Bitcoin ETFs Part 3/3: Expert Opinions and the Cases for and Against
The possible approval of a Bitcoin exchange-traded fund by the United States’ SEC has been one of the most controversial topics of the cryptosphere this year, to the point of heavily impacting cryptocurrency prices. Last month, the SEC’s decision to postpone its ruling on VanEck’s third attempt at getting an ETF approved ended in one of the biggest cryptocurrency selloffs of recent times, causing Bitcoin to lose over $9 Billion, and the cryptocurrency market as a whole drop over $40 billion overnight.
In this article, the final of a series of three, we will see what several public and private experts think of the Bitcoin ETF issue, and explore the cases for and against the approval of a Bitcoin-backed ETF.
See also part one explaining Bitcoin ETFs, and part two, a history of Bitcoin ETF applications.
The Experts’ Case for a Bitcoin ETF
Exchange-traded funds have been one of the most successful passive investment instruments available to investors since the mid-90s because of their lower fees and higher intraday liquidity. By late 2016, total ETF market share reached over 10% of the total market capitalization and represented over 30% of the total volume traded on US-based exchanges.
Several specialists have expressed hopes that the upsides to ETFs would positively impact Bitcoin prices, lending further legitimacy to Bitcoin, and opening the market to traditional institutional asset managers. Positive remarks about the ETF idea have popped up everywhere from the private to the public sector.
Although the SEC has steadily declined all ETF proposals so far, hopes of an ETF approval have been renewed after the recent hiring of Elad Roisman, who has made strong remarks to the commission in support of cryptocurrencies. In a Banking Committee Hearing at the Senate earlier this year, Roisman challenged fellow regulators to behave in a “fair and transparent manner”, adding,
The SEC must examine and re-examine its rules, regulations, and guidelines to ensure that they are still working as intended to accomplish the SEC’s mission. This is most recently manifested in areas such as data protection and cybersecurity as well as the emergence of new investments and technologies such as initial coin offerings and blockchain.
With Roisman’s appointment, the SEC will now have two crypto-friendly Commissioners, the other being Commissioner Hester Pierce, who recently expressed her dissent about the SEC’s rejection of the CBOE’s/VanEck/SolidX Bitcoin Trust proposal in a now-famous letter,
…the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs.
Ms. Pierce added,
The Shares would therefore represent a significant innovation in the bitcoin market by providing an inexpensive and simple vehicle for investors to gain exposure to bitcoin in a secure and easily accessible product that is familiar and transparent to investors. Such an innovation would help to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest by improving investor access to bitcoin exposure through efficient and transparent exchange-traded derivative products.
Representatives from the private sector have also made the case for a Bitcoin ETF. During a series of interviews with CNBC Africa’s Ran Neu-Ner on his Crypto Trader show, several crypto specialists weighed in on the impact of a possible Bitcoin-backed ETF.
Arthur Hayes, the CEO of Bitmex said there will “definitely be a Bitcoin ETF by the end of 2018”, adding he considers Bitcoin is “one ETF away” from reaching the $50,000 level.
Mr. Hayes elaborated on the importance of a Bitcoin ETF,
It’s very important to get more retail money into the system because at the end of the day retail traders don’t want to have to worry about securing a Bitcoin wallet, where do they buy it from, using the different exchanges […] so if all they have to do is click on an e-trade […] they could buy an ETF which gives an exposure to Bitcoin but not allow them to actually experiences the risks of holding it that’s a very powerful way for them to get involved.
Mati Greenspan, Senior Analyst for eToro said to Mr. Neu-Ner he considers an ETF approval “a possibility for the first quarter of 2019” after the cryptocurrency markets have matured. Greenspan voiced his opinion that a Bitcoin-backed ETF is important, but not that relevant at all,
So yes it could be a good thing in that it’ll bring fresh money into the market new liquidity into the market is a very good thing and very healthy for the ecosystem […] I don’t think that it’s the most important thing in the world, but if the ETF is approved what happens to the Bitcoin price most likely it’ll go up.
Anthony Pompliano, founder and partner at Morgan Creek Digital Assets, thinks that the repeated denials by the SEC have “been fair”, adding he believes that we will not see a Bitcoin ETF until 2019,
The crypto industry will eventually get retail products approved by the SEC. The proper infrastructure and controls need to be in place first. This work will include implementing qualified custodianship, while preventing market manipulation. It is unlikely that regulators will be satisfied with any anti-market manipulation measures created during the remainder of this year. This would push the first ETF approval until 2019.
The public has also gotten involved in the discussion about the Bitcoin ETF. The website of the Securities and Exchange Commission opened a request for comments since June 26, that attracted over 150 comments about the upcoming CBOE ETF decision, almost all in support of the proposition. The high volume of comments caused the SEC to postpone…
Read the full story here.
