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The Bitcoin ETF saga continues this week, with further word from the now famous VanEck Bitcoin ETF application. In case you’re not familiar or you’ve (somehow) totally forgotten, ETF stands for Exchange Traded Fund. In short, the United States Securities and Exchange Commission (the SEC) who are in charge of financial matters within the US are inspecting a number of Bitcoin ETF applications. The SEC have the power to decide if an ETF is approved, therefore in this process they are looking at the legitimacy of the applications and of course, are looking at how the arrival of a Bitcoin ETF will affect the cryptocurrency markets and in turn, traditional finances and economics too.
Whatever happens in crypto does have an impact on FIAT currency and traditional stocks too, though they aren’t directly correlated, the traditional finance world is tied to the crypto-sphere in some way, therefore the SEC need to understand how big an impact a Bitcoin ETF will have on both sectors.
Initially, approval of a number of ETFs was expected in August this year, specifically the VanEck SolidX ETF application, however as a result of complications this decision was pushed back to a new deadline at the end of September. As September came, no final call had been made by the SEC and as a result, a new extension was added to their deadline.
Wouldn’t it be nice if we could all get away with pushing our deadlines further back?
So, with a new deadline in place (the end of 2018), speculation is now starting to arise about what will happen next. Will an ETF be approved or is this waiting game going to continue?
This is an important question, mostly because the Bitcoin ETF is seen as one of the products that will encourage vast amounts of institutional interest into the markets. An ETF will make institutional investment more secure and easier to carry out, which means big institutions (with lots of money) are more likely to invest in Bitcoin. This, will encourage more money into the markets which in turn will help pump the price of Bitcoin, giving more people better returns on their investment.
Simply put, the Bitcoin ETF is seen as the product that will spring some life back into the markets, and will remind people of exactly why they invested in the first place!
Why do we think an ETF will be approved?
All things considered, it is quite likely that a Bitcoin ETF will be approved, if so we can also expect a bull run to take off, so, all in all, this is good news. According to recent reports, representatives from the VanEck SolidX Bitcoin ETF have spoken to the SEC highlighting 5 reasons why they think the SEC should approve an ETF. According to AtoZMarkets, the representatives have highlighted the following:
- “There now exists a substantial regulated derivatives market for Bitcoin.”
- “Relevant markets are regulated. These include CBOE, bitcoin futures, OTC desks.”
- “Worries concerning price manipulation have eased, consistent with approval of prior commodity-based ETPs.”
- “CBOE’s rules are created to surveil for potential manipulation of Trust shares.”
- “Encourages investor protection.”
The latter point about investor protection is one of the main reasons why a Bitcoin ETF is sure to spur on high volume institutional investment.
Furthermore, representatives of VanEck are alleged to have told the SEC:
“As of now, no CCPs support the clearing of bitcoin. Investors are left facing absolute counterparty risk and such risks are often unacceptable to many investors. An ETF provides a straightforward solution for investors seeking price exposure without facing counterparty risk, as the ETF would be cleared through DTCC. Furthermore, in creations and redemptions, the Trust always requires APs and trading counterparties to settle their leg of the trade before the trust will do so.”
Moreover:
“This complexity means that only a very particular type of investor can pursue the diversification opportunities such assets can provide. Entrepreneurs are developing new products through which people can access cryptocurrencies indirectly or hedge their cryptocurrency holdings. Bitcoin futures, for example, began to trade recently.”
Of course VanEck would say that, right?
Okay, it’s hardly breaking news that VanEck are bullish about their ETF approval, it’s expected – they need to be seen to be bullish about their application as it is obviously something they believe in. Whether or not these comments have made a difference at an SEC level, only time will tell. As it stands, the deadline for approval (or rejection) is still a little way off, therefore now the role of all the ETF applicants is to simply continue in this way in order to try and subtly encourage the SEC to actually issue an approval.
An approval of just one of the pending ETF applications will change the crypto landscape, perhaps forever.
