The cryptocurrency community has been closely following news related to Bitcoin ETF since the summer of 2018. It was then that the first applications were filed with the United States Securities and Exchange Commission (SEC), but as we all know, none of them was accepted. In this article, we will talk about what ETF is, why its adoption is so much awaited by cryptocurrency investors, and also discuss the latest news that relates to this issue.
1. What is an ETF?
By and large, an ETF can be regarded as a type of securities that perform the function of a certificate for a specific portfolio of assets. If literally, the ETF is an Exchange Traded Fund. The rate of this certificate depends on the value of the assets that are included in it. In order to register a new fund in the USA, it is necessary to submit an application to the main regulatory body – SEC. The regulator should review the submitted application and make its verdict.
2. How does an ETF differ from an investment fund?
You can perform the same operations with ETF, as with ordinary shares on the exchange. Trading ETF stocks is possible throughout the entire trading day. Habitual investment fund units are generally less liquid than ETF stocks. The first ones are often in circulation only within the limits of the state where the investment fund is registered. ETF, on the contrary, as a rule, is not limited to geographic boundaries. ETF is also ideal for high-risk and aggressive trading, as margin trading is available here.
3. Why are crypto enthusiasts waiting for the adoption of Bitcoin ETF?
The cryptocurrency industry at this stage has a sufficient number of problems, one of which is the lack of popularity and prevalence among the masses. Many investors fear to work with a new type of asset, and ETF is a more or less common financial tool. If the ETF is launched, it will attract a large number of investors to the market who are used to working with traditional financial assets. Investing in Bitcoin ETF will be devoid of many inconveniences that market participants are now facing:
All these nuances listed above are an obstacle for a large number of potential investors to enter the market who do not want to spend their time studying technical aspects. Also, many analysts are confident that the launch of the Bitcoin ETF will attract institutional investors to the industry, who will be able to significantly increase the overall market capitalization. The arrival of “whales” will be the main catalyst for the next rapid growth of the cryptocurrency market.
4. Why are some experts opposed to Bitcoin ETF?
It is worth noting that not all representatives of the cryptocurrency community so enthusiastically perceive the launch of the ETF.
Popular analyst and experienced Wall Street trader Tone Vays believes there is no direct correlation between the launch of the ETF and the growth of the BTC rate. That is, in his opinion, the launch of Bitcoin ETF does not necessarily have to cause the long-awaited growth.
Andreas M. Antonopoulos has been strongly opposed to the launch of Bitcoin ETF. He believes that this is a “terrible idea” since such funds contradict the original principles of digital coins, namely, decentralization. After the launch of Bitcoin ETF, large investors will have pressure levers on the market and will be able to subject it to aggressive manipulation.
Creator Ethereum Vitalik Buterin also believes that the industry needs more useful applications for development, but not exchange-traded funds.
5. SEC’s intransigence
Since July 2018, the Securities Commission is literally bombarded with requests related to the launch of Bitcoin ETF. But this regulator is famous for its conservatism, therefore, so far not a single application has been approved. The main argument of SEC employees is the fact that Bitcoin is still too weak and subject to market manipulation, and the cryptocurrency industry is not yet mature enough. At the same time, officials do not operate with exact figures and make their statements as neutral as possible.
6. Breaking news
As of the end of February 2019, not a single exchange fund has been launched at BTC. At the moment, SEC is considering an application from two companies VanEck and SolidX, which is aimed at changing the rules of the Chicago Stock Options Exchange (CBOE) for the subsequent launch of the ETF. The SEC has a little more than a month to make its decision on this issue. In parallel with this, the regulator is currently considering another application from Bitwise Asset Management for listing Bitcoin ETF on the NYCE Arca. It is worth noting that the SEC has not considered several applications on this issue at once for a long time (since August 2018).
According to lead researcher Bitwise Matthew Hougan, cryptocurrency infrastructure has grown significantly over the past 12 months (regulated futures appeared, such giants as Bakkt and Fidelity Digital Assets came to the industry). All these points will undoubtedly be taken into account by the SEC staff.
Bitcoin ETF is undoubtedly one of the most discussed topics in the cryptocurrency industry over the past year. The overwhelming majority of market participants are positive about the launch of exchange-traded funds at BTC. They are confident that this will favorably affect the development of the industry. But there is also the opposite opinion voiced by some market experts. One of the strongest opponents of Bitcoin ETF is Andreas M. Antonopoulos, he believes that this event will make Bitcoin centralized and more subject to market manipulation.
In any case, at the end of March 2019, the Securities Commission must issue its verdict on two applications for listing Bitcoin ETF on the stock exchanges CBOE and NYSE Arca.
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