What you should know about the new Bitcoin ETF?
If you haven’t heard the news, Proshares launched a Bitcoin Futures ETF and everybody got really hyped about it and what the future (pun unintended) holds for Bitcoin. If you aren’t an expert in both cryptocurrencies and exchange traded funds, this article should help you get a better view of what is really going on in the markets right now. But first, why should our opinion matter? Simple, during the spring and summer of 2021 we were also prospecting on launching and listing on a major US exchange, a bunch of crypto based ETFs tracking different Bitcoin, Ethereum and altcoin proprietary indices. After discussions with two NY based fund managers with around 450MM AUM (assets under management) and a custodian, we came to the conclusion that the easiest way to launch an ETF would be to contract a company that offers so called “white-label ETFs”. After multiple discussions with one of the best company that specializes is offering white-label ETFs the outcome was obvious, the SEC /(Securities and Exchanges Commission) will not allow it in the near future. There are also some accounting issues with cryptocurrencies. The closest alternative was to create a Bitcoin Futures ETF and aim for launching it early 2022 which was completely out of our initial scope.
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Is this the first Bitcoin ETF?
No, it is just the first one listed in the United States, but there are other popular Bitcoin ETFs listed on European exchanges that started to appear more than one year ago. A good choice would be BTCetc - ETC Group Physical Bitcoin with over 670MM AUM, that is 100% backed by Bitcoin, meaning that investors are legally entitled to the underlying bitcoin, and they can redeem the сryptocurrency from ETC Group, alternatively to selling on exchange which is a huge advantage compared to ETF futures that operate much the same as a normal futures contract. These contracts never take possession of the asset, but keep the capital moving from one basket of futures to another. This means investors don’t have direct exposure to the underlying assets and must deal in cash terms.
How much will BTC appreciate in value if the ETF gets approved?
Hard to say exactly, but given the fact that the ETF will not hold BTC as underlying and Proshares manages a total of around 55B dollars across their entire 140 different ETFs we personally don’t see why the BTC price will suffer a major impact. Can we be wrong and see a major increase? Of course, we cannot foresee how people will react to the news and start a hype-driven rally. One thing we can tell for sure is that any appreciation in Bitcoin’s market capitalization will not come as a direct result of investors buying the newly launched ETF.
Is this ETF a good thing or a bad thing for BTC?
Both at the same time, it is a good thing because it brings more media exposure and validity in the eyes of skeptics but at the same time it is a step backwards for DeFI because it proves that for the majority of investors, BTC and all other cryptocurrencies are only means of storing value, easily confused with commodities like gold, silver, etc., or common assets. In simpler words, a small plus for crypto-investors, a big minus for blockchain technology as a whole.
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