What is a Bitcoin ETF? – How Soon Will SEC Approve It?

A number of bitcoin ETFs have filed proposals in the past for SEC approval in the past but none was given the approval. 

There have recently been indications pointing in the direction of a bitcoin ETF approval by SEC.

A commissioner for the US SEC is of the opinion that a bitcoin ETF {exchange traded fund} will ultimately be approved.

What is a Bitcoin ETF?

bitcoin ETF

An ETF is marketable security that keeps track of stock index, bonds, and a bundle of assets or commodity.

The price of an ETFs share is susceptible to change throughout the day as they are traded and most times have an average volume and lesser fees.

Simply put, an ETF is a certain type of fund that contains assets such as stocks oil futures, bonds, foreign currencies, gold etc. and then divides the ownership of these assets into smaller shares.

Alright, I know you still do not understand it. I did not at first too so I will break it down further and include a 2 mins videos.

Supposing you want to invest in gold and you have only $1,000 (N360,000). A 400oz (12,5kg) gold bar is worth about $500,000 (N180 million).  That’s a lot.

What you can do is to invest in Gold EFT; this is a company that has bought a large quantity of gold, stored it in a safe, and then sell shares of this gold.

The value of the share rises when the price of gold rises and drops when it drops. This is safer because you can easily buy and sell the Gold ETF shares, you don’t have to worry about the security of keeping the gold safe, and, lastly, you can invest in Gold with your $1,000.

I hope you know understand what ETF. You can still watch this 2 minutes video from the ‘marketplace’.

A Bitcoin ETF merely mirrors or mimics the price of the most popular cryptocurrency in the world.

This feature allows investors to buy into the fund without necessarily going through the rigours of trading bitcoin itself.

And since investors in the ETF are not directly investing in bitcoin, they worry less about the storage and security problems and procedures

Will a Bitcoin ETF be Approved?

Robert J. Jackson, the only Democratic commissioner at the US Securities and exchange commission {SEC} has said that despite rejecting several ETF applications in the past year, this string of rejections would ultimately come to an end.

Discussing previous bitcoin ETF applications, Robert highlighted the Winklevoss twins’ bitcoin ETF application in March 2017 as a signal of how attitudes are changing in the market.

When the application was rejected in March 2017, the bitcoin markets saw some volatility, a thread that has largely decreased.

Jackson stated that there was a risk of price manipulation and this could get people hurt enormously. He further claimed that the liquidity issues in the market were very serious.

SEC has, to date, refused at least 10 bitcoin ETF proposals.

In August 2018, it turned down about seven proposal fillings from ProShares, GraniteShares, Direxion amongst others. Although, the regulator said it would review the proposal fillings the day after.

However, there has been another SEC commissioner who has been even more optimistic about the probability of the approval of a bitcoin ETF.

Hester Pierce said the Winklevoss’ twins proposed rule change satisfies the standards and should be permitted to list and trade its bitcoin-based exchange-traded product.

Pierce said that the SEC had to be mindful of its role. This role, however, is not to be the ones to determine which innovations and technologies get approved and those that don’t.

Last month, Cbeo withdrew its proposal due to the shutdown of the US government. If eventually approved, the proposal would pave the way for a bitcoin-based ETF backed by SolidX and VanEck.

Conclusion

Amidst all the optimism, the SEC chairman, Jay Clayton has come out to say that he doesn’t see a clear pathway to a crypto-based ETF approval until all standards are met and all concerns of market manipulation are addressed.”


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