Eight years of the US bitcoin ETF, from out of reach to close at hand

On Oct. 15, Bloomberg reported that a bitcoin futures ETF is not expected to face objections from the SEC, according to people familiar with the matter. The market reaction was swift, and Bitcoin rallied.

On October 9, Bloomberg reported that four BTC ETFs are expected to receive approval from the US Securities and Exchange Commission (SEC) by the end of October. The SEC is expected to decide by the end of October whether to approve, reject or delay such ETFs. Bloomberg ETF analyst James Seyffart said he believes approval is likely. "There is no reason for the SEC and chairman Gensler to make the opposite decision less than a month after making positive comments about the BTC futures ETF based on the 1940 law in late September," Seyffart said.

(Gensler teaches Blockchain courses at MIT)

SEC Chairman Gary Gensler has been pushing for Crypto to be included in the regulatory framework, and the way to be included in the framework is naturally to provide investors with compliant Crypto exposure. On Sept. 30, he endorsed the BTC futures ETF over the BTC cash ETF. To date, there are nine BTC futures ETFs awaiting SEC approval.

Just days ago, the SEC approved the Volt Crypto Industry Revolution and Tech ETF, 80% of the fund's holdings will be allocated to entities defined as holding a majority of BTC's net assets or deriving a majority of its income from BTC Mining, lending or trading. This is also seen by the market as a prelude to A BTC ETF.

After a series of regulatory developments, the approval of THE BTC ETF seems to be on the verge of extinction. These news have aroused strong attention in the market, and the market sentiment has been improving. If SEC finally approves Crypto ETF, it will undoubtedly play a demonstration effect in traditional finance. If Crypto ETF rises one after another and financial giants compete to buy Crypto, it is not impossible.

Although several BTC ETFs have been launched before, the launch of Crypto ETF in the United States is still a milestone: BTC will be fully open to the most developed traditional finance, the most capital-intensive place -- the United States, a large number of traditional financial institutions can have exposure to Crypto, the temperature of the market will rise sharply. If the SEC gives final approval, it may add some fuel to the growing market sentiment, and the word "market" no longer needs to distinguish between traditional finance and Crypto world. This event is important enough to penetrate the entire financial market.

Why are ETFs important?

Etfs are an extremely important part of the traditional financial system. When the commodity can appear in the form of ETF, it means the local compliance and maturity of the commodity. Exchange-traded funds (ETFs) can securitize specific assets through physical guarantee. Investors only need to buy the fund shares issued by the institution to hold the exposure of corresponding investment targets indirectly. The product was invented by John Berger, founder of Pilot Capital. In 1993, he launched the world's first and still famous index ETF, the S&P 500 Index ETF.

Several years after the birth of stock index ETF, the first bond ETF was born in 2001. After years of development, THE types of ETF are gradually diversified. How important are ETFs in today's financial markets? We've entered the era of anything and everything ETFs, with Canada even launching the world's first marijuana-themed ETF.

At present, there are three well-known BTC ETFs in the world: The Purpose BTC ETF has 21,700 shares, the 3iQ CoinShares BTC ETF has 20,200 shares, and the CI Galaxy BTC ETF has 3,393 shares. Crypto as a rapidly rising new asset, many institutions are interested in it. But due to compliance requirements, there aren't many alternatives to owning the asset.

In the first half of 2021, BTC once again enjoyed sustained gains. Unlike in the past, this bull market has been dominated by institutions, with the amount of money invested in listed companies far from matching that of retail investors. BTC also hit an all-time high of $64,000, helped by the flood of money. Although Crypto has attracted much attention from traditional finance, Crypto is still not configured in most large traditional financial institutions. Regulatory and compliance issues have always hampered the allocation of Crypto exposure by mainstream financial institutions. ETF compliance, into the supervision, and good liquidity, intra-day trading, if there is a Crypto ETF, will undoubtedly completely open the door of the Crypto world and traditional finance.

Etfs have been one of the most successful investment vehicles available to investors because of their low fees and high intraday liquidity. ETF trading alone accounts for 30 per cent of all trading volume on US exchanges. And how much money can BTC ETF bring to Crypto market?

(Physical gold, which is not easy to deliver, is not the first choice for investors to trade gold.)

Let's take gold. According to data, the scale of gold Bars and Coins in the world is about 38,000 tons, while the scale of the gold ETF market has reached about 2,200 tons. Account for B& C 5.6% of the gold market. Extrapolating from that ratio, ETFs could attract about 6% of their current market capitalization, or about $60 billion at current market values.

Etfs not only solve compliance issues, but also the liquidity they provide to the market. Etfs provide investors with a cheap and simple tool that allows them to access Bitcoin in a safe and easily accessible product. This approach will help better protect investors who don't know Crypto that well: they don't have to actually own bitcoin, know the chain, address, public key, private key, and worry about forgetting their private key and losing their assets.

This will technically level the bar for everyone to invest in Crypto, and while this may not be what BlockChain originally intended, this fairness is surprisingly consistent with what BlockChain is all about.

BTC ETF's "Great Route"

The development of BTC ETFs has been fraught. Back in 2013, the Winklevoss brothers announced the imminent launch of a BTC ETF. The ETF was rejected by the SEC in 2014 after it was filed. Since then, the Winklevoss brothers have tried to set up BTC ETFs in various ways, including changing the trading venue and setting up the ETF. They have applied several times over the years, but have not been successful, and the plan is still stalled. This may be the first attempt at a BTC ETF.

In 2016, SolidX's application for a bitcoin ETF was rejected. 2017 was the year that BTC ETFs looked set to explode. BTC prices changed dramatically during the year, from a low of $789 at the beginning of the year to a high of $18,674 at the end of the year. Within a year, several BTC ETFs applied to be established, starting with BTC Investment Trust at the beginning of the year, VanEck in the middle of this year, As for Exchange Listed Funds Trust, Pro Shares, REX BTC and First Trust at the end of the year, six ETFs submitted form applications within one year, but unfortunately, they were either rejected by the SEC or voluntarily withdrawn, and none of them were successfully issued.

New ETF applications continued in 2018, even as currency prices continued to fall. This year, there were two new players in the market, GraniteShares and Direxion, as well as two old players: VanEck and SolidX, which jointly filed for an ETF. But it's no different from the past year, when the SEC rejected both ETF applications and withdrew the latter's after the partnership fell apart.

At that time, the SEC had not defined BTC clearly, and Crypto was neither a security nor a financial derivative. As a nonphysical Commodity, BTC is theoretically not regulated by the SEC and Commodity Futures Trading Commission, which is one of the main reasons BTC ETFs are frequently rejected.

Every year since then, one or more BTC funds have applied, but without exception, they have failed. Applications have been rejected and expectations dashed, and the launch of BTC ETFs seems to be forever stuck in "next year". Until today, the issuance of "the first BTC ETF in the United States" is still in the status of "expected approval".

It's 2021, and the wheels of history are finally slowly turning forward. In February, Canada approved the Purpose BTC ETF, the world's first BTC ETF. The ETF (ticker symbol BTCC) traded 9.3 million shares and $145 million on its first day of trading on the Toronto Stock Exchange, making it one of the 10 most actively traded securities of the day.

Within a few months, the Crypto ETF began to grow, quickly completing a path that had not been done in years. Just two months after the launch of BTC ETF, three ETH ETFs were also approved for listing, namely: The Purpose Ether ETF (ETHH) from Purpose Investment, CI Global Capital Management's CI Galaxy Ethereum ETF (ETHX) and Evolve Capital Group's Evolve Ether ETF (ETHR).

Represented by gray scale, ETF alternative & NBSP;

The cross-chain bridge widely existing in the Crypto world communicates different infrastructures, and in the two markets of traditional finance and the chain world, there is also an urgent need for a "bridge" to communicate the two. Greyscale Trust is the most famous of these Bridges.

(Traditional financial institutions on Wall Street cannot conveniently allocate Crypto exposure)

If a compliant institutional investor is bullish on Crypto, how can you allocate Crypto exposure in a fully compliant situation? Greyscale trust is one answer. In this round of institutional boost in the bull market, the rapid rise of gray trust, also let the traditional financial industry to see a new opportunity -- into the Crypto world is the real demand of the market urgently needed. Even at present, gray is still the largest position in the organization, its BTC position has reached 649,000. In a long period of time, gray trust share has been one of the main ways for institutions to invest Crypto currency indirectly.

Unfortunately for Greyscale Trust, it's not that "easy to use". Grayscale is not a true ETF and has long been seen as an alternative to Crypto ETFs. While it provides institutions with Crypto exposure, greyscale trusts also have a significant disadvantage compared to true ETFs. The GBTC share of grayscale trust not only has a 6-month lock-up period, but can only be resold after unlocking and cannot be redeemed. This special mechanism may also be one of the reasons for the long-term premium of grayscale share compared with BTC. In the long period of several years, gray GBTC has maintained a high premium level, the highest even more than 100%. The lack of a regulatory framework leaves institutional investors with few easy-to-use tools to get in.

Greyscale trusts aside, there are other alternatives on the market. Back in 2017, Tobam launched the world's first BTC mutual fund. In the same year, Swissquote Group of Switzerland launched BTC certificate ETP products and listed them on Six Swiss, the largest stock exchange in Switzerland. Since then, Germany, Sweden, Austria and other countries have issued Crypto ETP products. Like grayscale trusts, these products can only partially fulfill the functions of ETFs -- ETPs are essentially bonds and cannot be incorporated into a fund's regulatory framework.

Within the current regulatory framework, Crypto ETF is the real demand of the market. After all, alternative ETF alternatives cannot really replace ETF. If it is possible to set up a Crypto ETF, it is possible to set up a fully compliant, intra-day trading, financial institutions can be regarded as a fund to buy financial products. This greatly reduces the threshold for institutions to configure Crypto. This is one reason why the Crypto industry is still filing applications after eight years of repeated rejections.

Cryptoetfs are now poised to accelerate. But in the US, the most capital-intensive, there are still no compliant ETFs. According to statistics, up to now at least 15 asset management institutions in the United States have applied for Crypto ETF at least 35 times. Unfortunately, none has been approved so far. With the gradual improvement of compliance framework, the door of Crypto world is gradually opening to traditional finance. If the BTC futures ETF is approved, it will have a demonstration effect in the traditional financial field. Whether the US Crypto ETF will catch up with the rest of the world, or be "expected to launch" for several years, we still need to wait for time to tell.    

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