Breaking News! Is A Bitcoin ETF Finally Coming?
The Hype Around An ETF
Throughout the entirety of the 2018 Bitcoin bear market, one of the few silver linings that the community clung onto was the hope that eventually, in the near future, a Bitcoin ETF would get approved. An ETF is an investment fund traded on stock exchanges. They offer several favorable advantages including low costs, tax efficiencies, and stock-like features. Gold had nearly tripled its all-time high after receiving its first ETF.
Also, predictions for Bitcoin ran anywhere between $20k to $100k if it were to receive the same treatment.
Unfortunately, as with most things in the crypto world, things took a lot longer than expected. Over 11 proposals for Bitcoin ETFs were submitted, some were denied, others were delayed, delayed, and delayed some more. The problem was that all ETFs required SEC approval, a governmental agency not known for being kind to crypto. But the latest VanEck proposal is a game-changer because rather than trying to fulfill tedious SEC requirements, it will instead try to circumvent them.
Why It’s Different This Time
The latest proposal has used an exemption under the SEC’s Rule 144A, which allows accredited institutional investors to trade funds for shorter holding periods without approval from the SEC. Officially known as “VanEck SolidX Bitcoin Trust 144A Shares”, the shares are not technically an ETF but “looks and feels like a traditional ETF” according to the description.
Proceed With Cautious Optimism
This is most certainly good news for crypto and the market sentiment has reflected it as Bitcoin surged another 8% after the announcement. However, it’s important to remember that there is still a long way to go before we see a full-scale retail ETF that will truly push Bitcoin to unprecedented heights. The current ETF proposal is geared towards a very small percentage of actual investors. However, it could serve as a great foot-in-the-door to open the floodgates for trillions of future dollars to pour in. Current concerns that have restricted the SEC from approving a full-scale ETF include market manipulation, fraud, and wash-trading. By offering physically settled Bitcoin with an extensive insurance policy in the millions, VanEck hopes to gradually alleviate the SEC’s concerns.
The Market Sentiment Reaction
Shortly after the announcement of the news, Bitcoin immediately shot up, back and over the all-important $10k resistance level. The ETF has been long hailed as the next potential catalyst for a new parabolic, multi-year bull-run. Even a mere positive mention was enough to propel Bitcoin again. It is for this reason that understanding market sentiment is so crucial.
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Written by Ezra Yao