After a large number of Bitcoin ETF applications are handed over to the SEC, the SEC’s attitude of “don’t approve it” may soon be overwhelming.
Asset management giant Fidelity recently submitted a Bitcoin exchange-traded fund (ETF) registration application document to the U.S. Securities and Exchange Commission (SEC).
Fidelity’s ETF application is just the latest of many applications. In the past two months, after a large number of Bitcoin ETF applications have been handed over to the SEC, the SEC’s attitude of “don’t approve it” may soon be overwhelming.
In the past February, the first ETF backed by BTC rather than derivatives in North America was launched. This Purpose Bitcoin ETF became the world’s first Bitcoin fund for ordinary investors. On the first day of listing, the Bitcoin ETF hit a new high of nearly $165 million. It held more than 10,000 BTC in just one week. Subsequently, although the transaction has slowed down, this ETF has exceeded 1 billion Canadian dollars (about 800 million US dollars) within one month of its establishment.
Judging from the public feedback from the market, it seems that many people did not anticipate the popularity of the Bitcoin ETF. At present, Purpose Bitcoin ETF has become an investment tool of preference for all institutions.
According to the blockchain data platform Glassnode, as of March 22, the number of Bitcoin ETF holdings has reached 1,4659.99.
Hester Peirce, a member of the U.S. Securities and Exchange Commission (SEC), “crypto mom” also made this comment: If the Bitcoin ETF is not approved, the United States may lose its first-mover advantage.
Around the Bitcoin ETF, many institutions from Wall Street have become active.
Bulk ETF applications are coming
In July 2013, the Winklevoss twin brothers, a well-known American investor, filed a Bitcoin ETF application with the SEC for the first time, setting a precedent for ETF applications. The full name of ETF is Exchange Traded Fund, which is an open-end fund. It can be traded on the stock exchange. The fund management company can sell new fund shares to investors at any time, and it also needs to buy back funds held by investors at any time at the request of investors Share. Through the Bitcoin ETF, many companies and institutions in the United States that want to buy Bitcoin have further solved the compliance problem and lowered the risk and threshold of investing in Bitcoin.
For U.S. retail investors, ETFs are considered a product that is very beneficial to ordinary investors in the U.S. stock market. Investors are allowed to trade a basket of assets on the stock market. Bitcoin ETF stocks can track the price of Bitcoin. Investors effectively trade Bitcoin on the stock market. For a long time, Bitcoin ETFs have been highly anticipated.
In the long years after 2013, many institutions have made similar attempts, but they were all rejected by the SEC. According to public information, according to incomplete statistics from foreign media, 8 companies have successively applied to the SEC for Bitcoin ETFs, but they have not been successful.
The main reasons for the SEC’s refusal are “the issuer cannot guarantee the potential market manipulation of Bitcoin”, “the price of Bitcoin is highly volatile”, and “the Bitcoin custody mechanism is not yet mature” at the time. The SEC has adopted a very cautious attitude towards alternative assets such as Bitcoin.
At the end of 2020, as the price of Bitcoin continues to break through, the crypto market is becoming more popular. It coincides with the change of the SEC and the former chairman Jay Clayton resigns. After the new SEC chairman took office, the possibility of the Bitcoin ETF application being approved has been raised again, and there may not be much time for the SEC to think about it.
In contrast, Canada, which has long been in the North American market with the United States, was the first to pass the Bitcoin ETF application. In the beginning of 2021, Canadian asset management companies Purpose Investments and Evolve Funds have successively obtained approval from the Ontario Securities Commission (OSC) of Canada to issue Bitcoin ETFs, and the first Purpose Bitcoin ETF has been welcomed by the market.
In Canada, a total of 3 Bitcoin ETFs were approved and listed throughout February, namely: Purpose Bitcoin ETF (trade code BTCC), Evolve Bitcoin ETF (EBIT), CI Galaxy Bitcoin Fund (BTCX).
Interestingly, behind the first two ETFs launched, Gemini Trust Company (Gemini Trust Company) seems to stand behind the two, providing them with secondary custody. The Winklevoss brothers, founders of Gemini and well-known investors in the crypto community, seem to have succeeded in their tactics of moving to Canada after multiple applications for Bitcoin ETFs were rejected.
According to documents from the Electronic Document Analysis and Retrieval System (SEDAR) of the relevant Canadian agency, other proposed Bitcoin ETFs are also in the status of awaiting approval, including the Bitcoin ETF specifications submitted by Horizons ETF Management (Canada), Arxnovum Investments and Accelerate Financial A preliminary decision document has been issued.
Although Canada has successfully issued two Bitcoin ETFs, there is still a gap between the number of market participants and market activity in the two listing paths of the United States and Canada. At present, the price of Bitcoin has already hit a new high of more than 60,000 U.S. dollars, and the current total market value has exceeded 1 trillion U.S. dollars.
The Huobi Research Institute pointed out in a report that the current US market is approximately 27 times that of the Canadian market. In the case that US retail investors cannot purchase Canadian ETF products unimpededly, if the US can approve Bitcoin ETFs to enter the market, its Bitcoin ETF trading volume is very likely to trigger explosive growth under the enthusiasm of investors. Although Canadian regulators were inspired by the advantages of cryptocurrency ETF products and launched the product first, the size and complexity of the U.S. market determines that it may have more concerns and it is difficult to follow the same innovative route as Canada.
At a time of strong institutional demand, batches of Bitcoin ETF applications flocked to the SEC again.
On January 22, during the “transition period” of the US SEC, the US investment management company VanEck renewed its application for Bitcoin ETF and plans to launch VanEck Vectors Digital Assets ETF, which will track MVIS (a digital asset index provider) global digital assets The performance of stock index prices and yields. At the same time, the Chicago Board Options Exchange (Cboe) also submitted documents requesting the listing of VanEck’s proposed Bitcoin ETF. Recently, the SEC announced the relevant situation, and the VanEck Bitcoin ETF application has opened a 45-day review period. If approved, the ETF may become the first open Bitcoin exchange-traded product in the United States.
On March 20th, Skybridge Capital has submitted a Bitcoin Exchange Traded Fund (ETF) application to the U.S. Securities and Exchange Commission (SEC). As early as January this year, Skybridge Capital has launched a Bitcoin fund.
Also in March, WisdomTree Investments, an asset management company headquartered in New York City, filed an application with the SEC to activate the Bitcoin Exchange Traded Fund (ETF), which is intended to be traded on the Chicago Board Options Exchange. In the Bitcoin ETF application submitted by the New York Digital Investment Group (NYDIG), it is proposed to list its NYDIG Bitcoin ETF on the New York Stock Exchange (NYSE).
In the “US Stock + Bitcoin ETF” (NASDAQ: SPBC) application filed by Simplify Asset Management, a non-traditional combination of stocks and cryptocurrencies has also appeared for investors to choose from. For this kind of fund of funds, 15% of the fund’s total assets will be used to invest in Grayscale Bitcoin Trust (GBTC) and indirectly invest in Bitcoin.
Compliance investment tools for mainstream funds
Facing the new wave, Grayscale is also preparing for it. Grayscale has released a number of ETF-related recruitment information in official information, triggering market speculation.
For a long time, entering the crypto market through Grayscale Bitcoin Trust has been the main channel for traditional institutional investors to purchase Bitcoin. While ETFs allow market makers to create and redeem stocks at will, if liquidity is sufficient, premiums or discounts will rarely occur. In the traditional market, its risk is also considered to be much smaller than closed-end trust funds such as GBTC. ETF tools are also more easily accepted by public funds and pension funds. Canadian ETFs may be more popular.
In an interview on March 24, Grayscale CEO Michael Sonnenshein publicly stated that Grayscale is taking a wait-and-see attitude towards applying for a Bitcoin ETF, and Grayscale is preparing for this possibility. But for the real approval of the Bitcoin ETF, the SEC may still not be ready to approve it.
While the market is still arguing about the SEC’s attitude, the “ETF effect” has begun to spread.
First, there were some actions in South America. On the 3 and 19, Brazil also approved the first Bitcoin ETF in South America. The ETF is issued by the asset management company QR Asset Management and will be listed on the Brazilian Stock Exchange B3 under the code QBTC11. It is expected this year B3 will be opened for trading only in June.
On the other hand, this effect also spread to ETH. After issuing the Bitcoin ETF, in early March, Evolve again submitted the initial prospectus of its Ethereum ETF (ETHR) to the Canadian Securities Regulatory Agency (CSA). According to the official introduction, ETHX will directly invest in Ethereum, and its assets will be priced using the Bloomberg Galaxy Ethereum Index under Bloomberg Index Service (this is also the settlement index of the Ethereum futures contract on CME).
Whether a variety of encrypted ETF applications will be approved will become the focus of the market’s next focus.
Huobi University President Yu Jianing publicly analyzed that: “The successful approval of the Bitcoin ETF means that as long as you have a compliant stock account, you can buy Bitcoin indirectly. For the Bitcoin market, users will increase by an unimaginable order of magnitude. , Retail investors and institutions including traditional finance can buy bitcoin in large quantities, and the market will usher in another dimension of upgrade.”
At this stage, the market is still eager for new capital to enter. If Bitcoin-based ETFs can be issued and circulated, the market has new expectations for the entry of large amounts of user funds.
Some industry observers have also seen huge demand in institutions. In early March, Mathew McDermott, the head of Goldman Sachs Digital Assets, released the results of a survey, which stated that more than one-third of the institutional clients surveyed by Goldman Sachs Of respondents indicated that they currently hold digital assets, and more than half of institutional clients plan to expand their digital asset portfolio in the coming months. They are witnessing huge demand from institutions for Bitcoin and the crypto market, and in terms of institutional demand, they have not seen any signs of abating.
The institutional needs discussed here include the entire industry sector, referring to hedge funds, asset management companies, macro funds, banks, corporate treasurers, insurance and pension funds. Most institutional clients are actually discussing around Bitcoin. Loose monetary policy has promoted institutional demand for digital assets. We may be optimistic about the SEC’s approval of the Bitcoin ETF.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.