Bitcoin ETFs: Everything You Need to Know

In this article, we’ll delve into the fascinating world of Bitcoin ETFs and their ongoing battle for approval in the United States. The clash between the crypto universe and Wall Street against the SEC’s reluctance to embrace Bitcoin ETFs continues. Regulators have been cautious about giving the green light to these cryptocurrency products, but the tide appears to be turning in favor of the crypto community.

We’ll take a closer look at some essential points to grasp the current state of this long-standing struggle. If the regulatory agency ultimately decides to approve Bitcoin ETFs, it could be a game-changer for the digital currency market, offering a wealth of opportunities for crypto investors.

What are Bitcoin ETFs?

ETFs are part of a larger family of exchange-traded products. They currently boast a $7 trillion market that is growing all the time. Some native crypto and other Wall Street firms have wanted to have spot Bitcoin ETFs for several years now.

It is worth mentioning that some ETFs of this digital currency already exist, but they are in the form of futures. The crypto community and some large firms want investors to have these products available, but in spot form.

Difference between Bitcoin futures and spot

Futures are contracts to buy or sell assets at certain prices, but at a later date. These are common in a wide range of markets such as oil. With these options, investors can speculate on an asset without the need to buy it or directly own the underlying asset.

As such, according to how the price of BTC fluctuates, futures immediately follow those spot movements on exchanges such as the CME. Meanwhile, in the spot market, users have the possibility to buy or sell the actual currency through exchanges.

What products are available so far?

The ProShares Bitcoin Strategy ETF was the first such futures fund approved by the SEC in August 2021. An approval in Canada followed earlier that same year. In the latter case, the managers claim that individuals invest directly in Bitcoin. In June this year there was also a launch of futures ETFs by Volatility Shares.

Recently, in October some Ethereum futures funds also received approval. On the other hand, some firms have been tracking Bitcoin in a similar way to an ETF, but with some restrictions. The best known of these is Grayscale’s GBTC.

Here’s how things stand right now

After the world’s largest investment manager, BlackRock, announced its application, hopes in the industry were reborn. This application triggered the crypto market to get into an exit position, plus it spawned a rush of applications from other firms. Grayscale took up the push to convert GBTC into a spot Bitcoin ETF with more force.

In the court case against Grayscale, the SEC announced that it would not file appeals against the court’s decision. The latter left the door open for approval to become a reality. However, it still remains to go through the time gaps that the latter will take.

Why is the SEC taking so long to give the green light?

The regulatory agency’s narrative to approving these exchange-traded products is based on some arguments such as the low liquidity of the crypto market. Similarly, they also make mention of the immaturity of the market, which makes it a sector vulnerable to manipulation. Added to all this is the volatility of the assets that make up the crypto universe.

According to the agency, the intense level of volatility of cryptocurrencies can be very harmful to individual investors. SEC chief Gary Gensler has repeatedly argued that the potential for fraud is one of the biggest hurdles for the sector.

The SEC approval process

But assuming the SEC has no choice and is nevertheless forced to approve an ETF, that doesn’t mean the process is complete. In other words, if the regulators decide to remove the hurdles, then there would come a slow stage of generating the conditions. This includes requesting new requirements from applicants, which would lengthen the process even more.

Some experts believe that before the end of the year there will be at least one ETF approval. However, other analysts consulted in the same media believe that hasty assumptions should not be made. For the latter, it is a battlefield in which the SEC has postponed 30 times the applications of different firms.

Conclusion

The battle for Bitcoin ETF approval in the United States is ongoing, with the crypto community and Wall Street eagerly awaiting a decision from the SEC. The potential approval of Bitcoin ETFs could be a monumental moment for the cryptocurrency market, opening up new opportunities for investors. However, the SEC’s concerns about market maturity, liquidity, and volatility continue to be significant roadblocks.

As we move forward, the crypto world remains in a state of anticipation, hoping for a breakthrough in this years-long struggle. The coming months will undoubtedly be crucial in determining the fate of Bitcoin ETFs in the United States.

FAQs

1. When was the first Bitcoin ETF approved in the United States?

The first Bitcoin ETF approved in the United States was the ProShares Bitcoin Strategy ETF, granted SEC approval in August 2021.

2. What is the main difference between Bitcoin futures and spot trading?

Bitcoin futures are contracts that allow investors to speculate on the price of Bitcoin without owning the underlying asset, while spot trading involves buying or selling actual Bitcoin on cryptocurrency exchanges.

3. Why is the SEC hesitant to approve Bitcoin ETFs?

The SEC cites concerns about the low liquidity, immaturity, and volatility of the cryptocurrency market as reasons for their hesitation in approving Bitcoin ETFs.

4. What could the approval of Bitcoin ETFs mean for crypto investors?

The approval of Bitcoin ETFs could open up new opportunities for crypto investors, potentially driving significant growth in the digital currency market.