Tuesday, January 18

Bitcoin jumps as ETF approval optimism reaches fever pitch

Optimism is through the roof in the $ 6.7 trillion exchange-traded fund industry that, after nearly a decade, the first US Bitcoin fund could start trading next week.

Bitcoin shares rose about $ 1000 in minutes in afternoon trading after the US Securities and Exchange Commission’s Office of Investor Education and Advocacy tweeted a notice in June about investing in funds holding Bitcoin futures.

Last week, cryptocurrency lender BlockFi Inc. and Cathie Wood’s Ark Investment Management put their names on applications for futures-backed Bitcoin ETFs, a structure to which Securities and Exchange Commission Chairman Gary Gensler hinted that it would be open. Meanwhile, Valkyrie Investments updated its futures-backed ETF prospectus with the symbol BTF on Wednesday, usually a sign that an issuer is nearing launch, according to Eric Balchunas of Bloomberg Intelligence.

The drama centers on Proshares, as the SEC’s deadline to reject or approve the issuer’s futures-based filing under the Investment Company Act of 1940, a route that offers greater investor protection, expires. on Monday. While the ETF industry has watched the SEC object to countless applications since Gemini Trust Co.’s Cameron and Tyler Winklevoss filed the first one in 2013, Gensler’s own words suggest this time is different, Balchunas said. The SEC chief noted that he would favor funds based on Bitcoin futures traded by CME in August, a stance he reiterated late last month.

“At the end of the day, the strongest evidence is Gensler’s own words. He literally told them what to do, ”Balchunas said. “They can feel what is happening.”

If US regulators give the green light, four futures-backed Bitcoin ETFs could begin trading on US exchanges this month, and application deadlines for Invesco Ltd., VanEck, and are approaching. Valkyrie. Meanwhile, dozens of publicly traded cryptocurrency products have been launched in Canada and across Europe.

Building speculation surrounding a potential US launch has fueled a torrent rally in Bitcoin, with the world’s largest cryptocurrency surpassing $ 58,000 this week for the first time since May. Bitcoin has risen more than 90% since it broke below $ 30,000 in late July.

Of course, it is not certain that the current round of speculation is anything more than wishful thinking. There is about a 25% chance that the SEC will reject or delay a decision next week, Balchunas said. And while issuers are clearly hopeful, there is no way of knowing what regulators think, according to Morningstar Inc.

“Issuers are desperately trying to do everything they can to be the first, or first, out the door. This is a good old-fashioned asset grab, “said Ben Johnson, Global ETF Research Director at Morningstar. “The only thing I think we can say for sure is that they are an indication of where these issuers believe the SEC might be leaning.”

© 2021 Bloomberg


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