The bitcoin market has been facing its share of disruption of late. There were repeated attempts by issuers for a bitcoin ETF and the SEC was in disagreement with the same. The regulatory board rejected as many as nine proposals from three different issuers last August (read: Top ETF Stories of August).
Late last July, the authority turned down an application by the Winklevoss brothers for a bitcoin ETF, finding the product not safe enough. Thanks to stringencies by regulatory authorities, bitcoin prices have dropped 67.5% in the past year (as of Jan 15, 2019).
Though the SEC had released letters mentioning intentions of reassessing the verdict of rejecting nine applications, soon after rejecting, the letters did not clarify the review timeline for the decision. Along with that, the SEC deferred the decision for VanEck-SolidX’s proposed product in early August. And again in December, it extended the review period for the same ETF to Feb 27, 2019.
VanEck’s product is different in nature as the company has collaborated with blockchain company SolidX to make it physical and not futures based. This means the product will hold actual bitcoin, which will be “insured against any loss or theft.” The VanEck SolidX Bitcoin Trust will have a ticker symbol “XBTC,” if approved (read: Will VanEck's Renewed Attempt to Launch Bitcoin ETF Work?).
A New Issuer Entering the Race
Cryptocurrency asset manager Bitwise announced on January 10 that its filing for a new bitcoin ETF with the U.S. SEC. The product would be different from other proposals as it would depend “on regulated third party custodians to hold its physical Bitcoin, and the index draws prices from a large number of cryptocurrency exchanges.”
After many failed attempts by peer companies last year, Bitwise Asset Management believes it can make a successful bitcoin ETF launch this year by providing the SEC with all the necessary data and information needed for an approval, as noted by benzinga.
Will Bitwise & VanEck Make it Happen This Year?
There are a few factors that seem positive about the formation of the VanEck fund. First, the underlying currencies will be insured, which would provide insulation against any hacking attack. Secondly, the issuers purposely kept retail investors far from the proposed fund, which reduces the broad-based risk associated with such a product. Also, the fact that Bitwise’s proposed fund will be physical in nature and not futures-based raises the chances of approval (read: SEC to Rethink Rejecting Bitcoin ETFs: Any Hopes Ahead?)
ETF Impact
Though bitcoin ETFs are not available to investors, theyhave blockchain ETFs at their disposal. Per a source, “the blockchain in Bitcoin literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands.”
So, if investors cannot lay their hands on a bitcoin ETF now, they can definitely familiarize with the concept through blockchain ETFs like Reality Shares Nasdaq NexGen Economy ETF BLCN, Amplify Transformational Data Sharing ETF (V:BLOK) and First Trust Indxx Innovative Transaction & Process ETF LEGR.
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Zacks Investment Research