What is bitcoin etf

Bitcoin ETFs Explained

It seems inevitable that two of the hottest areas of the investment world would meet up sooner or later. For cryptocurrency enthusiasts and investors looking to capitalize on the growing popularity of exchange-traded funds (ETFs), the possibility of an ETF that tracks bitcoin is the best opportunity for this type of connection. However, there have been growing pains and problems in trying to launch the first bitcoin ETFs. 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.

Key Takeaways

• A bitcoin ETF mimics the price of the digital currency, allowing investors to buy into the ETF without trading bitcoin itself.
• Investing in a bitcoin ETF cuts out any issues of complex storage and security procedures required of cryptocurrency investors.
• The Securities and Exchange Commission hasn’t approved any digital currency ETFs.

How Does a Bitcoin ETF Work?

Before we look at the potential benefits and risks of a bitcoin ETF, let’s back up a step and go over what a bitcoin ETF is and how it works. An ETF is an investment vehicle that tracks the performance of a particular asset or group of assets. ETFs allow investors to diversify their investments without actually owning the assets themselves. For individuals looking to focus only on gains and losses, ETFs provide a simpler alternative to buying and selling individual assets. And because many traditional ETFs target larger baskets of names with something in common—a focus on sustainability, for instance, or stocks representing the video game industry and related businesses—they allow investors to easily diversify their holdings.

A bitcoin ETF is one that mimics the price of the most popular digital currency in the world. This allows investors to buy into the ETF without going through the complicated process of trading bitcoin itself. Moreover, because holders of the ETF won’t be directly invested in bitcoin itself, they will not have to worry about the complex storage and security procedures required of cryptocurrency investors.

Why Not Just Invest in Bitcoin?

If a bitcoin ETF merely mirrors the price of the cryptocurrency itself, why bother with the middle man? Why not just invest in bitcoin directly? There are several reasons for this. First, as indicated above, investors don’t have to bother with the security procedures associated with holding bitcoin and other cryptocurrencies. Further, there is no need to deal with cryptocurrency exchanges in the process—investors can just buy and sell the ETF through traditional exchanges and markets.

There is another crucial benefit to focusing on a bitcoin ETF rather than on bitcoin itself. Because the ETF is an investment vehicle, investors would be able to short sell shares of the ETF if they believe the price of bitcoin will go down in the future. This is not something that can be done in the traditional cryptocurrency market.

You can short sell bitcoin ETF shares if you believe the price of the underlying asset will go down—an advantage you won’t find by investing in bitcoin itself.

Perhaps most importantly, though, ETFs are much better understood across the investment world than cryptocurrencies, even as digital coins and tokens become increasingly popular. An investor looking to get involved in the digital currency could focus on trading a vehicle they already understand instead of having to learn the ins and outs of something seemingly complicated.

The Road to Bitcoin ETF Approval

Firms looking to launch bitcoin ETFs have run into problems with regulatory agencies. Cameron and Tyler Winklevoss, famous for their involvement in Facebook (FB) and, more recently, for their Gemini digital currency exchange, had their petition to launch a bitcoin ETF called the Winklevoss Bitcoin Trust turned down by the SEC in 2017.   The reason for the denial was that bitcoin is traded on largely unregulated exchanges, leaving it susceptible to fraud and manipulation.   The Winklevoss brothers did not give up their efforts. On June 19, 2018, the U.S. Patent and Trademark Office awarded them a patent for a firm called Winklevoss IP LLP for exchange-traded products. 

The Winklevosses are not the only cryptocurrency enthusiasts looking to be the first to successfully launch a bitcoin ETF. Cboe Global Markets (CBOE), the exchange responsible for bringing about bitcoin futures, hoped that the SEC will permit digital currency-related ETFs, too.   Cboe also acquired Bats Global Markets, the exchange on which the Winklevoss ETF would have been offered. 

VanEck and SolidX, a fintech company with projects related to bitcoin, announced plans earlier in 2018 for the VanEck SolidX Bitcoin Trust ETF. This ETF would target institutional investors, according to ETF Trends, as it would open with a share price of $200,000. XBTC is designed to track an index related to a group of bitcoin trading desks.   The idea is that, by spreading out the focus of the ETF somewhat, XBTC may be able to alleviate the SEC’s concerns about funds that are linked to bitcoin itself. VanEck CEO Jan van Eck explained to CoinDesk that he «believe[s] 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.» 

The Bottom Line

Although the SEC has so far not approved any digital currency ETFs, investors remain broadly optimistic. A source at the Commodities Futures Trading Commission explained that the chance of a bitcoin ETF being approved in 2018 was «90% at this point.» The reason for the shift may have something to do with the fact that «the crypto markets have moderated and regulators have watched the lack of drama surrounding bitcoin futures across several global exchanges.» 

The SEC also opened up bitcoin ETF applications to public comments, with the vast majority of commenters voicing their approval for the new product.   If and when the first bitcoin ETFs are launched, it’s likely that they will see early success, as both cryptocurrency enthusiasts and traditional investors take part. In turn, the rise of bitcoin ETFs could also help to fuel gains in bitcoin as well, and, because many other digital currencies are closely tied to the performance of bitcoin, gains across the cryptocurrency market.

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What is a Bitcoin ETF?

February 23, 2021

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You have probably heard the term Bitcoin ETF discussed multiple times over the last few years. These unique exchange-traded funds (ETF) provide investors with more flexibility, protection, and security than traditional investments. An ETF is a fund that tracks the performance of an asset or group of assets. As such, ETFs can be a great way to increase profits and mitigate risks.

What is an ETF?

An ETF is an investment tool that includes a basket of securities. ETFs are very popular in the market. Currently, they are used for a myriad of different investment strategies. These strategies include income generation, speculation, price increases, and to offset risk in an investor’s portfolio.

Importantly, an ETF can include all types of investments. It’s common to see an ETF that offers a selection of stocks, commodities, or bonds. In this way, ETFs are very similar to mutual funds. In many instances, an ETF will contain stocks from various companies all related to a certain sector, such as banking or the defense industry.

Market Speculation on Bitcoin ETF Approval – Woobull

Also, there are ETFs that are far more inclusive. These investments could contain hundreds or thousands of stocks across various industries. Additionally, they can include both US and international companies depending on the ETF specifics. Consequently, ETFs are hugely popular globally.

Unlike mutual funds, ETFs are traded daily. Hence their name “Exchange Traded Funds.” As such, these investments experience price fluctuations depending on their composition and market activity. Their price fluctuations can be more subtle because the fund is an average of all the investments it contains.

One of the main advantages of an ETF is that it allows investors to save big time on broker fees and expense ratios. Additionally, your average ETF is far more liquid than mutual funds or other investment vehicles in the market. This added liquidity equates to more options for investors in these funds.

Types of ETFs

• Bond ETF
• Industry ETF
• Commodity ETF
• Currency ETF
• Inverse ETF

What is a Bitcoin ETF?

The Bitcoin ETF concept is long-awaited in the industry. Notably, multiple firms submitted requests to the SEC over the last year. Unfortunately, none has received approval as of yet. To date, the SEC is hesitant to allow an ETF focused on cryptocurrencies to emerge. Most recently, WisdomTree revealed the latest in a long line of SEC filings

A Bitcoin ETF has long been an interesting prospect in the market and for good reason. A Bitcoin ETF that tethers to the price of Bitcoin would allow investors to make profits on Bitcoins volatility without exposure to the crypto market directly. In this way, major investors could avoid the still-emerging legal framework associated with cryptocurrency investing.

Bitcoin ETF – Security

Paramountly, a Bitcoin ETF allows investors to make purchases and sales from traditional exchanges versus newly emerged crypto trading platforms. This ability is a huge advantage for major financial institutions that are unable to participate in the market in its current unregulated status. Consequently, many believe an SEC approval would catapult the cryptomarkets value moving forward.

Additionally, a Bitcoin ETF would provide investors with more options. Currently, investors are unable to short Bitcoin when they believe the price will drop. The introduction of this new financial instrument provides investors with all the traditional ETF functionalities they are accustomed to

Lastly, ETFs have been around for a while. Whereas Bitcoin is still a relatively new concept for most people. This lack of understanding and transparency makes a direct investment into cryptocurrencies a higher risk for some. Opposingly, ETFs have been around for decades and most investors are familiar with their capabilities and processes.

SEC Opposition to Bitcoin ETFs

Considering all the advantages gained from the introduction of a Bitcoin ETF into the marketplace, its no surprise that multiple firms have attempted such an action. The first attempt to bring this new age financial product to the market came from two giants in the industry – Cameron and Tyler Winklevoss.

Winklevoss Twins – CNN

The Winklevoss twins are no stranger to innovation. These Harvard graduates are best known for their lawsuit against Facebook founder Mark Zuckerberg in which they alleged he stole the Facebook concept from them. Most recently, the pair is known for their pro-Bitcoin stance. The brothers were one of the first Bitcoin billionaires in the world and they currently operate the hugely popular Gemini exchange.

In 2017, the Winklevoss twins submitted a filing to the SEC for the Winklevoss Bitcoin Trust. However, the SEC quickly denied the application. The SEC cited concerns over the unregulated status of Bitcoin. However, many in the industry pointed out that there are already multiple ETFs for industries that don’t fall under regulations.

SEC Commissioner on Board with Bitcoin ETF

The brothers made another filing earlier this year. Again the SEC rebuked their application. However, this time, there were some members of the SEC on board with the concept. Specifically, SEC Commissioner Hester Peirce. She filed a dissent against the board’s decision citing numerous instances in which the Bitcoin ETF was put under unfair pressure versus other financial instruments.

In 2018, another firm made a notable attempt to secure a Bitcoin ETF. This time, the blockchain startup VanEck SolidX submitted a Bitcoin Trust ETF application. The firm believed it had a better chance of approval because the fund was geared only towards professional investors. For example, the fund costs $200,000. Despite their new approach, the SEC denied their efforts.

After multiple application denials, the SEC opened applications up to public comments. Importantly, regulators sought insight from the public on their decisions. Notably, most comments on the applications were positive for the approval of these instruments.

How a Bitcoin ETF Could Effect Bitcoin

Analysts have long believed that the approval of a Bitcoin ETF would catapult Bitcoin’s market value. This belief is evident when you examine Bitcoin’s price activity around the times of possible ETF application approvals. Hopefully, in the coming months, regulators will take a more open and fair approach to the crypto market. For now, the entire blockchain community patiently awaits a Bitcoin ETF approval.

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Что такое биткоин-ETF и зачем он нужен

Летом большинство новостей из мира криптовалют связано с тем, что Комиссия по ценным бумагам и биржам США (SEC) рассматривает вопрос запуска биткоин-ETF. По этому поводу высказались множество экспертов, которые имеют самые разные мнения на этот счет.

Создатель Ethereum Виталик Бутерин, например, уверен в том, что эта тема захватила криптосообщество не совсем по праву. По мнению программиста, есть куда более важные вещи, и продвигать цифровые деньги нужно таким образом, чтобы каждый мог расплатиться криптовалютой в ближайшем магазинчике, а все эти инвестиционные фонды — мишура и не так важно.

В свою очередь глава Fatfish Group Кин Вай Лау утверждает, что запуск криптовалютных ETF положительно повлияет на рынок. Отрасль будет готова к ним в ближайшее время, и это позволит ценам на криптовалюты «взлететь на луну». Так что же такое ETF, как это работает и почему так сильно влияет на стоимость цифровых денег.

Что такое биткоин-ETF

Биткоин-ETF — это биржевой фонд, который будет использовать биткоин в качестве базового актива, то есть закупать первую криптовалюту и продавать инвесторам свои акции, объясняет эксперт «Международного финансового центра» Ольга Прохорова. Инвесторы, которые купят эти ценные бумаги, смогут зарабатывать на изменении курса монеты.

Напрямую с цифровыми деньгами они работать не будут, а значит их активы окажутся под надежной защитой. В отличии от бирж, которые неоднократно взламывали хакеры на сотни миллионов долларов, эмитенты биткоин-ETF несут ответственность за сбережение средств клиентов и их страхование.

«Запуск биткоин-ETF, как ожидается, приведет к тому, что в эту сферу начнут вкладывать деньги крупные институциональные инвесторы, такие как инвестиционные и пенсионные фонды, которые пока могут инвестировать свои капиталы только в те активы, которые которые относятся к регулируемому пространству», — убеждает в важности этого инструмента Прохорова.

Она добавила, что если всего лишь 1% инвестиционных портфелей пенсионных фондов будет выделен под размещение в биткоин-ETF, рыночная капитализация цифровых денег увеличится до $413 млрд, что почти в полтора раза больше текущего показателя.

Почему стоит ждать решения SEC

Подобные инструменты, такие как торговля криптовалютными фьючерсами или запуск биткоин-ETF, привлекает на рынок институциональных инвесторов, уверена финансовый консультант TeleTrade Жанна Кулакова. Приход крупных игроков повышает ликвидность рынка, делает его более устойчивым и зрелым.

Биткоин значительно подорожает в том случае, если подобные биржевые фонды получат «зеленый свет», утверждает эксперт. Это может произойти уже в августе — 10 числа SEC проводит заседание по поводу запуска подобных ETF. Заявки на его проведение подали большое количество компаний, в том числе и знаменитые братья Уинклвоссы, которые владеют криптовалютной биржей Gemini.

Трейдеров невероятно вдохновляет идея о притоке институциональных игроков после запуска таких деривативов, считает аналитик социальной сети для инвесторов eToro в России и СНГ Михаил Мащенко. Он провел аналогию с золотом: на данный момент SPDR Gold ETF (GLD) имеет капитализацию в $35 млрд, что близко к показателям криптовалюты Ethereum.

После запуска GLD в 2003 г., котировки золота стали более предсказуемы и начали четко коррелировать со стоимостью американского доллара, это крайне положительно отразилось на курсе драгоценного металла, подчеркнул специалист. Он считает, что «акулы» с Уолл-стрит начинают работать с цифровыми деньгами, а они не склонны к необдуманным действиям.

«Это говорит о высокой вероятности одобрения запуска биткоин-ETF. В таком случае вход на рынок на ожиданиях будет гораздо логичнее, чем постфактум», — добавил Мащенко.

Эксперты сходятся во мнении, что новый инвестиционный инструмент крайне положительно повлияет на криптовалютную отрасль и выведет ее на принципиально новый уровень. Именно поэтому внимание СМИ приковано к биткоин-ETF, одобрение подобных контрактов может вызвать рост цены не только BTC, но и альткоинов.

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