Bitcoiners have been waiting for American regulators to green-light a bitcoin (BTC) exchange-traded fund (ETF) for what seems like ages. Although they appear to be close to a breakthrough it turns out they may end up with the wrong type of BTC ETF.
After many failed starts, Gary Gensler, the new head at the Securities and Exchange Commission (SEC), gave a speech this week indicating that the regulator might finally approve a bitcoin ETF. However, there was one important condition: the ETF must be based on futures and not Bitcoin itself.
Gensler stated that there are many mutual funds that invest on bitcoin futures on the Chicago Mercantile Exchange. I look forward for the staff to review such filings, especially if they are restricted to these CME-traded Bitcoin Futures.
This measure is not what most bitcoiners want. A mainstream ETF would signal that traditional finance has accepted the token.
Eric Balchunas, Bloomberg Senior ETF Analyst, wrote on Twitter that futures-based BTC fund funds could “end up funneling billions in derivatives as well as Grayscale Bitcoin Trust,” which he said “is a major reason that an ETF approval” is “needed” and “up north into Canada [Canada]”, when “the people want an ETF that has bitcoin directly.”
Several bitcoin ETFs have been approved in Canada. Many of them are experiencing rapid growth.
However, Bloomberg reported that fund managers “are already putting” Gensler’s assertion “to the test.”
According to the report, ProShares and Invesco “have registered plans with SEC for futures funds within the last 24 hours.” The report also stated that these filings could be the first of many.
Bloomberg quoted Todd Rosenbluth (head of ETF/mutual fund research at investment researcher CFRA), as saying that he agreed, and that he stated:
Gensler’s indication that the SEC is more likely than physical to approve a futures-based Bitcoin ETF, means there is a race to offer such products. A United States-listed bitcoin ETF is in high demand. We anticipate more filings over the next few days.”
VanEck, which has been pushing for the approval of its own BTC ETF for years now, smarted at the news, with Matthew Sigel, its head of digital assets research, stating (in a separate Bloomberg article):
We see bitcoin futures-based funds, which have underperformed Bitcoin prices in the past and are more complicated to manage than ETFs, as inferior products. They are substandard vehicles.
Others also agreed and pointed out the Canadian example. Nate Geraci, president of the ETF store, stated:
“Investors are looking for the real deal. A quick glance north shows that the real deal is not only possible, but also profitable.”
Mohit Bajaj (director of ETFs at WallachBeth Capital) was quoted as saying that bitcoiners’ reaction to the Gensler speech was lukewarm.
Futures are a derivative from bitcoin, and have no physical bitcoin backing. It is a proxy for the bitcoin’s performance. It could be a step in the right direction, but it is a start. It might lead to greater comfort and eventually, a bitcoin ETF.
BTC trades at USD 40.730 at 11:03 UTC and is up 7% per day and 2% per week.