Cryptocurrency
Could a Bitcoin ETF be the Catalyst the Crypto Market Has Been Waiting for?
On March 10th, 2017, the SEC decision regarding the approval of the Winklevoss bitcoin ETF was due. At this point, the bitcoin price reached a record high of $1,350. This was the first time bitcoin had broken $1,000 since the fatal Mt Gox incident. When the SEC’s decision was postponed, the price fell to $1,200. […]
On March 10th, 2017, the SEC decision regarding the approval of the Winklevoss bitcoin ETF was due. At this point, the bitcoin price reached a record high of $1,350. This was the first time bitcoin had broken $1,000 since the fatal Mt Gox incident. When the SEC’s decision was postponed, the price fell to $1,200. Once the SEC officially declined the proposal the price fell to around $950.
Earlier in June, SolidX and money management firm VanEck came together to create the proposal of a new bitcoin ETF. The SEC received this application on June 26th and many are expecting the SEC’s decision to be made on August 10th, 2018. The CEO, Jan van Eck, commented,
“We believe that collectively, we will build something that may be better than other constructs currently making their way through the regulatory process. A properly constructed, physically-backed Bitcoin ETF will be designed to provide exposure to the price of Bitcoin, and an insurance component will help protect shareholders against the operational risks of sourcing and holding bitcoin.”
Many believe August 10th will be different then previous attempts. This time around the sentiment is much more optimistic in relation to the approval of a bitcoin ETF. Much has changed in the crypto world since March of 2017. The bitcoin winter run of 2017 drew the attention of Wall Street and prominent institutional investors such as JP Morgan and Goldman Sachs. Since December, the launch of CBOE and CME futures contracts has further legitimized bitcoin and cryptocurrencies as an emerging asset class.
Most importantly, Coinbase recently announced the implementation of a Custodial service for hedge funds and large scale clientele. It seems as if Coinbase is preparing for institutional money to flow into the space so they can fully capitalize on the potential approval of a bitcoin ETF. A regulated exchange traded fund would be exactly what institutional investors are looking for.
Up until this point, bitcoin has been held back mostly due to the implementation of futures contracts and regulatory uncertainty. Institutional cryptocurrency trading is also still inefficient relative to traditional securities designated on regulated exchanges. Storing large funds on a cryptocurrency exchange incurs significant risk due to the hacking vulnerability of the exchanges.
Institutional investors don’t want to HODL crypto on a Trezor or Nano Ledger like most retail investors. Buying a bitcoin ETF will make it easier for large institutional investors to gain exposure to bitcoin without having to mitigate exchange risk or deal with regulatory uncertainty. If all regulatory decisions go according to plan, a bitcoin ETF could launch as early as Q1 2019.
Unfortunately, there is always a degree of uncertainty when it comes to the time frame of such a decision. The SEC can chose to postpone the decision up to 45-90 days after the initial date.
Disclaimer: This is not financial advice. Please do your own research and make objective decisions. This article is intended to educate readers about the potential approval of a bitcoin ETF. The author of the article owns cryptocurrency.