What are the chances for a Bitcoin ETF? Requirements for an SEC approval!

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Oct 28, 2018 · 5 min read

The history of a Bitcoin ETF has been a long and hard one. The Winklevoss twins proposed a Bitcoin Trust, that seemed like an ETF all the way back in 2013. Over the past five years, various attempts have been made to get a Bitcoin ETF approved and they have all failed.

Most people believe that the latest ETF application is going to be approved due to the structure of an ETF. An Average retail investor does not have about $200k to invest in Bitcoin. That results in an effect, that the SEC’s main concern of protecting retail investors is satisfied. Both cryptocurrency experts and the CBOE have both concluded that the latest proposal are fulfilling all of SEC’s ETF approval requirements. This, coupled to the growing cryptocurrency market, has led to an overall optimism around the approval of the ETF.

A Bitcoin ETF Would Increase the BTC Price?

Most financial institutions, hedge funds, and high-net-worth individuals are interested in investing in cryptocurrencies. The largest financial players with trillions of funds under management provided by their clients under management such as Blackrock, J.P.Morgan, and Fidelity have all expressed interest in cryptocurrencies in 2018.

To create more awareness and to foster the discussion about crypto assets, the chances for an approved BTC ETF are high. In August, the Securities and Exchange Commission (SEC) rejected nine applications for Bitcoin ETFs. Shortly thereafter it was announced that the rejected Bitcoin ETFs would be reviewed again. This is not the only reason why the mood is becoming more optimistic. However, one should not rejoice too early. The question of whether the SEC will allow a Bitcoin ETF or not will have a significant impact on the Bitcoin price. The decision will most likely be delayed, probably until March 2019. Currently, the SEC wants a public discussion regarding Bitcoin ETFs. The government authority wants to hear votes for and against a BTC ETF in order to assess what public opinion is on the subject.

Therefore, a SEC decision on the physically covered Bitcoin ETF is expected in the first quarter of 2019. John Lore, a Managing Partner at Capital Fund Law, pointed out that the SEC may not approve the Bitcoin ETF until there is some kind of Bitcoin exchange standard. This is intended to resolve the dreaded market manipulation that was and still is a reason for the SEC’s rejection, Lore told US News & World Report.

Bitcoin exchanges have considerable weaknesses and some support this manipulation for their own purposes, as John Lore said. Two SEC members for a Bitcoin ETF? Most probably know Hester Pierce. She works for the SEC and she said that “there is no reason not to accept a Bitcoin ETF”. She will vote for a Bitcoin ETF, as she did the last time she was overruled. Last month another person was nominated for the SEC: Elad Roisman. An anonymous source said that Roisman was fair in dealing with crypto currencies and that thanks to him a Bitcoin ETF is “inevitable”.

Details

Regulatory body: SEC (USA)

The earliest date for a decision was: 16th Aug 2018.

Extensions: SEC has the right to defer a decision for up to 90 days.

Application made by: CBOE Global Markets

Standards: ETF proposed to hold 25 Bitcoins per share. Partial shares cannot be held in an ETF, meaning the minimum investment would be around $185k with bitcoin prices at $8.4k. This means the ETF is geared for use by institutions and high-net-worth individuals. It also makes reasonable provisions for the protection of average retail investors.

Insurance: Proposal includes provisions for $25 million in primary coverage and additional coverage of up to $100 million. Provisions for further coverage extensions can be made.

Support: The ETF is widely supported by the cryptocurrency community and 250 comments (mostly in support of approval) have been posted on the official SEC website.

Backed By Actual Bitcoin: The proposed ETF is to be backed by actual Bitcoin. This means that if there are fund inflows of $100 bn, then $100 bn worth of bitcoin must be purchased to fully back the ETF.

*https://totalcrypto.io/bitcoin-etf-analysis/

An interesting fact about the history of Gold and Bitcoin is that both got futures contracts before an ETF was launched. In both cases, the price rose before the futures markets opened and there was a significant fall in the price of both assets when futures trading actually began.

What happened when the gold ETF was finally launched?

Þ It was the start of the biggest bull run in gold’s history.

Þ The initial prices increase from just $331.60 per ounce to a high of $1,917.90.

Þ That was a significant 478% increase in price after the gold ETF was launched.

Bitcoin is called digital gold for good reasons. In fact, many people came around with the idea that Bitcoin could become a better version of physical gold. This resulted in various arguing that bitcoin is dramatically undervalued in comparison to the precious metal. The approval of a Bitcoin ETF could be the catalyst that jump-starts a revaluation of Bitcoin and makes ownership of the asset more widespread.

Almost every cryptocurrency expert seems to believe that it will. However, it is far from certain that SEC will approve the latest Bitcoin ETF application. Indeed, the Bitcoin ETF thesis could well become a self-fulfilling prophecy with the levels of hype and optimism surrounding a Bitcoin ETF.

The truth is that the interest in this form of digital gold only increases as its price rises. In turn, positive price action is likely to attract institutional money and further upward price momentum. Further highs can be reached by retail investors following the institutional money too.

About spot9:

The Berlin-based FinTech start-up spot9 is planning to become the world’s first bank that offers full crypto services. Smart banking for smart people — this is why spot9 is focused on digital and mobile banking products with fully integrated fiat and digital currencies. These include highly secure and transparent real-time cryptocurrency transactions as well as smart contract-based banking solutions.

spot9 is going to expand the cryptocurrency infrastructure in Germany and other European Countries through the offering of financial services like crypto ATMs, global crypto credit cards, point-of-sale (PoS) devices, and comprehensive mobile banking solutions. spot9 will announce an SCO later this year to offer one of the first German security coins. It is soon be made available on www.spot9.de

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