The U.S. of Bitcoin ETFs has gone from unattainable to imminent for eight years

On October 15, according to Bloomberg News, a person familiar with the matter said that the Bitcoin futures ETF is reportedly not opposed by the SEC. The market reacted quickly, and Bitcoin rose accordingly.

On October 9, according to Bloomberg News, 4 BTC ETFs are expected to be approved by the US Securities and Exchange Commission (SEC) at the end of October. The SEC may decide at the end of October whether to approve, reject or delay the listing application of such ETFs. Bloomberg ETF analyst James Seyffart said that he believes that approval is very likely. “The SEC and its chairman Gensler have no reason to make positive comments on the BTC futures ETF based on the 1940 law at the end of September. And then made the opposite decision.”

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(Gensler teaches Blockchain course at MIT)

SEC Chairman Gary Gensler has always advocated the inclusion of Crypto in the regulatory framework, and the only way to be included in the framework is naturally to provide investors with compliant Crypto exposure. On September 30, he expressed his support for BTC futures ETF funds instead of BTC spot ETF funds. As of now, a total of 9 BTC futures ETFs are waiting for SEC approval.

Just a few days ago, the SEC has just approved the Volt Crypto Industry Revolution and Tech ETF (Volt Crypto Industry Revolution and Tech ETF), 80% of the fund’s holdings will be allocated to those defined as holding most of the BTC net assets or most of the income Entity from BTC mining, lending or trading. This is also considered by the market as a prelude to the BTC ETF.

After a series of regulatory developments, the passage of the BTC ETF seems to be just one step away. These news aroused strong market attention, and market sentiment continued to pick up. If the SEC finally approves the Crypto ETF, it will undoubtedly play a demonstrative effect in traditional finance. If Crypto ETF one after another and financial giants compete to buy Crypto, it is not impossible.

Although many BTC ETFs have been launched before, the launch of the Crypto ETF in the United States is still a milestone: BTC will be completely open to the most developed and capital-intensive place of traditional finance-the United States-and a large number of traditional financial institutions can own Crypto exposure, the market temperature may rise sharply. If the SEC finally approves it, it may add some fuel to the rising market sentiment, and the word “market” no longer needs to distinguish between traditional finance and the crypto world. The importance of this event is enough to penetrate the entire financial market.

Why is ETF important?

In the traditional financial system, ETF is an extremely important component. Because when a commodity can appear in the form of an ETF, it means that the commodity is locally compliant and mature. Trading open-end index funds (exchange-traded funds, ETF) can securitize specific assets through physical guarantees. Investors only need to purchase fund shares issued by the institution to indirectly hold the exposure of the corresponding investment target . This product was invented by John Berger, the founder of Linghang Investment. In 1993, he issued the world’s first and still well-known index ETF-the Standard & Poor’s 500 Index ETF.

A few years after the stock index ETF was born, the first bond ETF was born in 2001. After years of development, the types of ETFs have gradually enriched. How important is ETF in today’s financial markets? Now that it has entered an era of ETFs for everything, Canada has even launched the world’s first cannabis-themed ETF.

At present, there are mainly three well-known BTC ETFs in the world: Purpose BTC ETF holding 21,700 BTC, 3iQ CoinShares BTC ETF holding 20,200, and CI Galaxy BTC ETF holding 3,393. Crypto is a rapidly emerging new type of asset, and many institutions are interested in it. However, due to compliance requirements, if you want to hold this asset, there are not many investment targets to choose from.

In the first half of 2021, BTC once again ushered in a continuous rise. Different from the past, this bull market is dominated by institutions, and the amount of funds of investment institutions and listed companies is far from what retail investors can match. With the help of massive funds, BTC also hit a record high of US$64,000. Although Crypto has attracted the attention of traditional finance, most of the large traditional financial institutions still do not deploy Crypto. Regulatory and compliance issues have always constrained mainstream financial institutions to allocate Crypto exposure. ETFs are compliant and regulated, and have good liquidity and can be traded within the day. If there is a Crypto ETF, it will undoubtedly completely open the door of the Crypto world and traditional finance.

ETFs have always been one of the most successful investment tools that investors can use. They have low fees and high intraday liquidity. Among all exchanges in the U.S., ETF transactions alone account for 30% of the total U.S. exchange transactions. And how much money can the BTC ETF bring to the Crypto market?

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(Spot gold that is not easy to deliver is not the first choice for investors to trade gold)

Let’s take gold as an example. According to statistics, the current global gold Bars and Coins (gold bars and coins) scale is about 38,000 tons, while the gold ETF market has reached about 2,200 tons. It accounts for 5.6% of the B&C gold market share. If calculated by this ratio, the ETF can attract about 6% of the current total market value into the market, which is about 60 billion U.S. dollars based on the current market value.

ETF not only solves the compliance problem, but also the liquidity it provides to the market is also important. ETFs provide investors with a cheap and simple tool that allows them to access Bitcoin in a safe and easily available product. This approach will help to better protect investors who don’t know Crypto so much: they don’t need to really hold Bitcoin, don’t need to know the chain, address, public key, private key, and don’t worry about forgetting their private key so much. Lost his own assets.

This will technically smooth the threshold for everyone to invest in Crypto. Although this may not be the original intention of BlockChain, this fairness is unexpectedly consistent with the purpose of BlockChain.

The “Great Route” of BTC ETF

The development of BTC ETF can be described as ill-fated. As early as 2013, the Winklevoss brothers announced the upcoming BTC ETF. In 2014, the ETF was rejected by the SEC after submitting an application. Since then, the Winklevoss brothers have attempted to set up a BTC ETF in a variety of ways, including changing the trading venue and setting up location. They have applied for several times over the years, but they have not been successful. The plan is still being stranded. This may be the first attempt of the BTC ETF.

In 2016, SolidX’s application for Bit ETF was rejected. 2017 is a year in which the BTC ETF seems to be developing rapidly. The price of BTC changed drastically during the year, from a low of $789 at the beginning of the year to a high of $18,674 at the end of the year. Within one year, several BTC ETF funds applied for the establishment, from BTC Investment Trust at the beginning of the year, VanEck at the middle of the year, to Exchange Listed Funds Trust, Pro Shares, REX BTC, First Trust at the end of the year, and six ETFs within one year. However, unfortunately, they were rejected by the SEC or withdrawn voluntarily, and none of them successfully issued.

In 2018, even in the context of continued decline in currency prices, new ETF applications were still not suspended. This year, two new players, GraniteShares and Direxion, were added to the market, and two old players: VanEck and SolidX jointly applied for an ETF. But it is no different from the past year. The ETF applications of the former two were rejected by the SEC, while the latter’s application was voluntarily withdrawn due to the breakdown of the partnership.

At that time, the SEC had not yet clearly defined BTC, and Crypto was neither a security nor a financial derivative. As a non-physical commodity, BTC is theoretically not subject to the supervision of the US Securities and Exchange Commission and the Commodity Futures Trading Commission (Commodity Futures Trading Commission), which is one of the main reasons why BTC ETFs are frequently rejected.

Since then, BTC has submitted applications for one or more funds each year, but without exception, they have all failed. Applications have been repeatedly rejected and expectations have been repeatedly failed. The issuance of BTC ETF seems to stay in “next year” forever. To this day, the issuance of the “first BTC ETF in the United States” is still in a state of “hope to pass”.

In 2021, the wheel of history has finally moved forward slowly. In February of this year, Canada approved the world’s first BTC ETF-Purpose BTC ETF. After the ETF (stock code BTCC) was officially listed on the Toronto Stock Exchange in Canada, the total trading volume on the first day was 9.3 million shares, with a total trading volume of US$145 million, making it one of the top ten most actively traded securities on the Toronto Stock Exchange that day.

In just a few months thereafter, the Crypto ETF began to grow, and within a few months it quickly completed a path that had not been traversed in the previous few years. Only two months after the issuance of the BTC ETF, three ETH ETFs were also approved for listing, namely: Purpose Ether ETF (ETHH) launched by Purpose Investment, CI Galaxy Ethereum ETF (ETHX) launched by CI Global Capital Management , and Evolve Capital Group The launched Evolve Ether ETF (ETHR).

Represented by grayscale , an alternative substitute for ETF 

The widespread cross-chain bridge in the crypto world communicates different infrastructures, and in the two markets of traditional finance and the world on the chain, there is also an urgent need for a “bridge” between the two. The Grayscale Trust is the most famous bridge among them.

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(Traditional financial institutions on Wall Street cannot easily configure Crypto exposure)

If a compliant institutional investor is bullish on Crypto, how can they configure Crypto exposure in full compliance? Gray Trust is one of the answers. In the bull market boosted by this round of institutions, the rapid rise of Grayscale Trust has also allowed the traditional financial industry to see new opportunities-entering the world of Crypto is a real demand urgently needed by the market. Even at the moment, Grayscale still has the largest holdings among institutions, and its holdings of BTC have reached 649,000. For a long period of time, the gray trust share has been one of the main ways for institutions to indirectly invest in Crypto currency.

Unfortunately, Grayscale Trust is not so “easy to use”. Grayscale is not a true ETF product and has long been regarded as a substitute for Crypto ETF. Although it provides institutions with Crypto exposure, Grayscale Trust also has great disadvantages compared with real ETFs. Grayscale Trust’s GBTC shares not only have a 6-month lock-up period, but can only be resold after unlocking and cannot be redeemed. This special mechanism may also be one of the reasons that promote the long-term premium of Grayscale shares compared to BTC. For several years, Grayscale GBTC has maintained a high premium level, even exceeding 100% at the highest level. The lack of a regulatory framework has left institutional investors lacking easy-to-use tools for entry.

In addition to Grayscale Trust, there are other alternatives on the market. As early as 2017, French Tobam ​​issued the world’s first BTC mutual fund. In the same year, Swissquote Group of Switzerland launched the BTC certificate ETP product, which was listed on Six Swiss, the largest stock exchange in Switzerland. Since then, Germany, Sweden, Austria and other countries have successively issued Crypto ETP products. Similar to the disadvantages of Grayscale Trust, these products can only meet part of the functions of ETFs-ETPs are essentially bonds and cannot be included in the regulatory framework of funds.

Within the current regulatory framework, Crypto ETFs are the real demand of the market. After all, alternative alternatives to ETFs cannot truly replace ETFs. If a Crypto ETF can be set up, then a fully compliant, intraday trading financial product can be set up as a financial product purchased by a financial institution. This greatly reduces the threshold for institutions to deploy Crypto. This is also one of the reasons why the Crypto industry has repeatedly rejected applications in the past eight years, but is still continuing to apply.

CryptoETF is currently accelerating. However, in the most capital-intensive United States, there is still no compliant ETF launched. According to statistics, at least 15 asset management institutions in the United States have applied for Crypto ETF at least 35 times. Unfortunately, none of them has been approved so far. With the gradual improvement of the compliance framework, the door of the Crypto world is gradually opening up to traditional finance. If the BTC futures ETF is passed, it may have a certain demonstration effect in the traditional financial field. And whether the US Crypto ETF keeps up with the pace of other regions, or is it “promising to launch” for several years, we still need to wait for time to give an answer.  

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-u-s-of-bitcoin-etfs-has-gone-from-unattainable-to-imminent-for-eight-years/
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