Friday, January 21

Bitcoin ETF approval may actually disappoint bulls


The long-awaited green light from US regulators for a Bitcoin exchange-traded fund could turn into a news-selling event.

Creating speculation that the Securities and Exchange Commission could approve a futures-backed product as early as this week has been touted as a catalyst for the resurgence of Bitcoin torrents, with a deadline for a decision fast approaching. . Cryptocurrency promoters like Morgan Creek Digital Assets’ Anthony Pompliano have seized on the idea, tweeting that things could “get crazy.”

Other industry veterans aren’t so sure. Given the ease of access to cryptocurrency markets compared to previous years, it’s not clear that launching a Bitcoin ETF will trigger a flood of demand, according to Juthica Chou, head of OTC trading at Kraken Digital Asset Exchange. . People can already buy and sell digital assets on crypto exchanges around the world and through more retail-oriented platforms such as PayPal and Square. Meanwhile, institutional investors have been able to gain crypto exposure through vehicles like the Grayscale Bitcoin Trust, albeit plagued with persistent discounts, for years.

“Onboarding individual investors, retailers, and institutions is already much better, safer, and more accessible than, say, crypto was in 2017,” Chou said on Bloomberg’s “QuickTake Stock” streaming show. “An ETF will definitely be positive, it will expand the variety of participants that can start buying Bitcoin and participating in the ecosystem, but it will not be as impactful as it would have been years ago because we are already seeing institutional demand.”

However, optimism helped the world’s largest cryptocurrency skyrocket to nearly $ 58,000 this week for the first time since May. Bitcoin has risen by more than 80% since breaking below $ 30,000 in late July. It was up 2.9% to $ 56,959 as of 2:39 p.m. in New York.

The speed of the bounce could be setting the bulls up for disappointment, with Bitcoin briefly entering overbought territory on its 14-day Relative Strength Index. Not to mention, the past few months have been marked by explosive events, from the direct listing of Coinbase Global Inc. in April to the launch of Bitcoin as legal tender in El Salvador in September.

For Stephane Ouellette, CEO of crypto-focused platform FRNT Financial Inc., ETF approval would certainly be good news, but it would be far from a “game changer” at this point.

“Ultimately, I’m not sure this gradually adds a lot of access for investors who are struggling to access the space,” Ouellette said. “With that said, if an ETF were to be approved, all US-based trading platforms would possibly offer access to Bitcoin exposure where only a few do now.”

It has been a long road for ETF advocates, with Cameron and Tyler Winklevoss, the twins best known for their role in the history of Facebook Inc., filing the first application for a Bitcoin ETF in 2013. In August, the president of SEC Gary Gensler noted that policymakers may be more open to an ETF if it were based on futures rather than the cryptocurrency itself, setting the stage for a likely decision based on a deadline for approval or the rejection of current future-based ETF applications.

Even if approved, a futures-backed fund could limit the positive impact, according to Eric Balchunas of Bloomberg Intelligence. Futures-linked ETFs “are not ideal” as the ETF has to roll over futures contracts, which affects performance, he said.

“Investors generally don’t like derivatives, and many advisers don’t like derivatives,” Balchunas said on Bloomberg’s “QuickTake Stock” show. “A physically backed ETF would be an important catalyst. I see this as a minor catalyst. ”

© 2021 Bloomberg


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