Why Bitcoin ETF matters?
ETF is the abbreviation of Exchange Traded Fund, which is an open-end fund with non-fixed fund shares.
What are ETFs? In a nutshell, ETFs are indexing assets. There are some investors who are reluctant to possess real assets (The process of owning the real assets portfolio is complex and difficult to manage) want to earn capital gains by the spreads. Therefore, ETFs could be a nice investment target for the investors to obtain the proceeds from the appreciation of the asset without actually buying the asset. In the traditional market, ETFs’ prices will follow the index like the S&P 500, etc. Investors can easily spread the risk and have a relatively stable investment choice by buying ETFs.
Recently, the investors have turned their attention to Crypto-ETFs. However, the SEC rejected the proposal of Bitcoin ETF. The main reason for the SEC’s veto is that the Bitcoin market is still in its early stages. The price of Bitcoin is easily manipulated by a small number of Bitcoin holders who hold a large share. There is currently no effective way to protect investors’ asset safety.
In spite of that the Winklevoss brothers were rejected by the SEC with a 3:1 vote on July 25, 2018, the SEC particularly emphasized that the veto of the Bitcoin ETF proposal is not a denial of the innovation and investment value of Bitcoin considering the evaluation of blockchain technology and bitcoin. It can be seen that the SEC is waiting for the bitcoin market to be mature enough. So far, none of the Bitcoin ETF proposals have been approved. Yet, the acceptance of the Bitcoin ETF proposal should be just a matter of time.
Once the Bitcoin ETF proposal is successfully accepted, it will definitely be the biggest news for the Bitcoin community. It means that it will open the door to investing in Bitcoin for the traditional market. All the investors with US stock accounts can use simple order procedures to buy Bitcoin. They even don’t need to worry about how to keep their Bitcoin safe because the issue of custody will be handled by the issuer. The entry of traditional investors will strengthen the confidence of Bitcoin investors and the public visibility of Bitcoin.
As the market cap of crypto remains little compared to the global market, if Bitcoin ETF can be successfully approved, the number of investors and the amount of investment will enormously grow. You can see why the whole crypto market has a high expectation of the Bitcoin ETF.
By Tino Lin, Flowchain Research Intern
