or Elizabeth Warren, his good buddy, said,” Michael Novogratz, the billionaire founder and chief executive officer of Galaxy Digital Holdings Ltd. and one of Bitcoin’s most long-standing supporters, said in an interview. “A lot of people believe there’s value here.”
This relentless demand has created an urgent dilemma for the investing industry. The legacy titans can continue to shun the famously volatile and scandal-prone asset even when it’s served in the new regulatory-friendly ETF wrapper.
This is the approach that Vanguard, an uber-conservative shop, is taking. Or they can give their clients what they want, regardless of the long list of risks. Bank of America’s Merrill Lynch and Wells Fargo & Co. are among the latest firms taking that route, giving some brokerage clients access to new Bitcoin exchange-traded funds while stopping short of allowing their advisers to recommend them.
“Wall Street will embrace whatever will raise them money so that doesn’t let you know whether it’s good or bad,” said Michael Rosen, chief investment officer at multi-asset investment firm Angeles Investments, adding that he believes faith in cryptocurrencies like Bitcoin borders on the delusional.
What’s not a delusion is the money at stake. The 10 spot-Bitcoin ETFs that are now trading in the US have seen about $8 billion in net inflows, with funds managed by investing giants Fidelity and BlackRock taking the lion’s share.
BlackRock’s iShares Bitcoin Trust alone has accumulated $10 billion in just seven weeks — the fastest an ETF has ever hit that milestone and a feat which the first gold ETF took more than two years to accomplish after it was launched in 2004, according to Bloomberg Intelligence.
All that new ETF cash needs to find Bitcoin to buy in a market famous for “hodlers” who are happy to hold tight to it and watch the numbers go up. Of course everyone has a price, and the sudden demand has recharged the retail traders in the crypto market itself.
As the price went higher and higher, a surge in activity caused a spate of outages on Wednesday and temporary displays of $0 balances for some users of Coinbase, the largest US crypto exchange.
Yet the massive crypto rally inspired by the fresh cash also threatens to magnify the risks inherent in the asset class — risks that blueblood investment firms are now a party, too, as well, at least reputationally.
For one thing, Jimmy Su, chief security officer at Binance, warns that the bullish sentiment could cause an upswing in “rug pulls” — a type of scam in which a developer hypes up a crypto project to attract money only to then disappears with the funds.
An equally important — albeit more mundane — concern is simple market risk for Bitcoin. As the self-described “degen” traders chase the rally, they are loading up on borrowed funds to help max out trading profits after such leverage all but dried up with the demise of crypto lenders like Celsius almost two years ago.
Aggregate open interest in Bitcoin derivatives, which can be leveraged up to 100 times, has risen nearly 90% since October on centralized exchanges to reach the highest level since the beginning of 2022, when the last crypto bull run collapsed, per CCData.
Crypto exchanges Binance, OKX and Bybit are all seeing a jump in open interest to levels not seen since the peak of 2021 bull market, according to CCData.
The loan book at Ledn, which lends out money safeguarded by Bitcoin collateral, has returned to levels last seen before the FTX exchange collapsed in late 2022, said Mauricio Di Bartolomeo, co-founder of Ledn.
As a result, many expect that a reversal of at least some of the recent rally is a question of when, not if. CME Group’s digital asset products are experiencing record volumes as Wall Street investors seek traditional routes for hedging their risk.
‘Prepared To Lose Everything’
“The traders with leveraged, highly risky positions in cryptos should realize there will be an inevitable correction,” said Campbell Harvey, a finance professor at Duke University who studies digital-asset markets. “With leverage, you need to be prepared to lose everything.”
Only time will tell how prepared the owners of the new ETFs are for a potential downturn in an asset class that — with no revenue stream or practical large-scale financial functionality — makes it inherently volatile and susceptible to shifts in sentiment.
Yet regardless if the next major milestone for Bitcoin is $70,000 or $50,000, many believe the opening of the ETF floodgates has changed the game forever — both in the traditional financial market and the crypto world.
“It’s completely legitimized it,” said Stephane Ouellette, chief executive of digital-asset platform FRNT Financial. “Now when you talk to hedge funds, they’ll say ‘I was always scared to put Bitcoin in my list of tradeable assets and vehicles, but now BlackRock’s there, no problem.’
It’s a ‘get with the times’ kinda thing,” he said, adding that the buzz was so strong during Wednesday’s rally that he couldn’t leave his desk because of all the phone calls and instant messages he was receiving.
The air of legitimacy that the new ETFs provide sets this crypto bull market apart from prior boom-and-bust crypto cycles, which were driven by risk-embracing speculators and products that ended up collapsing all around them: crypto loans that sometimes turned out to not be backed by anything, and, prior to that, initial-coin-offering fundraising by startups that issued tokens but in many cases never actually produced a product.
Many individual investors buying the ETFs and driving this rally are different, too. Bitcoin is seeing “a new army of buyers,” Novogratz said on Bloomberg Television on Thursday.
“This is a big, big deal because it’s the first time since I’ve been involved — which is, you know, 11 years — where Baby Boomers and older people have an easy way to buy crypto,” he added in a separate interview.
Of course, hope and hype have long been among the main drivers of crypto bull-market runs. These days, the hope is that this new class of crypto recruits is just the beginning, as financial advisers and money managers steer more deep-pocketed clients — not just wealthy individuals, but also institutional investors and sovereign wealth funds — into a suddenly investable asset class.
“I think Wall Street is only about 10% of the way there, given the traditional financial institutions are loath and slow to change,” said Edward Chin, co-founder of Parataxis Capital, whose clients include pension funds.
“Given the massive revenue opportunity on the asset management side for Wall Street, I imagine every large player will eventually have to develop a crypto-asset investment strategy or product, if for no other reason than that the demand from their clients will mean that not having something available will mean losses in market share and revenue.”
Still, it’s hard not to notice an abundance of irony in crypto’s latest era — and wonder what it all means for the future of the asset class.
For one thing, it’s happening while Sam Bankman-Fried is awaiting to find out how much time he will spend in prison following his conviction on fraud charges related to the implosion of his FTX empire.
His former rival Changpeng Zhao is also due to be sentenced next month after pleading guilty to charges including violating anti-money-laundering laws at the Binance exchange he once ran.
Then there’s the irony that this bull market is owed almost entirely to Securities and Exchange Commission Chairman Gary Gensler.
He had formerly played the role of the crypto industry’s leading antagonist, due to the SEC’s barrage of enforcement actions against crypto companies and years-long refusal to approve spot-Bitcoin ETFs, before he finally capitulated and provided the swing vote needed for the SEC to approve the funds in January.
What Would Satoshi Think?
And perhaps the biggest irony of all: The spectacular renewal of the digital-asset market is a result of the Gensler-blessed marriage of the traditional financial industry and crypto.
After all, when Bitcoin was conceived by anonymous creator Satoshi Nakamoto in 2008, the original cryptocurrency was supposed to provide an alternative to a financial system dominated by Wall Street and governments.
“The whole idea was for Bitcoin to be an alternative to the mainstream finance system, free of centralized regulation, etc.,” said Michael O’Riordan, founding partner of Blackwater, an ETF consulting firm. “With Bitcoin ETFs, the opposite has happened. Satoshi would be turning in his grave.”
Indeed, there’s even an irony embedded in that remark: It’s more than 15 years later, and still no one is exactly sure who Satoshi is, or whether they have passed away. For better or worse, however, Satoshi’s invention is alive and well.
Updated: 3-3-2024
Bitcoin Tops $67,000 On ETF-Led Demand Even With GBTC Outflows
* Largest Crypto Passes $67,000 For First Time Since Nov. 2021
* ETFs Drive Rally On Concern Of Missing Out Ahead Of Halving
Few obstacles seem to be in the way of Bitcoin’s current rally. The largest cryptocurrency rose for the second straight day and marched closer to its all-time high, driven by expectations of exchange-traded funds’ robust demand at the week’s start.
The most liquid token rose as much as 6.7% to $67,069 – its first move above $67,000 since November 2021. The token has surged around 60% so far this year, outpacing traditional asset classes such as stocks by a wide margin.
“These conditions are reminiscent of some moments of late 2020 and 2021, of the bull market and extreme optimism,” said Jaime Baeza, founder at crypto hedge fund AnB Investments. “There is high leverage in the market and levels of greed are getting extreme.”
At the heart of this frenzy for the largest crypto token lies seemingly insatiable demand from US-listed Bitcoin ETFs, which began trading on Jan. 11. Bitcoin has jumped about 186% in the last 12 months.
Net inflows of $7.35 billion have been invested since the debut of US Bitcoin ETFs from some of the biggest fund names, including BlackRock Inc. and Fidelity Investments. Even outsize outflows at one notable firm — nearly $9 billion at Grayscale Bitcoin Trust since the ETFs were listed — haven’t swayed traders. There were net outflows of about $140 million on Friday, with GBTC seeing around $490 million pulled from the fund.
“Given the low liquidity over the weekend, markets are moving north in anticipation that tonight’s ETF inflows will continue and prices will continue to rally,” said Hayden Hughes, co-founder of social-trading platform Alpha Impact.
Traders are betting on the price to soon cross the record of almost $69,000, reached during the Covid pandemic in November 2021, given the ETFs’ strong demand and concern of missing out ahead of Bitcoin halving, which is expected in April this year. After the halving — when the reward for mining is cut in half — the supply growth of the coin could come down, adding to the demand squeeze.
Other tokens known as altcoins, including Cardano and Polkadot, also were up Monday 7.4% and 10% respectively.
Memes Rise
Small-cap tokens, known as meme coins, also rose on the back of Bitcoin’s rally. Dogecoin was up nearly 20% and Shiba Inu 34% in the last 24 hours.
“This is a situation reminiscent of the 2021 bull run, with retail traders looking to make quick profits from rising prices in very volatile tokens,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.
Trading in crypto derivatives, which reflects traders’ positions, also signaled a bullish outlook. Open interest at Chicago-based CME Group’s Bitcoin and Ether futures market is just 1.8% away from their respective record highs. The increase in the number of outstanding contracts is a sign of greater interest in crypto-related exposure and hedging among US institutions.
“The all-time highs in Bitcoin should get tested in the short-term, with the important 70,000 level providing strong resistance,” Mauron said.
Updated: 3-4-2024
Best Bitcoin ETFs Ranked By “Buy Side” Wall Street Journal’s Reviews And Recommendations Team
These funds make it much easier for everyday investors to trade the world’s most valuable cryptocurrency.
Bitcoin ETFs are finally here. Whether you’re a crypto pro or new to digital currencies, you may be wondering which—if any—of the new bitcoin ETFs is worth your time.
One thing to keep in mind: Putting your money in bitcoin is just as risky as ever. Bitcoin trades at more than $65,000, close to its all-time high reached in late 2021. (A year later it had lost about three-fourths its value. Then, of course, there are the scandals that have plagued the crypto industry. )
Despite all this, the Securities and Exchange Commission recently gave the green light to nearly a dozen ETFs that track bitcoin’s “spot price”—as opposed to more complicated futures contracts.
The move has made trading the digital currency cheaper and easier. Investors have already begun piling billions into the initial crop of Bitcoin ETFs and that, in turn, has led to a recent run-up in Bitcoin’s price.
While the price bump may fade, a new, more convenient way to own the crypto currency could help it gain mainstream acceptance.
“This is the best option and the cheapest option currently available for trading bitcoin,” says Bryan Armour, a researcher at fund analysis firm Morningstar.
How to pick the best bitcoin ETF for you? As with all ETFs you should consider the cost (also known as the expense ratio) and the trading volume.
Funds with high trading volume tend to be cheaper and easier to trade.
Given all the uncertainties surrounding Bitcoin, you may also want to favor an bitcoin ETF from an established investing brand. While there are no guarantees, it may lower the chance of an unhappy surprise.
Here’s A Rundown On The Bitcoin ETFs That Started Trading Last Week, Based On What We Know So Far:
iShares Bitcoin Trust (IBIT)
Annual Fee: 0.25% (After Waiver Expires)
Average Daily Trading Volume: 27 Million Shares
Assets Invested: $11 Billion
BlackRock is the world’s largest asset manager overseeing $10 trillion in assets and its iShares ETF brand has long dominated the exchange-traded fund industry. Those facts alone mean the iShares bitcoin ETF should get serious consideration.
Not only does iShares have tons of experience making complicated ETFs work, if anything goes wrong with IBIT, iShares would have a lot of egg on its face—and plenty to lose.
Like many of the new spot bitcoin ETFs, the iShares Bitcoin Trust uses a fee waiver to lower the initial cost of investing and attract more investors.
For the first 12 months of trading or the first $5 billion in fund assets (whichever comes first), the annual fee will be just 0.12%. After that the fee will jump to 0.25%, more or less in line with many competitors.
Perhaps because iShares is already a well-established and trusted brand, IBIT was one of the most heavily traded bitcoin ETFs out of the gate.
That’s an auspicious sign, since the ETF business tends to be winner-take-all, with entrenched funds difficult to dethrone. “In terms of liquidity, it seems like iShares and Fidelity really took the bull by the horns so far,” Armour says.
Fidelity Wise Origin Bitcoin Fund (FBTC)
Annual Fee: 0.25% (After Waiver Expires)
Average Daily Trading Volume: 10 Million Shares
Assets Invested: $7 Billion
Like iShares, Fidelity Investments is also a trusted name. Millions of Americans who know little about investing have Fidelity accounts because of its place as the largest 401(k) plan provider. As with BlackRock’s iShares, that means Fidelity stands to lose big if its bitcoin fund somehow fails to perform the way investors expect it to.
Also like the iShares’ ETF, the fee on the Fidelity Wise Origin Bitcoin ETF will be 0.25%. However, Fidelity is waiving the fee to invest until Aug. 1, 2024. While that might seem like a good deal for initial investors, it’s important to remember the fee waiver is temporary.
As far as liquidity, the ETF’s trading kicked off its first day of trading with more than $700 million worth of shares changing hands, second only to iShares’ ETF.
Bitwise Bitcoin ETF (BITB)
Annual Fee: 0.2% (After Waiver Expires)
Average Daily Trading Volume: 3 Million Shares
Assets invested: $1.7 billion
While iShares and Fidelity are mainstream brand names, Bitwise may be familiar to more experienced crypto investors. The asset manager offers a range of products that aim to repackage crypto for mainstream investors, including Bitcoin futures ETFs.
What’s more, Bitwise says it will donate 10% of BITB’s profits to three nonprofit organizations that fund Bitcoin open-source development: Brink, OpenSats and the Human Rights Foundation’s Bitcoin Development Fund.
If you’re a crypto believer, Bitwise might “have the ethos that you’re looking for,” Armour says.
The Bitwise Bitcoin ETF is also a fierce competitor when it comes to cost. It’s waiving the fee for the first six months of trading or the first $1 billion in fund assets, whichever comes first.
After that, the fee will jump to 0.2%—among the lowest of all the spot bitcoin ETFs we looked at. (Franklin Templeton’s bitcoin ETF will charge 0.19% after its fee waiver, which will last until Aug. 2, 2024, or the fund reaches $10 billion, whichever comes first.)
Other Bitcoin ETFs To Know About
We considered all of the bitcoin spot ETFs that initially hit the market together—and we’ll inevitably have more to consider as issuers continue to jump on the bitcoin bandwagon. Here are some other spot bitcoin ETFs to know about.
Ark 21Shares Bitcoin ETF (ARKB)
Ark 21Shares Bitcoin ETF is also competitive from a fee perspective with a 0.21% management fee and a fee waiver that means it won’t charge any fee for the first six months of trading or until the fund hits $1 billion in assets.
VanEck Bitcoin Trust (HODL)
VanEck Bitcoin Trust is another option from an established ETF provider and has a 0.2% fee. Like Bitwise, Armour said Ark and VanEck are more connected with the digital asset community than a traditional issuer like Fidelity.
Grayscale Bitcoin Trust (GBTC)
Grayscale was one of the first firms to offer bitcoin in a mutual fund-like product—and GBTC has been around for nearly a decade. Still, the fund’s complicated investment strategy meant its price moves didn’t always match bitcoin’s.
Following the SEC’s latest move, GBTC converted into a spot bitcoin ETF, so performance should be in line with competitors’ from here on out. One big drawback: Grayscale Bitcoin Trust’s annual fee of 1.5% was far higher than other funds we looked at.
How To Buy Bitcoin ETFs
Bitcoin ETFs are traded on the stock market, just like any other stock or exchange-traded fund.
That means to trade bitcoin ETFs, you need a brokerage account. If you are looking to open an account, Buy Side’s top brokerage picks include Fidelity, TD Ameritrade and more.
One thing to keep in mind: While exchange-traded funds closely track the value of their underlying assets, they frequently deviate by small amounts.
Investors looking to buy bitcoin ETFs should expect to pay a price slightly above bitcoin’s actual value.
Those looking to sell should expect to receive a price slightly below. These discrepancies are referred to as bid-ask spreads. Funds with higher trading volume tend to have lower bid-ask spreads.
Another Thing To Remember: While bitcoin trades 24 hours a day, the U.S. stock exchange is open from 9:30 a.m. to 4 p.m. most weekdays.
If bitcoin’s price moves quickly while the stock market is closed, it may be difficult to trade bitcoin ETFs until markets reopen.
How We Picked
Bitcoin spot ETFs, cleared by the Securities and Exchange Commission on Jan. 10, are still brand new. While most of the funds are broadly similar in design, their newness makes them hard to evaluate.
All the same, investors who want to trade bitcoin through an exchange-traded fund, need to make a choice. Our initial picks for the best bitcoin ETF were based primarily on fees and trading volume.
While we didn’t necessarily highlight ETFs with the lowest absolute fee, we looked for fees on the lower end.
Updated: 3-5-2024
Bitcoin Surges To Record Above $69,000 On Sustained ETF Demand #gotbitcoin #bitcoinfixesthis 😂😹🤣
* Bitcoin (BTC) Surges To Record Above $69,000 On ETF Demand
* Largest Digital Asset Scales All-Time Peak Achieved In 2021
The largest digital asset rose as much as 2.5% to $69,191.95 as of 10:10 a.m. Tuesday in New York. Bitcoin has climbed about 62% so far in 2024, outperforming global stocks and spreading optimism across the digital-asset market.
Bitcoin surged to a record as demand from new US exchange-traded funds and a looming reduction in the token’s supply growth fuel a breathtaking rebound in the original cryptocurrency.
In an ironic twist, Bitcoin owes much of its resurgence to a regulator long-viewed as hostile to crypto: the US Securities and Exchange Commission. The SEC approved spot-Bitcoin exchange-traded funds in early January after suffering a legal defeat last year in its attempt to reject them.
The move has widened the mass-market accessibility of Bitcoin, helping the crypto sector to turn the page following a bear market in 2022 and a string of subsequent bankruptcies, including the implosion of Sam Bankman-Fried’s FTX exchange.
A steady tide of money has poured into the ETFs issued by investment heavyweights including BlackRock Inc. and Fidelity Investments. The net inflow of more than $7 billion in less than two months is colliding with a looming reduction in Bitcoin’s supply growth — known as the halving — that is also stoking bullish sentiment.
“Breaking all-time highs, with the current momentum in spot ETFs as well as the upcoming halving narrative, would likely awaken true FOMO — fear of missing out — among participants currently watching markets from the sidelines,” said Stefan von Haenisch, head of trading at OSL SG Pte.
The comeback in Bitcoin that started in early 2023 has lifted the overall market value of digital assets to about $2.6 trillion.
Its revival from a low in November 2022 caps a bust-to-boom cycle that left the industry it spawned irrevocably changed.
Bitcoin hit its previous peak of $68,991.85 on Nov. 10, 2021, according to data compiled by Bloomberg, powered by the monetary and fiscal stimulus that governments around the world deployed to tackle the impact of Covid-19.
The rally was driven partly by crypto purists known for their mantra of “HODL,” the result of a misspelling of “hold” that’s been adopted as an acronym for “hold on for dear life.”
Reckoning In 2022
What was hailed by some as crypto’s ultimate coming-of-age moment back then instead turned out to be the start of a brutal reckoning.
Soon after touching its high in 2021, Bitcoin — and wider crypto markets — began a precipitous descent as central banks turned hawkish to fight runaway inflation. By the end of 2021, Bitcoin’s price had tumbled by almost a third from its peak.
The bear market exposed widespread fraud and reckless risk-taking among many of crypto’s key players, embodied by the implosion of the TerraUSD stablecoin and the collapse of Bankman-Fried’s FTX exchange and related companies.
Binance, the largest digital-asset exchange, and its founder Changpeng “CZ” Zhao also came under increased regulatory scrutiny.
Bankman-Fried and Zhao are now awaiting sentencing in the US on criminal charges. TerraUSD creator Do Kwon, who was imprisoned in Montenegro last year for traveling with a fake passport, is fighting extradition to the US, where he’s wanted on fraud charges.
As the crypto dominoes fell during the 2022 slump, regulators around the world were already laying the groundwork for increased oversight — efforts given added impetus by the market crash.
Dubai and Hong Kong have adopted new regulatory regimes, and the European Union passed the sweeping Markets in Crypto-Assets (MiCA) legislation last year.
Countries from Australia to India and the UK have stepped up efforts to ensure that unlicensed crypto exchanges don’t cater to their residents.
BlackRock’s Impact
But just as crypto skeptics from JPMorgan Chase & Co.’s Jamie Dimon to Berkshire Hathaway Inc.’s Charlie Munger derided Bitcoin as an intrinsically worthless object of mindless speculation, one of the world’s largest financial companies was about to add fuel to its rebound.
On June 15 last year, BlackRock filed an application with the SEC for the iShares Bitcoin Trust, which would invest directly in the token.
While there had already been several similar attempts, BlackRock’s size and influence — it is the biggest ETF provider — was seen as an indication that this time, the outcome might be different.
BlackRock’s ETF, trading under the IBIT ticker, was among the first batch of such products approved in early January. In less than two months, its assets have swelled to more than $10 billion.
Bitcoin, meanwhile, has more than doubled in value since BlackRock made its application.
Updated: 3-8-2024
BlackRock’s iShares Bitcoin ETF (IBIT) Grabs ETF Crown
This week’s Spotlight ETF may eventually turn out to be ETF of the year, but let’s not get ahead of ourselves and for now have a look at the record-setting debut of the iShares Bitcoin ETF (IBIT).
Launched Jan. 11 along with 10 rival spot bitcoin ETFs, each vying for the eager dollars of investors and financial advisors looking for an easy onramp to cryptocurrency investing, IBIT in short order pulled away from the pack.
While currently up to more than $12 billion in assets under management, IBIT entered March by reaching the $10 billion in assets mark faster than any other ETF in history.
For some perspective, it took the SPDR Gold Shares ETF (GLD) more than two years after its 2004 launch to hit $10 billion.
For even more perspective, the next largest spot bitcoin ETF among the 11 launched in January is the Fidelity Wise Origin Bitcoin ETF (FBTC) at $7.6 billion.
BlackRock’s Heft Pushes IBIT To The Top
The why behind the breakout popularity of IBIT is at least two-fold.
For starters, we’re talking about New York-based BlackRock Inc., which at more than $10 trillion in total assets under management, has the kind of resources to overshadow whatever it wants to overshadow in the financial services industry.
BlackRock’s iShares ETF brand manages $2.7 trillion.
Compare that to Boston-based Fidelity Investments, which is no slouch at $3 trillion in total assets, including nearly $700 billion in ETF assets, but still a third the size of BlackRock.
“When you see stuff fly out the door, that’s where your attention goes,” said Mark Connors, head of research at the Canadian digital asset management firm 3iQ.
“Right now, the BlackRock sales force is no longer talking about ESG or bonds,” he added. “They’re looking at IBIT.”
The second part of the two-fold growth spurt of IBIT is the rallying price of the underlying bitcoin, which touched an all-time high earlier this week and is up more than 55% over the past 30 days.
Granted, the bitcoin rally is lifting all spot bitcoin ETFs, but when price appreciation accounts for about 40% of the asset growth in those ETFs, bigger just gets bigger.
Updated: 3-24-2024
BlackRock’s ETF Could Flip GBTC In Bitcoin Holdings Within 3 Weeks
BlackRock’s spot Bitcoin ETF could soon surpass the Grayscale Bitcoin Trust (GBTC) in Bitcoin held within 14 trading days, based on current rates.
The amount of Bitcoin in BlackRock’s spot Bitcoin ETF could overtake crypto asset manager Grayscale’s GBTC within the next three weeks, assuming no drastic changes in current flows.
As of March 22, BlackRock’s Bitcoin ETF held 238,500 Bitcoin (BTC) on its books — worth $15.5 billion at current prices, but has touted an average daily inflow of approximately $274 million — roughly 4,120 in new Bitcoin entering the fund every day.
Meanwhile, Grayscale’s Bitcoin Trust (GBTC) reports that it still holds an estimated 350,252 BTC — worth $23 billion at current prices. It has been experiencing an average daily outflow of roughly $277 million, or roughly 4,140 BTC daily, over the last fortnight.
Assuming no drastic changes in the rate of the inflows and outflows, BlackRock could overtake Grayscale in terms of total Bitcoin held by April 11.
This date could come even closer if BlackRock’s inflows were to return to the prior week’s daily average inflow of 7,200 Bitcoin, meaning the flip could occur in 10 days.
“BlackRock is going to flip Grayscale soon,” YouTuber George Tung said in a March 20 video on his CryptosRUs channel.
“I say within the next two weeks — it’s going to happen.”
If BlackRock surpasses Grayscale, it will officially become the largest institutional holder of Bitcoin in the world.
On March 18, GBTC notched a staggering $643 million in net outflows, its largest day of bleeding on record.
While the flows leaned up a little in the following days, the heightened volume of outflows saw several analysts warn of potential downward volatility in the price of Bitcoin.
Senior Bloomberg ETF analyst Eric Balchunas wasn’t too concerned by the GBTC-led outflows and predicted the exodus could be over almost entirely within the next few weeks.
Additionally, Blachunas speculated that the majority of last week’s outflows came from bankruptcies of crypto firms such as Genesis and Digital Currency Group due to their “size and consistency.”
On March 10, BlackRock’s spot Bitcoin ETF officially outpaced MicroStrategy’s holdings of the cryptocurrency. As of the time of publication, MicroStrategy holds 214,246 BTC on its books after purchasing an additional 9,000 BTC on March 19.
Updated: 3-26-2024
Hong Kong To Offer Spot Bitcoin ETFs In The Second Quarter With In-Kind Creations And Redemptions
Hong Kong’s financial regulators aim to offer in-kind creation models for spot Bitcoin exchange-traded funds (ETFs).
This could be a significant market opportunity, which could considerably increase assets under management (AUM) and trading volume for Bitcoin ETF issuers in the region, according to a research note by Bloomberg ETF analyst Rebecca Sin, shared in a March 26 X post by Eric Balchunas:
“Hong Kong is aiming for in-kind creation of the ETF, unlike the US, where the transaction is cash only — in the US, it’s cash in, Bitcoin ETF out, while Hong Kong aims for Bitcoin in, ETF out. This could be an opportunity for the market.”
Hong Kong’s approach is in contrast with the model of the United States Securities and Exchange Commission, which only allows cash creation models for spot Bitcoin ETFs.
The U.S. Bitcoin ETFs have amassed a total of $11.28 billion worth of flows since launch, with a net negative of $1.07 billion in net flows last week, before starting to pick up on March 25.
After five consecutive days of negative outflows last week, the spot Bitcoin ETFs saw over $15 million worth of flows on March 25, the same day Bitcoin price recorded its highest daily close of above $69,000 in the past 10 days.
Bolstered by the ETF inflows, Bitcoin price reclaimed $70,000 on March 25. As investors have resumed accumulating BTC off exchanges, BTC supply on Coinbase reached a nine-year low of 344,856 BTC on March 18.
Last Week’s Negative Spot Bitcoin ETF Inflows Aren’t A Long-Term Concern For Bitcoin Holders And Price Action, Bitfinex Analysts Told Cointelegraph:
“Even though negative ETF outflows featured heavily last week, all of it is from the Grayscale Bitcoin Trust (GBTC), as investors both switch out of the higher fees demanded by GBTC and also take profit, especially as many of these investors are long-term holders who entered during the bear market. GBTC investors are not the only sellers in the market. Whale wallet activities have also indicated significant profit taking.”
Updated: 4-27-2024
How To Self-Custody (Placing It Beyond Government Reach) Your Newly-Acquired Bitcoin In Your Spot ETF Account
Discover the working pros, cons and step-by-step setup to gain control of your Bitcoin assets via self-custodial wallets.
Those interested in holding Bitcoin have two main options: a centralized exchange (CEX) wallet or a private (self-custodial) wallet to store them, and both approaches have pros and cons.
This article will explain self-custodial wallets and share basic steps to set up a Coinkite Coldcard Wallet to take control of your Bitcoin assets.
Pros And Cons Of Holding Bitcoin With Centralized Exchanges
A centralized exchange (CEX) holds Bitcoin on their client’s behalf. It aligns with a standard Web2 arrangement where users create an account, purchase and sell tokens on the exchange, and rely on the exchange to handle their account and its holdings carefully.
CEXs are similar to having a bank or stock brokerage account, but that’s where some of the similarities end.
The exchange owns the user’s tokens, and in the case of any unfortunate event like a hack or bankruptcy, users would have no recourse to retrieve these funds.
Considering the lack of protection and control over deposits and assets by users, the famous adage “not your keys, not your coins” exists to encourage direct ownership. Exchange failures are not uncommon; hence, a prudent option is to factor in this reality and avoid large exposure.
However, CEXs offer an accessible entry point for those new to Bitcoin and can be used to purchase tokens for transfer to other wallets. Users can create an account with one of the reputable exchanges available in the industry.
Most CEXs will require Know Your Customer (KYC) checks where users need to provide identification, and upon approval, their account can be set up to buy and sell Bitcoin. Users must ensure that they turn on additional safety features like two-factor authentication to keep their accounts safe.
What Are Private Self-Custodial Wallets?
Blockchains are inherently public, making the tokens owned by any particular wallet address visible to everyone. However, a self-custodial wallet is “private” because the user controls the access to these tokens alone.
What makes self-custodial wallets unique is that users own the seed phrase or the private key required to perform any transaction with that address.
As long as users keep their private key secure, they are the only ones who can control the funds in their wallet, i.e., no third party can control or access those funds.
How Do Self-Custodial Private Wallets Work?
Self-custodial wallets typically begin by generating a unique seed phrase for the user’s wallet, which the user must then securely store in a safe place. This could be on a piece of paper or any other medium.
However, users should avoid leaving them as plain scripts on a computer or mobile device, as anyone with access to the seed phrase will have full control over the wallet.
A self-custodial wallet can take various forms, including a browser extension wallet, a desktop application a mobile application or a hardware wallet (Trezor). These wallets are usually categorized as hot or cold wallets, depending on their intended use and level of security.
The wallets on a user’s browser, desktop or mobile phone are generally considered hot wallets since they stay connected to the internet and are more exposed to potential malicious hacks and security threats, while cold wallets (hardware wallets) are usually offline and only connect to the internet when users need to perform a transaction or interaction.
Users highly concerned with security often use cold wallets in a one-way interaction, where coins are transferred into the wallet for storage, but the wallet is never connected to any internet-based application, as a strict rule.
Evolution Of Bitcoin Wallets
Some wallets are moving beyond the usual seed phrase mechanism to bring security and simplicity that could help expand adoption. Some mobile wallets offer features allowing recovery by trusted contacts, focusing on biometric security to safeguard assets.
Additionally, certain hardware wallets pair with mobile apps and utilize chip cards for asset protection, emphasizing the need to secure the chip card like a safe key.
Moreover, multisignature wallets require multiple approvals for transactions, adding a layer of security against unauthorized access and potential fraud.
Key Steps To Getting Started And Setting Up Coinkite Coldcard
The Future Of Self-Custodial Wallets
Self-custodial wallets have significantly evolved from their early days when users needed technical skills to set them up and had to be very cautious to avoid losing their Bitcoin. However, seed phrases are just one aspect of the broader picture.
The potential for losing a wallet due to misplaced seed phrases or private keys, coupled with the lack of straightforward methods for transferring wallet ownership to family and friends, remains a significant barrier to the widespread adoption of these wallets by everyday users.
Future self-custodial wallets would ideally not rely solely on seed phrases but a combination of biometrics and layers of authentication and approvals to make it easy to onboard more users and provide them with peace of mind and security around the ownership of their digital assets.
In terms of privacy, future regulations may require KYC procedures for individual wallet addresses to transact.
Therefore, the adoption of self-custodial wallets is primarily aimed at enhancing control over a user’s Bitcoin assets and accessing opportunities within the Bitcoin ecosystem rather than preserving anonymity on the blockchain.
Casa’s Multi-Key Solution For Tackling Self-Custody Bitcoin Inheritance
Casa’s new self-custody inheritance feature will support multi-key vaults that allow benefactors to inherit BTC, ETH, USDT and USDC from deceased estates.
Bitcoin self-custody firm Casa is rolling out an inheritance feature aimed at streamlining the transfer of assets to benefactors from deceased estates.
The inheritance of Bitcoin can be a complicated process, even more so if the owner of the digital assets has not made any provisions for their families or designated recipients to take control.
Nick Neuman, co-founder and CEO of Casa, tells Cointelegraph that the inheritance of Bitcoin has long been an issue for Bitcoin-natives looking to ensure that their digital holdings are passed on accordingly.
“It’s not overlooked. Many people recognize it as a big problem they want to solve but they haven’t had good tools to solve it yet, so most people either don’t have a solution, or have cobbled together something that they hope will work but don’t feel good about,” Neuman said.
Casa has offered an inheritance feature to its highest membership tier in the U.S. for the past few years. Neuman said the new offering will be available to all Casa members and differs from the existing high-tier feature, allowing users to transfer Bitcoin holdings to benefactors.
The offering aims to ensure that the process of managing Bitcoincurrency holdings of deceased individuals is straightforward, secure and resistant to malicious actors. Neuman said that instances where inheritance plans have not been made have been “precarious and stressful,” adding:
“When we’ve tried to help recover assets for people who don’t have an inheritance plan and have passed away, it has taken anywhere from 6-12 months to figure everything out. Even then, the chance of actually recovering the assets is low.”
The offering hinges on a Casa’s user designating a recipient to a specific token vault in its proprietary app. The recipient then creates a free Casa account and scans a QR code provided by the vault owner, which contains an encrypted version of the owner’s mobile key.
Updated: 4-4-2024
Morgan Stanley Wants To Beat UBS To Become First Bitcoin ETF Bank
According to crypto insider Andrew AP Abacus, both Morgan Stanley and UBS are set to add Bitcoin ETFs to their platform next week.
The launch of spot Bitcoin exchange-traded funds (ETF) in the United States has fueled rivalry between investment banks over which will be the first wirehouse to add the products.
Morgan Stanley is hoping to beat UBS in becoming the first wirehouse to fully approve the Bitcoin ETF, crypto enthusiast Andrew (AP_Abacus) reported on X on April 3.
Citing internal Morgan Stanley notes, Andrew said that the bank “may announce a few days before” its move into Bitcoin ETFs.
He also mentioned that global banks have been actively talking about the Bitcoin ETF addition as a race.
Bloomberg ETF expert Eric Balchunas added to Andrew’s X thread, noting that neither Morgan Stanley nor UBS have added Bitcoin ETFs, citing a “solid source.”
“Still in a holding pattern, in a compliance game of chicken, waiting for one of them to go first, then gives rest cover. So probably will be an all-at-once type moment when that is the question,” Balchunas suggested.
Prior to posting the new update, Andrew reported that UBS plans to add Bitcoin ETFs to its platform between April 8 and April 12 next week.
The latest speculation about Morgan Stanley’s potential rival move against UBS comes a few weeks after Andrew reported that the bank is set to approve Bitcoin ETFs.
“Several sources confirm that Morgan Stanley is set to approve Bitcoin ETFs on its platform in the next two weeks,” the poster wrote on March 26.
Cointelegraph approached Morgan Stanley and UBS for a comment regarding the potential addition of spot Bitcoin ETFs to their platforms but did not receive a response at the time of publication.
Spot Bitcoin ETFs made a historic trading debut in the United States on Jan. 11, after many years of efforts to launch one in the country. Customers of major banks like UBS and Citi subsequently reported not being able to access spot Bitcoin ETFs, with banks citing different reasons to not list those investment products.
A spokesperson close to UBS told Cointelegraph in January that spot Bitcoin ETFs can only be offered in a brokerage account and are only suitable for “aggressive investors.”
“It remains to be seen if the issuers will be able to distinguish themselves in terms of ability to manage the product during turbulent markets,” UBS wrote in an official statement about spot Bitcoin ETFs on Jan. 29.
Some other major banks in the U.S. have continued to maintain skepticism about Bitcoin even after the ETF approval.
“We do not think it is an investment asset class,” Goldman Sachs’ chief investment officer and known Bitcoin skeptic Sharmin Mossavar-Rahmani said in an April 2 interview with the Wall Street Journal. “We’re not believers in crypto,” she stated.
Updated: 4-5-2024
Blackrock Updates Bitcoin ETF, Adds 5 Wall Street Firms
BlackRock’s New Additions Include ABN AMRO, Citadel Securities, Citigroup Global Markets, Goldman Sachs And UBS Securities.
Global asset manager BlackRock updated its Bitcoin exchange-traded fund (ETF) prospectus on April 5, adding five big Wall Street firms as new authorized participants.
New members include ABN AMRO Clearing, Citadel Securities, Citigroup Global Markets, Goldman Sachs and UBS Securities, according to the document amending BlackRock’s S-1 registration statement with the United States Securities and Exchange Commission.
Among the previously authorized participants in the ETF are JPMorgan Securities, Jane Street Capital, Macquarie Capital and Virtu Americas.
Authorized participants play a crucial role in the BTC ETF operational mechanism, as they can create and redeem shares of the ETF, which involves exchanging ETF shares for a corresponding basket of securities that reflect the ETF’s holdings or exchanging them for cash.
According to Bloomberg analyst Eric Balchunas, the new additions indicate that “big time firms now want piece of action and/or are now OK being publicly associated w[ith] this.”
The SEC’s position on a cash creation and redemption mechanism for Bitcoin ETFs was primarily directed at mitigating market manipulation risks associated with transactions.
The cash mechanism entails that new shares of a Bitcoin ETF will only be created or redeemed through cash transactions, in contrast to the traditional in-kind model, where market participants handle the underlying assets directly.
This approach was developed to prevent intraday price manipulation, according to initial proposals by asset managers like Hashdex. Following the SEC’s guidance, other asset managers — including giants like BlackRock, ARK Invest and Grayscale — have incorporated this mechanism into their filings.
The Bitcoin ETFs witnessed a spike in trading volume in March, reaching $111 billion, while some analysis suggests the product’s demand is cooling down. BlackRock’s iShares Bitcoin Trust (IBIT) continues to dominate trading volume and assets under management, followed by Grayscale’s and Fidelity’s funds. According to data from BitMEX Research, BlackRock’s IBIT assets reached $17.6 billion on April 1.
Updated: 4-15-2024
Hong Kong Gives Initial Bitcoin, Ether ETF Nod, Issuers Say
* Harvest And HashKey Are Among Those Saying They Got Approvals
* Bitcoin Extended Gains As Crypto Got Lift From City’s Decision
Hong Kong gave conditional approvals for asset managers to start spot-Bitcoin and Ether exchange-traded funds, the firms said, a development that boosted both tokens and the wider crypto market.
Harvest Global Investments Ltd. and a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co. announced initial approvals in separate statements on Monday.
The Hong Kong unit of China Asset Management said it had received approval from the city’s Securities & Futures Commission for the provision of virtual-asset management services and is deploying resources to develop products.
Hong Kong is vying with the likes of Singapore and Dubai to become a digital-asset hub after rolling out a dedicated regulatory regime last year.
Officials are trying to restore the city’s reputation as a modern financial hub following a crackdown on dissent that dulled its allure.
Listing Approval Pending
The SFC said the agency issues a conditional authorization letter to an ETF application if it generally satisfies its requirements, subject to various conditions.
An applicant would then apply to Hong Kong Exchanges and Clearing Ltd. for listing approval, the SFC added.
In a statement, OSL Digital Securities Ltd. said it would provide custodial services for Bitcoin and Ether products from the China Asset Management unit as well as Harvest.
The crypto market got a boost from the latest developments. Bitcoin rose as much as 4.3% and Ether 6.5%. The tokens traded at $66,232 and $3,253 respectively as of 4:30 p.m. Monday in Hong Kong.
Spot-crypto ETFs have been in the spotlight after Bitcoin funds from companies including BlackRock Inc. and Fidelity Investments debuted in the US in January.
The portfolios have attracted a net inflow of $12.5 billion to date, demand that helped take the largest digital asset to a record high of $73,798 in mid-March.
It’s unclear if the US will approve pending applications to start ETFs that directly hold second-ranked token Ether.
In-Kind Redemption
HashKey Capital and Bosera said the Hong Kong spot-ETFs would have an in-kind subscription and redemption mechanism, where the underlying assets are swapped for ETF units and vice versa. That contrasts with the US funds, which operate on a cash redemption model.
The in-kind approach is a “potentially smoother and cheaper process” that may bolster the appeal of the Hong Kong products, said Justin d’Anethan, head of business development for APAC at Keyrock, a crypto market maker.
The big unknown is the likely level of demand for the city’s ETFs. Hong Kong already allows futures-based crypto ETFs and three have listed so far: CSOP Bitcoin Futures, CSOP Ether Futures and Samsung Bitcoin Futures.
They have combined assets of about $170 million, a fraction of equivalent US offerings.
Aside from ETFs, Hong Kong is mulling a batch of applications to expand its roster of licensed digital-asset exchanges and working on a framework for stablecoins, which are usually pegged 1-1 to fiat currency and typically backed by reserves of cash and bonds.
Hong Kong Boards The ETF Express
Hong Kong regulators on Monday approved the launch of spot bitcoin and ether exchange-traded funds (ETFs), according to local reports.
It’s the latest signal of the increasing institutionalization of the world’s leading crypto assets, and perhaps a harbinger of things to come in mainland China, which banned virtually all crypto activity in 2021.
ChinaAMC, Harvest Global and Bosera International are among the asset managers granted licenses to launch these spot market products by the Hong Kong’s Securities and Futures Commission (SFC), though more may follow.
In recent months, Hong Kong regulators have signaled their intent to open the former citystate into a crypto hub.
Notably, Hong Kong is positioning itself as one of the first regions to approve spot ether ETFs. Canada, the first country to allow the launch of bitcoin ETFs, approved ETH ETFs a few months later.
In the U.S., where the Securities and Exchange Commission’s hand was essentially forced to approve spot bitcoin ETFs is currently dragging its feet on ether-based products.
Europe, Singapore, Australia and Dubai also have approved bitcoin ETFs available in their respective regions. The U.K. will soon allow crypto-traded notes to be traded on the London Stock Exchange starting in May, while Australia is expected to approve them in June this year.
The Hong Kong news is positive especially considering the city’s role as a regional financial hub, perhaps opening the door for nearby neighbors like Japan and Singapore to also open the floodgates to spot bitcoin investing.
However, unlike the unlock that happened in the U.S., which is one of the main drivers of the recent bitcoin rally that has pushed the asset to ever newer all-time highs, there are reasons to doubt billions in new capital will flood into the market.
Bitcoin ETFs in the U.S. this year have been some of the fastest growing financial products ever — already accounting for billions in assets under management.
But as financial markets guru Noelle Acheson has pointed out, there is a gulf between the relative market size of the U.S. and Hong Kong.
“A handful of $BTC and $ETH futures ETFs listed in Hong Kong in December 2022, and today, more than a year later, have a combined AUM of just under $170 million,” Acheson tweeted. “For contrast, $BITO – the largest U.S.-listed BTC futures ETF – has an AUM of over $2.8 billion.”
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