In recent weeks, the market has been flooded with a new wave of applications for spot ETFs based on the first cryptocurrency. Financial giants BlackRock, Valkyrie, Fidelity Investments, WisdomTree and Invesco sent requests to the US Securities and Exchange Commission (SEC). Cryplogger and interviewed experts explain the significance of this highly anticipated investment vehicle.
How it all started
A variety of ETFs for bonds, global currencies, gold, real estate and oil have been available for many decades. The most well-known example of an instrument is the SPDR S&P 500 ETF Trust, which tracks the S&P 500 index.
However, many bitcoin exchange-traded funds have been rejected for several years. In 2021, the SEC still approved applications for ProShares and VanEck for a digital gold-based futures ETF, but spot instruments have not yet received a green light.
The ProShares Bitcoin ETF began trading on the New York Stock Exchange on October 18, and less than a month later, the price of the first cryptocurrency reached an all-time high of $69,000.
In the summer of 2023, a new race for spot Bitcoin funds began. But this time too, the Commission rejected the initiative, citing a lack of information regarding the so-called joint monitoring agreement and the details of this mechanism. Interested companies supplemented their requests and submitted documents to the SEC again.
Now the market is waiting for the final decision of the regulator, which could be a turning point for the industry. Amid ETF news, shares of crypto companies including Coinbase, MicroStrategy, Riot Blockchain and Marathon Digital Holdings posted double-digit gains. Bitcoin itself also reacted by rising above $31,000.
MicroStrategy founder Michael Saylor called the emergence of ETFs based on the first cryptocurrency “an important milestone on the path to institutional adoption.”
High expectations
There is an opinion in the community that the approval of the instrument will finally bring the crypto market out of the bearish phase due to the influx of traditional investors and, as a result, an increase in liquidity. However, one should not hope for a sharp increase in quotations, experts say.
The main advantage will still be a more stable regulatory environment in the digital asset sector.
“The industry has been waiting for institutional money for the last five or six years. This creates inflated expectations, especially when it comes to the price of bitcoin and other digital assets. Their entry into the market does not at all promise a rapid rise in prices, as many expect, ”says Andrey Veliky, co-founder of Allbridge.io.
In his opinion, the emergence of spot bitcoin ETFs will make the market “more mature” and help reduce the pressure on assets during large purchases or sales. He emphasized that the value of the instrument is overestimated in the context of the “ideological component”, because initially cryptocurrencies were created as an alternative to the traditional financial system, and the emergence of exchange-traded funds contradicts this concept.
The lack of spot ETFs based on the first cryptocurrency also leads to the growth of over-the-counter products, such as GBTC, which are expensive, illiquid and not very efficient.
From 2021 divergence of Grayscale product quotes relative to the net asset value began to decline and reached almost 50% at the bottom. At the same time, the head of the company, Michael Sonnenschein, called the conversion of a bitcoin trust into an ETF a top priority.
Yulia Privalova, head of the FinTech & Crypto practice at DRC law firm, believes that the approval of a Bitcoin spot fund will make it easier to invest in cryptocurrencies by eliminating the need to personally buy and hold assets. At the same time, the tool will allow more people to access a new form of money.
Probable SEC Strategy
According to Privalova, the SEC is a “very conservative body” that is “hard on any innovations.” The Commission needs clear regulations, consistent with the rules and standards, which would guarantee the safety and protection of investors.
“The SEC decision can change a lot, and this is a big responsibility that the regulator is not ready to take on,” she explained.
The DRC spokeswoman added that going forward, the agency will likely ask companies to demonstrate legal compliance with their bitcoin ETFs. Specifically, the SEC will require compliance with fraud prevention rules, transparency, and transaction data and related reporting.
Summing up, Privalova noted the low probability of approval of spot exchange-traded funds based on the first cryptocurrency in the form in which they are presented now. In her opinion, at this stage, none of the applicants will be able to fully satisfy the requirements of the SEC.
In turn, Andrew the Great said that the final response of the Commission depends on the decision of the US government on the regulation of cryptocurrencies in general. If the authorities want to become a financial center for a new generation of assets, this will make the jurisdiction more friendly, otherwise the market will continue to face red tape, he said.
“The SEC has historically delayed decisions ever since the Winklevoss brothers filed for Bitcoin ETFs. This is mainly due to the fact that the United States does not have a clear certainty in relation to the cryptocurrency market,” says the co-founder of Allbridge.io.
Ultimately, the approval process can be lengthy and require numerous changes. However, according to Veliky, big players like BlackRock, WisdomTree and Valkyrie have enough influence to get a positive response to Bitcoin spot ETFs.
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Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
In recent weeks, the market has been flooded with a new wave of applications for spot ETFs based on the first cryptocurrency. Financial giants BlackRock, Valkyrie, Fidelity Investments, WisdomTree and Invesco sent requests to the US Securities and Exchange Commission (SEC). Cryplogger and interviewed experts explain the significance of this highly anticipated investment vehicle.
How it all started
A variety of ETFs for bonds, global currencies, gold, real estate and oil have been available for many decades. The most well-known example of an instrument is the SPDR S&P 500 ETF Trust, which tracks the S&P 500 index.
However, many bitcoin exchange-traded funds have been rejected for several years. In 2021, the SEC still approved applications for ProShares and VanEck for a digital gold-based futures ETF, but spot instruments have not yet received a green light.
The ProShares Bitcoin ETF began trading on the New York Stock Exchange on October 18, and less than a month later, the price of the first cryptocurrency reached an all-time high of $69,000.
In the summer of 2023, a new race for spot Bitcoin funds began. But this time too, the Commission rejected the initiative, citing a lack of information regarding the so-called joint monitoring agreement and the details of this mechanism. Interested companies supplemented their requests and submitted documents to the SEC again.
Now the market is waiting for the final decision of the regulator, which could be a turning point for the industry. Amid ETF news, shares of crypto companies including Coinbase, MicroStrategy, Riot Blockchain and Marathon Digital Holdings posted double-digit gains. Bitcoin itself also reacted by rising above $31,000.
MicroStrategy founder Michael Saylor called the emergence of ETFs based on the first cryptocurrency “an important milestone on the path to institutional adoption.”
High expectations
There is an opinion in the community that the approval of the instrument will finally bring the crypto market out of the bearish phase due to the influx of traditional investors and, as a result, an increase in liquidity. However, one should not hope for a sharp increase in quotations, experts say.
The main advantage will still be a more stable regulatory environment in the digital asset sector.
“The industry has been waiting for institutional money for the last five or six years. This creates inflated expectations, especially when it comes to the price of bitcoin and other digital assets. Their entry into the market does not at all promise a rapid rise in prices, as many expect, ”says Andrey Veliky, co-founder of Allbridge.io.
In his opinion, the emergence of spot bitcoin ETFs will make the market “more mature” and help reduce the pressure on assets during large purchases or sales. He emphasized that the value of the instrument is overestimated in the context of the “ideological component”, because initially cryptocurrencies were created as an alternative to the traditional financial system, and the emergence of exchange-traded funds contradicts this concept.
The lack of spot ETFs based on the first cryptocurrency also leads to the growth of over-the-counter products, such as GBTC, which are expensive, illiquid and not very efficient.
From 2021 divergence of Grayscale product quotes relative to the net asset value began to decline and reached almost 50% at the bottom. At the same time, the head of the company, Michael Sonnenschein, called the conversion of a bitcoin trust into an ETF a top priority.
Yulia Privalova, head of the FinTech & Crypto practice at DRC law firm, believes that the approval of a Bitcoin spot fund will make it easier to invest in cryptocurrencies by eliminating the need to personally buy and hold assets. At the same time, the tool will allow more people to access a new form of money.
Probable SEC Strategy
According to Privalova, the SEC is a “very conservative body” that is “hard on any innovations.” The Commission needs clear regulations, consistent with the rules and standards, which would guarantee the safety and protection of investors.
“The SEC decision can change a lot, and this is a big responsibility that the regulator is not ready to take on,” she explained.
The DRC spokeswoman added that going forward, the agency will likely ask companies to demonstrate legal compliance with their bitcoin ETFs. Specifically, the SEC will require compliance with fraud prevention rules, transparency, and transaction data and related reporting.
Summing up, Privalova noted the low probability of approval of spot exchange-traded funds based on the first cryptocurrency in the form in which they are presented now. In her opinion, at this stage, none of the applicants will be able to fully satisfy the requirements of the SEC.
In turn, Andrew the Great said that the final response of the Commission depends on the decision of the US government on the regulation of cryptocurrencies in general. If the authorities want to become a financial center for a new generation of assets, this will make the jurisdiction more friendly, otherwise the market will continue to face red tape, he said.
“The SEC has historically delayed decisions ever since the Winklevoss brothers filed for Bitcoin ETFs. This is mainly due to the fact that the United States does not have a clear certainty in relation to the cryptocurrency market,” says the co-founder of Allbridge.io.
Ultimately, the approval process can be lengthy and require numerous changes. However, according to Veliky, big players like BlackRock, WisdomTree and Valkyrie have enough influence to get a positive response to Bitcoin spot ETFs.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
