A stronger upward momentum than the El Salvador issue is coming… “Bitcoin ETF”

The industry is buzzing with the news that El Salvador is the first country in the world to recognize Bitcoin as a fiat currency. El Salvador passed this bill in the parliament earlier this month. The bill includes a mandatory provision for all economic entities to accept Bitcoin payments and a provision to allow Bitcoin tax payment. This is the first case of equating Bitcoin with the US dollar, which is used as a fiat currency in El Salvador.

El Salvador’s decision became a catalyst among small countries where the national currency is not widely used, or the financial infrastructure is weak. Other countries like Tanzania in Africa and Panama in Latin America are also moving closer to adopting Bitcoin as a fiat currency. Following the news, the price of Bitcoin soared by more than 10%, showing an upward trend.

However, it is still low compared to when it once climbed way above $60,000. On the 14th, it just started crossing the threshold of $40,000. A much stronger momentum is needed to reach the “Bitcoin worth $100,000” target previously announced by some analysts amid the bullish enthusiasm. Investors are currently paying close attention to whether the US Securities and Exchange Commission (SEC) approves Bitcoin ETFs.

Something stronger than the El Salvador issue is coming

Of course, it is significant that a country recognized Bitcoin as a fiat currency, regardless of the size of its economy. However, its global impact is bound to be limited. This is because money is closely related to sovereignty and power of a country. The larger the region that uses the currency, the greater the population, and the stronger the national power, the greater the currency value will be.

This is why the legalization of Bitcoin ETFs in the United States, the world’s dominant currency, has become such a hot topic. Even though some countries, such as Canada, have already launched Bitcoin ETFs, a significant number of investors still cling to US ETFs. What they expect is the megaton-scale ripple effect that will occur when US authorities recognize Bitcoin.

In this regard, the most recent hot issue was whether the SEC approves the Bitcoin ETF from a US asset management company, VanEck. VanEck previously filed an application for approval of a Bitcoin ETF with the SEC in March. As a general rule, the SEC must respond within 45 days of receiving the filing. However, the SEC has delayed the ETF approval until after June 17. Considering that the SEC can postpone its response for up to 240 days, a final decision will be made in November at the latest.

In addition to VanEck, another asset management company, Wisdom Tree, is awaiting the SEC’s verdict. The SEC’s review of Wisdom Tree’s Bitcoin ETF was originally scheduled to end at the end of May, but the SEC extended the review period by 45 days, so the results will come out in mid-July.

Approving Bitcoin ETF

In this regard, there is a clear difference of opinion in the industry. First, the Financial Times (FT) believes that getting approval within this year is unlikely. On June 2, the FT concluded that early approval of ETFs would be problematic because SEC Chairman Gary Gensler, who was favorable to cryptocurrencies, showed only a very general reaction to Bitcoin ETFs. Earlier, SEC Chairman Gensler appeared before the House Committee on Financial Services and pointed out , “There are many challenges and gaps for investor protection in these markets, and none of the cryptocurrency exchanges has registered yet as an exchange with the SEC.” After his remarks, various media outlets have been speculating that the US will establish a regulatory framework first and then approve the Bitcoin ETF.

Greg King, Founder and CEO of digital asset management firm Osprey Funds, also predicted that the Bitcoin ETF would not be approved until 2022. In an interview with CNBC earlier this month, he told CNBC that he thinks “it’s just really getting going. These things take time.” He continued, “If something happens, it won’t be until 2 years later.”

There are also opposing views. Grayscale, which operates the world’s largest Bitcoin trust product called GBTC, expects that the approval of a Bitcoin ETF is only a matter of time given the active response of the regulators. The company also stated that it would convert GBTC to an ETF when the regulatory environment is sufficient.

“Bitcoin ETF is not exclusive to institutions”

Some point out that Bitcoin ETFs are limited in creating momentum for price growth. It is also said that if a Bitcoin ETF is approved, it will become the property of institutions or corporate giants.

Even if we look at the existing Bitcoin financial products like Grayscale’s GBTC, principal investment targets are institutions, not individuals. Besides, given the high premium, the burden is quite significant for individuals with thin wallets. If move on to derivatives, the difficulty increases even more. Although derivatives provided by cryptocurrency exchanges are more accessible, it is difficult for individuals to invest in regulated exchanges like the Chicago Mercantile Exchange (CME) or Bakkt.

On the other hand, some argue that the Bitcoin ETF will rather help lower the entry barrier for individual investors. The reason being that individual investors outside the US will be able to trade Bitcoin through the US Bitcoin ETF as easily as investing in stocks on the market.

Additionally, the launch of a Bitcoin ETF can be interpreted as a signal that the US financial authorities have recognized the stability of Bitcoin, and that Bitcoin has been incorporated into institutional finance.

Bitcoin ETF approval can become an important momentum in the virtual asset market because it will make access to Bitcoin easier and more reliable for individual investors.

*This research and analysis material was produced for the purpose of providing reference information based on reliable data and information. However, its accuracy or quality is not guaranteed.

*This material reflects personal opinions which may not be consistent with the company’s official views.

*This material has never been provided to third parties such as institutional investors