Will Bitcoin ETFs Ever Be A Thing?
Yes – no – maybe – perhaps… the answer to the question in our title varies depending on where you might hear it from. And in case you’re wondering what a general ETF is, you can read more about that here (just don’t forget to come back to this article afterwards). A Bitcoin ETF, is an ETF that mimics the price of Bitcoin, the most popular and leading cryptocurrency in the world. With a Bitcoin ETF, investors all around the world could buy into the ETF without having to follow the complicated processes of trading Bitcoin directly. Investors would also be able to participate in crypto trading without having the need to worry about the complex storage and security procedures, often brought about by crypto exchanges. It is believed that a Bitcoin ETF will most likely benefit the Bitcoin market, with one potential positive effect being a price increase of BTC.
However, despite initial attempts, Bitcoin ETFs continue to gain a series of rejections by the US Securities and Exchange Commission, more popularly known as SEC. It should be noted that there are reports of at least one member of the SEC who disagreed with the decision to block Bitcoin ETFs. Now, let’s look at some of the proposals thus far – each of the following had multiple proposals:
ETF by ProShares
The SEC decided to rule against the ETF proposed by ProShares. Despite the fact that ProShares is running and managing not less than 29 billion dollars of funds, the SEC still decided not to approve their proposal. ProShares itself, in their strategies to try to get a Bitcoin ETF approved, proposed to help investors invest in a combination of Bitcoin futures contracts and other money market instruments, hoping to give further incentives to them by having a reduced volatility while making sure that they could still gain nice profits. The SEC gave its reasons for rejecting ProShares’ proposals, doing so on August 22, 2018.
ETF by Direxion
Direxion is another ETF provider that has tried getting a Bitcoin ETF approved by the SEC. Their top five largest funds amount to more than $40 million of funds managed. Much to their dismay, however, the SEC (expectedly) also refused to grant approval for Direxion’s Bitcoin ETF to run. Whereas ProShares wanted to combine maximum profit and security and highlight it as what could potentially make them different from their competitors, Direxion focused on providing total returns that exceed Bitcoin futures contracts for their investors. The SEC found that the lack of mention of specific steps to prevent fraudulent and manipulative practices in Direxion’s Bitcoin ETF proposal less than appealing as they, again, decided to reject it, also on August 22, 2018.
ETF by GraniteShares
Surpassing a rather impressive figure of $300 million in asset management by June 2018, GraniteShares also decided to try their luck on having a Bitcoin ETF approved. With their Matching Fund mechanism, GraniteShares would seek results by matching the performance of front month Bitcoin futures contracts that are traded on CBOE – with the options available for both a single day and over time. Much like their response to the ETF proposed by Direxion, the SEC stated that they thought GraniteShares had failed in proving that the Bitcoin market and price is resistant to manipulation. Thus, this became the third case of what one might see as a “bad day” for Bitcoin ETF proposals, as it marked yet another rejection of Bitcoin-based ETFs by the SEC.
But wait, that’s not all…
While there are actually a lot more cases of Bitcoin ETF rejections (including one that was proposed by the Winklevoss twins), it seems like not all SEC members agree to their decision of rejecting those applications. As mentioned, at least one is reported to have disagreed with the majority. Hester Peirce, a SEC Commissioner appointed by US President Donald Trump, seems of the opinion that Bitcoin should be considered as a “regulated and mature enough” asset that could be worthy of the US markets. She even published her personal statement on Twitter, sarcastically saying that she didn’t agree to SEC’s decision as an institution. To her, the SEC actually had no jurisdiction to look at the underlying asset, which is Bitcoin, and the SEC had went over the line by focusing on how the Bitcoin markets were actually working – manipulated or not. For her, they should rather have focussed on the product itself, which is the ETF. you can read her dissent here on the SEC’s website.
How did SEC – and other market players – react?
Any further stances and opinions from the SEC remain to be seen for now, as the people are eagerly waiting for their decision on the next batches of Bitcoin ETF applications – some involving VanEck and SolidX. The SEC has decided to delay their decisions on these applications, which could only bring one of two possible outcomes: rejection or acceptance. It seems like they are, however, open to all possibilities as they continue to seek comments. People all around the world have dropped their two cents in regarding the matter, obviously with mixed opinions.
And what do we think?
We remain hopeful for the future of a Bitcoin ETF approval, and the positive effects it would likely have on the crypto markets. We’d like to think that it should only be a matter of time before the approval arrives, and this could be good for investors in general as institutions and big players more easily join the crypto craze. We encourage you to check out our gold and blockchain-based DinarCoin, with its price pegged to the spot-price of gold, giving you the security, investment, and hedging aspects of gold, while providing you the speed and flexibility of cryptocurrency tokens.