Over 3 years ago, in 2013, the organization in the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the 1st proposed bitcoin ETF, the Winklevoss Investment Trust, planning to trade in the HFT-dominated BATS exchange. The SEC is anticipated to create a decision onto it by March. A second group, SolidX Partners followed last July seeking SEC approval due to its bitcoin IRA rollover, SolidX Bitcoin Trust, which will be on the NYSE.
Then on Friday, Grayscale Investments, a unit of Barry Silbert’s Digital Currency Group filed with the SEC to list out their own Bitcoin Investment Trust around the New York Stock Exchange: just like the last two attempts, the fund hopes to acquire SEC approval to grow the target audience for that virtual currency. Initially, the trust will aim to launch with $500 million, the filing said, although the target is subjected to change. At Dec. 31, it had about 1.8 million shares outstanding. Depending on a net asset importance of $89.39 a share, its assets under management totaled $164.2 million.
Because the WSJ notes, “Grayscale’s Bitcoin Investment Trust, first launched in 2013, already trades on OTC Markets Group Inc.’s over-the-counter exchange, OTCQX. With all the new filing if approved, the trust would operate as a traditional ETF, meaning that specialized traders would create and retire shares based upon demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., happen to be in discussions to offer as authorized participants, according to the filing. Additionally, the fund’s trustee will be Delaware Trust Co., along with the transfer agent will probably be Bank of the latest York Mellon Corp., depending on the filing.
The purpose of a bitcoin-based ETF is usually to present an product that could be easier for investors to access and would mute no less than a number of bitcoin’s volatility, although it would hardly eliminate everything, which may still make it a riskier investment than many other ETFs.
More importantly, approval “could prove an earlier test for how an SEC run by a Donald Trump appointee will greet innovations that could raise investor-protection or some other market-structure issues.” Furthermore, the advantages of being first on a major exchange could possibly be big, assuming that bitcoin does find a way to establish itself as being a viable asset class. The SPDR Gold Shares ETF launched Nov. 18, 2004, has $31 billion in assets. The iShares Gold Trust ETF launched Jan. 21, 2005, has $7.7 billion in assets. Gold, a commodity not backed by any particular government, interests investors for a few of the same reasons as bitcoin… even though many physical hard-core “gold-stacker” fans mock both the thought of a paper gold representing their physical holdings, while relentlessly ridiculing the idea that “digital money” incorporated into a server somewhere, is by any means safe (following recent dramatic breaches of any Chinese bitcoin exchange, there is a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there exists significant pent-up demand from your investment public for this sort of vehicle” although he conceded that “the possibility of one being approved in 2017 was really low, expecting the SEC may be cautious about this kind of risky asset.”
Indeed, as one of the lawyers who helped craft the application form for the purpose is definitely the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he or she is doubtful the SEC will approve this type of request whenever anytime soon. The critique, thanks to former Gemini general counsel David Brill, is extremely relevant as his old employer’s last and final deadline to get approval to the experimental product is on 11th March.
Though Brill is quick to indicate he is a “proponent” of the creation of bitcoin ETFs and pro-bitcoin regulation more broadly, the prognosis does not bode well for its success. In conversation with CoinDesk, Brill explained that he or she believes factors like China’s influence on the price of invest in bitcoin make an approval unlikely.
Specifically, he was quoted saying that “It seems unlikely, among all of the other reasons, that this commission will would like to move forward using a product in which the major trading is completed upon an exchanges that may not be following our AML guidelines.” Put simply, China’s domination of bitcoin trading – around 98% of recent bitcoin transactions took place in China – would likely force the SEC to deny any one of the bitcoin ETF applications.
Blame China: “a career lawyer for 20 years, Brill worked at Thompson Financial from 2003 through 2010, when it acquired Reuters. Just before departing Gemini just last year, Brill worked because the New York City-based exchange’s general council, where he explained he helped create the legal infrastructure of your exchange and craft several responses to amendments to its S1 filing.”
Though Brill does assume that that a bitcoin ETF could eventually be permitted to accomplish business on the major stock exchange, he stated the SEC will probably be unlikely to accomplish this while just as much as 95% of most bitcoin transactions are carried out in China.
That, in conjunction with the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, provides a level unlikely approval, he said.
“It’s more the overwhelming largest part of trading is not being carried out in the US, and being carried out in a area where rules and regulations are not consistent with all the rules here,” said Brill.
As outlined by Brill, among the big hopes for even more acceptance and expansion of bitcoin is none other than Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he is “cautiously optimistic in regards to a more promising environment for bitcoin companies down the road.”
From your strictly small business perspective, he predicted Trump would likely require a pro-bitcoin stance. However, considering concerns in regards to a possible “trade war” with China following Trump’s expected policies, Brill said the predominance of bitcoin trading in the nation might be a hindrance. He concluded: “I would like to try to view what approaches might work to make it easier for bitcoin companies to grow over the US. Because at this time, it is extremely difficult because every state has something different which they want.”
Ultimately, bitcoin investors might have to make do without smartbitcoininvestments for a time, particularly when as some suspect, not only Chinese traders, but local HFTs took over trading of the extremely volatile product. Still, that may be a very important thing: neglecting to get ETF approval only will keep bitcoin extremely volatile, which is also why it is now the darling asset of any subset of traders starved for volatility inside a world where central banks have eliminated virtually any daily gyrations from the equity class. As such, we would expect bitcoin vol just to grow, not decline, during this process making the attainment from the bitcoin “holy grail” very much more improbable.