Why A Bitcoin ETF May Not Be Coming Any Time Soon
By Tyler Durden
When it comes to the future of bitcoin, the “holy grail” has emerged as becoming the first to have a bitcoin ETF approved by the SEC.
Over three years ago, in 2013, the company of the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the first proposed bitcoin ETF, the Winklevoss Investment Trust, looking to trade on the HFT-dominated BATS exchange. The SEC is expected to make a decision on it by March. A second group, SolidX Partners followed last July seeking SEC approval for its bitcoin ETF, SolidX Bitcoin Trust, which also would be listed on the NYSE.
Then on Friday, Grayscale Investments, a unit of Barry Silbert’s Digital Currency Group filed with the SEC to list its own Bitcoin Investment Trust on the New York Stock Exchange: as with the previous two attempts, the fund hopes to get SEC approval to expand the audience for the virtual currency. Initially, the trust will seek to launch with $500 million, the filing said, though the target is subject to change. At Dec. 31, it had about 1.8 million shares outstanding. Based on a net asset value of $89.39 a share, its assets under management totaled $164.2 million.
As the WSJ notes, “Grayscale’s Bitcoin Investment Trust, first launched in 2013, already trades on OTC Markets Group Inc.’s over-the-counter exchange, OTCQX. With the new filing if approved, the trust would operate as a traditional ETF, meaning that specialized traders would create and retire shares based on demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., are in discussions to serve as authorized participants, according to the filing. Additionally, the fund’s trustee will be Delaware Trust Co., and the transfer agent will be Bank of New York Mellon Corp., based on the filing.
The goal of a bitcoin-based ETF is to offer an product that would be easier for investors to access and would mute at least some of bitcoin’s volatility, although it would hardly eliminate all of it, which would still make it a riskier investment than most other ETFs.
More importantly, approval “could prove an early test for how an SEC run by a Donald Trump appointee will greet innovations that may raise investor-protection or other market-structure issues.” Furthermore, the benefits of being first on a major exchange could be big, assuming that bitcoin does manage to establish itself as a viable asset class. The SPDR Gold Shares ETF launched Nov. 18, 2004, has $31 billion in assets. The iShares Gold Trust ETF launched Jan. 21, 2005, has $7.7 billion in assets. Gold, a commodity not backed by any particular government, appeals to investors for some of the same reasons as bitcoin… even if many physical hard-core “gold-stacker” fans mock both the concept of a paper gold representing their physical holdings, while relentlessly ridiculing the idea that “digital money” contained in a server somewhere, is in any way safe (following recent dramatic breaches of a Chinese bitcoin exchange, they have a point).
Earlier this month, Needham analyst Spencer Bogart wrote …read more
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