U.S. regulators have repeatedly rejected Bitcoin ETF, citing concerns about potential manipulation and thin liquidity. Yet with the world’s largest digital coin rallying to new heights and a change of leadership at the Securities and Exchange Commission, the prospect of a first U.S. Bitcoin ETF appears to be rising.
There is huge demand for Bitcoin ETF. The Grayscale Bitcoin Trust has swelled in size during Bitcoin’s bull run into early 2021, with total assets soaring to more than $27 billion from $2.8 billion a year earlier. Demand for crypto-related products has been so relentless that investors piled into the trust even as its market value soared to 40% more than the value of Bitcoin it held. The recently launched Bitwise 10 Crypto Index Fund (ticker BITW) swelled to a valuation of more than $700 million in early February following its December debut, meaning it was valued 63% above its net asset value. Investors don’t want to be paying such premiums on trusts anymore and are waiting for proper BTC ETFs that can track the Digital asset more efficiently.
As of early February, the only active filing with the SEC was the request for the VanEck Bitcoin Trust made in December. Bitwise Asset Management is also seeking to launch a broader cryptocurrency ETF. It’s only a matter of time when other companies such as Direxion, ProShares, First Trust, Grayscale, WisdomTree and GraniteShares will be trying to launch the same ETF as well.
Market watchers say that the chances of Bitcoin ETF being approved are improving as Wall Street heavyweights such as Paul Tudor Jones and Stan Druckenmiller and Tesla adopt the cryptocurrency and the likes of Robinhood and PayPal make it easier to use and trade Bitcoin. Some crypto fans were encouraged by President Joe Biden’s nomination of Gary Gensler as SEC chairman; Gensler once taught a class at MIT’s Sloan School of Management called “Blockchain and Money.” But he has also acknowledged industry issues with fraud and light regulation. Don’t expect a decision until the new chairman is in place between now and July.
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