Bitcoin Reaches Crescendo Ahead of Key U.S. ETF Deadline

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  • Optimism is high in the US$6.7 trillion exchange-traded fund industry that a U.S. bitcoin fund could begin trading as early as next week.

  • Large, listed companies have bitcoin on their books and more institutional investors are looking at, or have already committed to the asset class than at any point in bitcoin’s history.

Almost nine years since the Winklevoss twins first applied for a U.S. bitcoin ETF, optimism is soaring that the U.S. Securities and Exchange Commission will approve one in the coming week.

Optimism is high in the US$6.7 trillion exchange-traded fund industry that a U.S. bitcoin fund could begin trading as early as next week, and bitcoin soared after the SEC’s Office of Investor Education and Advocacy tweeted a June advisory about investing in funds that hold bitcoin futures.

In all likelihood however, the U.S. bitcoin ETF won’t be the one that the Winklevoss twins had envisaged, and the ETF wouldn’t be buying the underlying digital asset itself, instead it would attempt to abstract the custody issues of bitcoin by allowing the ETF to invest in bitcoin futures (likely CME Group products) instead.

Over this past week alone, more groups have thrown their hat in the bitcoin ETF ring, with cryptocurrency lender BlockFi and Cathie Wood’s Ark Investment Management penning down their names on applications for futures-backed bitcoin ETFs, a structure that SEC Chairman Gary Gensler has hinted he would be open to.

But a bitcoin futures ETF could go either way for the cryptocurrency market because just like the CME Group’s (+1.37%) bitcoin futures saw bitcoin rally to the then-all-time-high of around US$20,000, on expectations of broader institutional adoption, it crashed the following year.

This time could truly be different though.

In 2017, expectations that more institutions would adopt cryptocurrencies failed to materialize and the retail investor-led rally in ill-conceived initial coin offerings or ICOs, eventually fizzled out and saw a precipitous crash in prices.

Fast forward to 2021 and the landscape is dramatically different.

Large, listed companies have bitcoin on their books and more institutional investors are looking at, or have already committed to the asset class than at any point in bitcoin’s history.

Proshares has a bitcoin ETF application that is due to either be rejected or approved next Monday and while the SEC has either rejected previous applications or deferred them, Gensler’s own words suggests that this time may be different.

Gensler has signaled that he’d be in favor of funds based on CME-traded bitcoin futures, a stance that he reiterated last month.

But a bitcoin futures ETF isn’t necessarily what the industry needs.