What are your thoughts on the Bitcoin ETF?


The Securities and Exchange Commission will decide by March 11 whether to approve one filed almost four years ago by investors Cameron and Tyler Winklevoss. If approved, it would be the first bitcoin ETF issued and regulated by a U.S. entity.

    Sorry Ameer, I didn’t see your question as I loaded mine from Top Content but glad to see we were both asking a similar question!

    I am no specialist in this field but I personally think it needs to grow organically for a while longer whilst the debate is raging between segwit and bitcoin unlimited. Perhaps when segwit is launched on Litecoin this may be a good indicator to see how it runs, which could then bring the communities together to make a calculated consensus for the general well being of Bitcoin

    bitcoin analyst at Needham & Co. has expressed doubts over the SEC approval. If approved, the fund can rake in about $300 million in institutional wealth within the first week of launch.
    I would be very very surprised if the Twinklevoss ETF was approved.

    It is my opinion that the way the ‘COIN’ ETF is structured actually represents a qualitative risk to investors.

    Global cryptocurrency trading volumes are only millions USD per-day, opposed to Trillions in Forex.

    The COIN ETF is bench-marked against (and has a conflict of interest because of this) the Winklvoss’s own “WinkDex” which is basically 3 constituents with Winklvoss’s own Bitcoin Exchange, Gemini bearing the bulk of the weighting.

    Never has there been an ETF approved where the issuer, is also the index supplier, which is based of an exchange the issuer also operates, as well as the issuer acting as custodian.

    The SEC is not stupid. Even if they see past the questions around Bitcoin’s global market structure and largely self-reported/unregulated liquidity, the set-up of the COIN ETF represents too great a risk to retail investors this ETF would give access to.

    Not going to happen.

    SolidX on the other hand, has a much better application and ETF structure. We expect this to be far more palatable to the SEC but are still weary that the SEC will have problems with Bitcoin’s general market-structure.

    The rise of Certificates, Instruments and other Exchange Traded products is on the rise however and we expect a number of other Exchange-Traded-Products (ETP’s) to come to market before a SEC approved full ETF.

    My 2c

    Excellent points, Fran. I agree especially with your analysis on the conflicts situation. My hunch is the custodial arrangement will scare the SEC more than the index conflict. When Russell Investments launched their own ETFs, they created their own new indexes. This was before the sale of Russell to the LSE, which kept the indexes and sold off the rest of Russell to a PE firm. (Side Note: Russell’s ETFs didn’t fare well and were quickly closed.)

    I think the relative lack of trading liquidity in the cryptocurrency market might not be of major concern. Unlike interests in open-end or interval mutual funds, interests in ETFs are not redeemable; instead, they trade like any other security on an exchange. If the assets held by an ETF aren’t all that liquid, it doesn’t matter as much as it would with other fund structures.

    I’m curious to see if someone comes up with a synthetic approach to an ETF based upon cryptocurrency values. That might work.

    Thanks Boomer

    Similar comments published on CNBC: http://www.cnbc.com/2017/03/03/bitcoin-price-rises-higher-than-gold-but-dont-read-too-much-into-it.html

    RE: the ETF space in general has seen a huge amount of M&A Activity in the past decade – lot’s of activity in every direction and I think now we have kind of established players and better regulation separating church from state so to speak.

    I think a clear separation needs to happen in Bitcoin too.

    Formal exchange traded products (ETP’s) like an ETF require 3 things:

    1) An issuer
    2) An index
    3) Institutional commitment.

    My company is an Index provider, we have $22m committed towards a Bitcoin ETF if we get one off the ground ourselves. There’s points 2&3 – but we do not want to be an issuer, as we’re back to conflicts of interest.
    So we’re shopping around for a partnership with an issuer. It’s a long process.

    I think the ETF approval will not happen, pretty much for the same arguments from Fran Strajnar. But, this up-coming news is just pumping the price up short term. At the same time, the technical point of view is very strong and positive when you refer to the all time graph. Just after the news, speculators will drop the price for a 48 hours period, then the «fundamental» bull trend will just keep on rocking. To recap: very very bull for the next weeks, then 2-4 % correction in the next couple days after SEC refuse the approval on their decision.
    Having a Blockchain digital asset like Bitcoin as a key financial instrument in an ETF would be a great advancement for the entire market. It would provide access for institutions who have not been able to invest in this growing asset class. The key issue holding back this progress are concerns about Chinese control over the asset. Bitcoin, Ethereum and many other digital coins have left the U.S. choosing less regulated countries abroad. These concerns along with the increased credibility that a March 11 approval would provide the entire market will face severe political opposition when the S.E.C meets. The addition of a U.S. based properly regulated digital assets added to the ETF would be an advancement that offsets the key argument against the creation of a Digital Coin ETF. The approval of an ETF will be extremely positive for digital asset investors when it occurs.
    I think we’ll see the industry get there in the not-too-distant future. I realize Bitcoin, Ethereum, et alia, are not commodities in the strictest definition of the term, but they have some commodity-esque attributes, and I think for a lot of people who would like a wee bit of exposure to cryptocurrencies and other digital assets as an asset class, an ETF is going to be their most likely move. Right or wrong, it feels less risky to a lot of people than buying directly the digital assets, and if an ETF can give them the exposure to the digital assets category, the ETF will no doubt be less expensive to them overall than buying and selling individual digital assets in their own account/wallet/vault, etc.

    So it’s like a commodity in that buying and selling individual commodities (through futures, options, or even holding the physical commodity itself) can be very cumbersome and expensive (commissions can be a real beast!), which makes something like an ETF way more attractive.

    A shop will come up with a way to have enough separation between the various providers — i.e., a model that is different from the Winklevoss’s “all in one” approach — and we’ll see financial products based upon digital assets grow from there.