Post by account_disabled on Mar 6, 2024 5:17:40 GMT -5
Bitcoin exchange-traded funds (ETFs) allow investors to securely access cryptocurrencies without needing to directly handle digital assets. The possible approval of Bitcoin spot ETFs by US regulators has generated growing optimism in recent months.
A US-regulated spot Bitcoin ETF could potentially increase the accessibility, liquidity, demand and price of BTC. However, there are also costs associated with such innovation.
In an optimal scenario, direct investment in BTC would coexist with several regulated instruments, allowing for diverse strategies and meeting different investor needs.
A bitcoin exchange-traded fund (ETF) is a financial instrument that allows exposure to cryptocurrency in a safe and regulated manner, avoiding the hassle of handling BTC directly. These types of products already exist in Canada and Europe, and American investors have been able to buy ETFs that track the price of bitcoin futures since 2021. However, the idea that a regulated ETF in the US has taken hold. holding “physical” bitcoin – commonly referred to as spot bitcoin ETFs – could become a real revolution for the industry.
At a narrative level, encouraging Ecuador Mobile Number List developments in US regulation have helped stoke investor optimism in recent months. As many observers believe a tipping point is approaching, cryptocurrency investors should arm themselves with a solid understanding of the key concepts and possible scenarios that could trigger the emergence of a regulated spot bitcoin ETF.
Key Definitions
An ETF is a type of financial product that tracks the price of a specific asset, index, or basket of assets and is bought and sold on a stock exchange. Generally, ETFs provide a means to invest in various assets allowing the flexibility of trading on one exchange. As such, they often serve as a practical tool to diversify market exposure.
With the advent of cryptocurrencies , two main types of BTC ETFs emerged : futures and spot. A bitcoin futures ETF invests in contracts that bet on the future price of BTC, providing exposure to its price movements without holding the cryptocurrency. A spot bitcoin ETF must hold the underlying asset, reflecting its price more directly, making ownership of its shares more like ownership of BTC itself. You can check out this Binance Academy article for a more detailed comparison.
Bitcoin trusts are another somewhat similar vehicle, differing in structure and operation. A trust acts more like a traditional investment fund, holding the actual BTC. Investors own shares that represent a portion of the pool of digital assets held by the trust. However, unlike ETFs, trusts are subject to premiums or discounts, meaning that the price of a share could diverge significantly from the value of the underlying BTC it represents.
The Grayscale Bitcoin Trust (GBTC) was launched in 2015 to become the first publicly traded bitcoin fund in the US. In early December 2023, Grayscale's application to convert GBTC to a spot ETF is under consideration by the Securities and Exchange Commission (SEC). The first bitcoin futures ETF began trading on the New York Arca Stock Exchange in October 2021. Several of these products are now available to US investors. Of all the instruments described in this section, only spot bitcoin ETFs remain out of reach, although many believe this could soon change.
Seeking SEC approval
The first application for a spot BTC ETF reached the SEC in 2013, and many more followed. The SEC initially highlighted several prerequisites for approval, including well-regulated bitcoin-related markets and surveillance exchange agreements to prevent fraud and market manipulation. In the following years, several firms submitted revised applications. Unfortunately, these attempts had similar results: denial due to ongoing worries or withdrawal in anticipation of denial.
However, the picture began to change in 2023. Many were confused by the SEC's decisions, as it was unclear why bitcoin futures ETFs were allowed while spot ETFs were not. In August, US courts appeared to uphold this notion, with the judge presiding over Grayscale's case against the SEC ruling in favor of Grayscale, requiring the SEC to reconsider its rejection of GBTC's conversion to an ETF. in cash and ruling that the differential treatment was “arbitrary and capricious.”
Another milestone came in June, when BlackRock, the world's largest asset manager, filed for a spot bitcoin ETF. The proposal included surveillance sharing agreements to deter fraud and market manipulation, potentially mitigating the SEC's major concerns. Coupled with BlackRock's unblemished track record in approving ETF applications, this move encouraged other firms to follow suit.
Together, these developments have fueled market optimism in the fall of 2023, with a flurry of companies resubmitting previously rejected applications. Anticipated deflationary pressures from the upcoming halving in 2024 further encouraged the positive outlook. As these events unfold, the market watches closely for signs of a breakthrough.
A US-regulated spot Bitcoin ETF could potentially increase the accessibility, liquidity, demand and price of BTC. However, there are also costs associated with such innovation.
In an optimal scenario, direct investment in BTC would coexist with several regulated instruments, allowing for diverse strategies and meeting different investor needs.
A bitcoin exchange-traded fund (ETF) is a financial instrument that allows exposure to cryptocurrency in a safe and regulated manner, avoiding the hassle of handling BTC directly. These types of products already exist in Canada and Europe, and American investors have been able to buy ETFs that track the price of bitcoin futures since 2021. However, the idea that a regulated ETF in the US has taken hold. holding “physical” bitcoin – commonly referred to as spot bitcoin ETFs – could become a real revolution for the industry.
At a narrative level, encouraging Ecuador Mobile Number List developments in US regulation have helped stoke investor optimism in recent months. As many observers believe a tipping point is approaching, cryptocurrency investors should arm themselves with a solid understanding of the key concepts and possible scenarios that could trigger the emergence of a regulated spot bitcoin ETF.
Key Definitions
An ETF is a type of financial product that tracks the price of a specific asset, index, or basket of assets and is bought and sold on a stock exchange. Generally, ETFs provide a means to invest in various assets allowing the flexibility of trading on one exchange. As such, they often serve as a practical tool to diversify market exposure.
With the advent of cryptocurrencies , two main types of BTC ETFs emerged : futures and spot. A bitcoin futures ETF invests in contracts that bet on the future price of BTC, providing exposure to its price movements without holding the cryptocurrency. A spot bitcoin ETF must hold the underlying asset, reflecting its price more directly, making ownership of its shares more like ownership of BTC itself. You can check out this Binance Academy article for a more detailed comparison.
Bitcoin trusts are another somewhat similar vehicle, differing in structure and operation. A trust acts more like a traditional investment fund, holding the actual BTC. Investors own shares that represent a portion of the pool of digital assets held by the trust. However, unlike ETFs, trusts are subject to premiums or discounts, meaning that the price of a share could diverge significantly from the value of the underlying BTC it represents.
The Grayscale Bitcoin Trust (GBTC) was launched in 2015 to become the first publicly traded bitcoin fund in the US. In early December 2023, Grayscale's application to convert GBTC to a spot ETF is under consideration by the Securities and Exchange Commission (SEC). The first bitcoin futures ETF began trading on the New York Arca Stock Exchange in October 2021. Several of these products are now available to US investors. Of all the instruments described in this section, only spot bitcoin ETFs remain out of reach, although many believe this could soon change.
Seeking SEC approval
The first application for a spot BTC ETF reached the SEC in 2013, and many more followed. The SEC initially highlighted several prerequisites for approval, including well-regulated bitcoin-related markets and surveillance exchange agreements to prevent fraud and market manipulation. In the following years, several firms submitted revised applications. Unfortunately, these attempts had similar results: denial due to ongoing worries or withdrawal in anticipation of denial.
However, the picture began to change in 2023. Many were confused by the SEC's decisions, as it was unclear why bitcoin futures ETFs were allowed while spot ETFs were not. In August, US courts appeared to uphold this notion, with the judge presiding over Grayscale's case against the SEC ruling in favor of Grayscale, requiring the SEC to reconsider its rejection of GBTC's conversion to an ETF. in cash and ruling that the differential treatment was “arbitrary and capricious.”
Another milestone came in June, when BlackRock, the world's largest asset manager, filed for a spot bitcoin ETF. The proposal included surveillance sharing agreements to deter fraud and market manipulation, potentially mitigating the SEC's major concerns. Coupled with BlackRock's unblemished track record in approving ETF applications, this move encouraged other firms to follow suit.
Together, these developments have fueled market optimism in the fall of 2023, with a flurry of companies resubmitting previously rejected applications. Anticipated deflationary pressures from the upcoming halving in 2024 further encouraged the positive outlook. As these events unfold, the market watches closely for signs of a breakthrough.