Will The SEC Approve A Bitcoin Futures ETF In 2021? Here Are The Implications
September 27 2021 - 5:15AM
NEWSBTC
Rumors are flying. The SEC could approve a Bitcoin Futures ETF
before the year ends. It seems like the US Security And Exchange
Commission will not give the go-ahead to the mythical Bitcoin ETF
just yet… or ever, but a new option has a few companies salivating.
What does this mean? And why a Bitcoin Futures ETF before one for
the asset itself? That’s what we’re here to explore. Related
Reading | Skybridge Capital Applies For Cryptocurrency ETF And
Accumulates $100 Million For ALGO Fund But first, why is the SEC
hesitant about approving the Bitcoin ETF? Investopedia responds:
“The reason is that bitcoin, the largest cryptocurrency in the
world by market capitalization, remains largely unregulated.
Additionally, the Securities and Exchange Commission (SEC) is
hesitant to allow an ETF focused on the new and largely untested
cryptocurrency market to make its way to the public.” If that’s
true, what makes us think that a Bitcoin Futures ETF is not only
possible, but imminent? Well, last month The SEC Chairman Gary
Gensler told the Aspen Security Forum: “I anticipate that there
will be filings with regard to exchange-traded funds (ETFs) under
the Investment Company Act (’40 Act). When combined with the other
federal securities laws, the ’40 Act provides significant investor
protections. Given these important protections, I look forward to
the staff’s review of such filings, particularly if those are
limited to these CME-traded Bitcoin futures.” 🤯
pic.twitter.com/XUlSV31jEw — Eduardo Prospero (@edprospero23)
September 23, 2021 Is A Bitcoin Futures ETF What US Investors Want?
Since Gary Gensler sent such a clear signal, the financial world
responded in unison. “At least four asset managers have filed
for ETFs that invest in bitcoin futures after Securities and
Exchange Commission chair Gary Gensler earlier this month indicated
that he could approve such funds. But investors may not want them
in lieu of physically backed bitcoin ETFs, analysts have said.”
According to Investopedia, “A bitcoin ETF mimics the price of the
digital currency, allowing investors to buy into the ETF without
trading bitcoin itself.” However, who’s interested in ETFs when
bitcoin, the asset, is widely available? Some investors or groups
simply can’t invest in bitcoin because their own internal rules
won’t allow them to. They can’t purchase bitcoin through a
brokerage account. No financial institution backs it, so no one
protects them. And, of course, there’s the feared volatility.
Bloomberg explains how Bitcoin fixes this: “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.” However, it appears that the SEC won’t
approve one any time soon. Why would they approve a Bitcoin Futures
ETF instead? Bloomberg continues: “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.” BTC
price chart 09/27/2021 on Coinbase | Source: BTC/USD on
TradingView.com Experts And Important Players Disagree While some
companies can’t wait for the Bitcoin Futures ETF to be available,
others are less enthusiastic. One of those is Michael Sonnenshein,
CEO of Grayscale Investments. His company is one of the many that
applied for a Bitcoin ETF and are still waiting for approval. In a
recent CNBC interview, he said: “It would be shortsighted of the
SEC to allow a futures-based product into the market before a spot
product,” Sonnenshein told CNBC’s “Squawk Box” on Tuesday. “They
really should be allowing both products into the market at the same
time and let investors choose which way they want.” Related
Reading | Did The SEC’s Gary Gensler Threaten Crypto And DeFi In
The WaPo Interview? Of course, he’s heavily invested in this
outcome. His company’s Grayscale Bitcoin Trust is incredibly
successful, but if they manage to turn it into an ETF, it might go
parabolic. However, he’s not the only one that thinks that way. In
the Bloomberg article, another expert elaborated on the Bitcoin
Futures ETF ‘s limitations: “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.” In any case, the
Bitcoin Futures ETF approval is just speculation. Gary Gensler said
he looked forward to reading his staff’s review of the fillings,
which is not a guarantee by any stretch of the imagination.
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