ETF (Exchange Traded Funds) refers to “Exchange Traded Funds”, also known as transactional open-ended index funds. It is an open-end fund with variable fund shares that is listed and traded on the exchange. ETF combines the characteristics of stocks and index funds, combines the advantages of closed and open funds, can diversify investment and reduce investment risks. It is a product recognized by governments and has a huge purchasing population worldwide. As long as the ETF can effectively track changes in the target price index, it is theoretically possible to construct an ETF based on this target asset. The Bitcoin ETF is a transactional open-ended index fund established to track changes in the bitcoin price index of an exchange.
In recent years, the SEC (US Securities and Exchange Commission) has received multiple applications for Bitcoin ETFs approval, but all of them have been rejected:
The Winklevoss brothers, the owners of the Gemini exchange, were the first to submit their applications. As early as 2014, they submitted their applications to the SEC, hoping that the BitsBZX exchange will be online. The SEC was fully reviewed for three years and eventually rejected. The two brothers were not disheartened, and soon submitted a petition asking the SEC to re-review it. The SEC again rejected the Winklevoss brothers’ Bitcoin
ETF application.In addition, proposals submitted by ProShares, Direxion, and GraniteShares were rejected by the US Securities and Exchange Commission last year, and regulators remain concerned about the market manipulation of Bitcoin. The next day, the applicant company asked the SEC to review the decision. However, although the US Securities and Exchange Commission must follow strict deadlines when initially reviewing rule change proposals, there is no such deadline for review. These reviews used to take 6 to 16 months, but will also be suspended when the SEC stops working (government shutdown). Therefore, once after the government resumes operation, the SEC will keep reviewing these proposals and may delay it for months or even theoretically, for years.
On February 27th, the processing of ETF application submitted by Cboe BZX Exchange was due. If the SEC did not have a decision before this deadline, the ETF will automatically obtain approval, but even if the ETF is it was automatically approved, the ETF would not likely to remain valid for a long time. Automatic approval is not a lifetime guarantee and can be easily undone. Even after the government shut down, SEC can still force ETFs to be delisted.
For the SEC, the liquidity problem in the Bitcoin market cannot be alleviated, and the risks brought by the ETF cannot be ignored. If the market is large enough to reach a scale of more than tens of billions, the risk of being manipulated becomes be smaller. However, the current market cap of Bitcoin is a little over 60 billion US dollars, even with a sound risk control system and regulatory mechanisms in place, experienced hedge funds will enter the market and it will be possible for them to easily control what this low volume asset. This is also one of the points of SEC, whose primary purpose is to protect investor rights and asset security, and avoid the least desirable situations. SEC has been skeptical about new asset classes and emerging commodities.
If that’s the case, why do so many people think that the Bitcoin ETF is likely to pass?
By the end of 2019, Bitcoin transaction processing speed, market capitalization, daily average trading volume, regulatory guidelines, etc. have not improved much, and the level of attention has fallen sharply under the run of EOS and other new popular currencies. But after careful attention, the recent financial circles, the changes in the attitude of the regulatory authorities regarding Bitcoin, and the layout of the market-related cryptocurrency institutions; it could be possible that some quiet changes are coming to the industry, and speculations that SEC’s may pass a Bitcoin ETF are not just blind optimism.
1. Financial giants are considering the bitcoin market
When talking about the attitude of traditional financial institutions to Bitcoin, the first thing that reminds us of is the continuous attack on Bitcoin by JPMorgan CEO Jamie Dimon. However, by the beginning of 2018, Jamie’s position had softened, and he regretted that he had previously called Bitcoin a scam. And JP Morgan Chase also began to test the cryptocurrency market during the year, and advising its new director to develop a digital currency strategy.
Interestingly, it’s not just JP Morgan Chase that has changed its attitude. Goldman Sachs, Morgan Stanley and BlackRock, who also avoided Bitcoin earlier, also announced plans to enter the cryptocurrency market in 2018. Provide Bitcoin derivatives trading.
On the surface, the layout of these traditional mainstream financial institutions in the cryptocurrency market is not obvious; but from the relevant spokesperson’s rhetoric, it can be seen that the incoming cryptocurrency market may become their choice in the future. And their current conservative approach is just waiting for a safer, more standardized and familiar way to enter the market.
2. Traditional financial organizations are also actively promoting adoption of Bitcoin ETFs
The Chicago Board Options Exchange (Cboe), which first entered the market, is particularly active. After the launch of the first bitcoin futures in December 2017, Cboe began actively collecting relevant data to prepare for its next-stage Bitcoin ETF transaction. The combination of Cboe, VanEck and established companies has greatly increased the optimism of its approval. In addition, the establishment of the Bakkt Exchange has also set a strong point for this market. The Bakkt Exchange is established by the Intercontinental Exchange Group (ICE), the parent company of the New York Stock Exchange (NYSE). It is important to mention that the Intercontinental Exchange Group is one of the world’s top financial institutions, with more than 10 well-known exchanges including the New York Stock Exchange and the London Futures International Financial Futures Exchange.
Why are everyone waiting for the Bitcoin ETF?
Once a Bitcoin ETF is approved, it will undoubtedly have an immensely positive impact on the market. Fundstrat founder Tom Lee said in an interview with CNBC that if the Bitcoin ETF is approved, it will likely return Bitcoin to its highest level. Mainly because Bitcoin ETFs can lower the investor threshold which will in turn attract more investors. In some regions ETFs may be the only legal way for the public to enter the world of cryptocurrencies. Influx of traditional institutions will also help to motivate new investors. This is where the real value of Bitcoin ETFs is, and why so many people want it to become a reality.
Follow us：
Twitter：https://twitter.com/CoindyOfficial
Facebook：https://www.facebook.com/CoindyOfficial/
Instagram：https://www.instagram.com/p/Bp9jkuUnCPP/
Telegram：https://t.me/coindyofficial
