Will The SEC Approve A Bitcoin Futures ETF In 2021? Here Are The Implications


Rumors are flying. The SEC could approve an ETF on Bitcoin Futures before the end of the year. What does this mean? And why Bitcoin Futures ETF in front of one for the asset itself? That’s what we’re exploring here. It looks like the U.S. Securities and Exchange Commission won’t give a go-ahead to the mythical Bitcoin ETF yet … or ever, but a new option has some companies salivating.

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But first, why does the SEC hesitate to approve the Bitcoin ETF? Investopedia answers:

“The reason is that bitcoin, the largest cryptocurrency in the world in terms of market capitalization, remains largely unregulated. Additionally, the Securities and Exchange Commission (SEC) is reluctant to allow an ETF focused on the new and largely untested cryptocurrency market to make its way to the public. “

If that’s true, what makes us think that a Bitcoin Futures ETF is not only possible, but coming soon? Well, last month The SEC president Gary Gensler told the Aspen Security Forum:

“I anticipate that there will be registries of exchange-traded funds (ETFs) under the Investment Companies Act (Act ’40). Combined with the other federal securities laws, the ’40 Act provides significant investor protections.

Given these important protections, I look forward to the staff’s review of such records, especially if those will be limited to these future Bitcoin-traded CMEs. “

Is Bitcoin Futures ETF What US Investors Want?

Because Gary Gensler sent such a clear signal, the financial world responded in unison.

“At least four active managers have asked for ETFs to invest in bitcoin futures after the chairman of the Securities and Exchange Commission Gary Gensler earlier this month indicated that he could approve such funds. But investors may not want them. instead of physically supported bitcoin ETFs, analysts said. “

But who is interested in ETFs? Well, according to Investopedia, “Bitcoin ETF mimics the price of the digital currency, allowing investors to buy into the ETF without trading bitcoin itself.“Some investors or groups simply can’t invest in bitcoin, the asset, because their own internal rules won’t allow them. They cannot buy bitcoin with a short account. No financial institution supports it, so no one protects them. And, of course, is the dreaded volatile.

Bloomberg explains how Bitcoin fixes this:

“Bitcoin ETFs could help circumvent those limits because the format is more widely accepted. There are all sorts of concerns and regulatory hurdles for large financial institutions to cross,” said Ross Mayfield, an investment strategy analyst at Robert W. Baird & Co. If it were offered on an ETF, it explains a lot about it for financial institutions. “

However, it appears that the SEC will not approve one any time soon. Why would they approve an ETF on Bitcoin Futures instead? Bloomberg continues:

“For the purposes of the SEC, Bitcoin futures also offer additional security, as they are governed by the Chicago Mercantile Exchange and force investors to put money on a margin to trade, as a form of collateral.”

BTCUSD price chart for 27/09/2021 - TradingView

BTC price chart 09/27/2021 on Coinbase | Source: BTC/USD on TradingView.com

Experts and Major Players Disagree

While some companies can’t wait for the Bitcoin Futures ETF to be available, others are less enthusiastic. One of those is Michael Sonnenshein, CEO of Grayscale Investments. His company is one of the many that have applied for a Bitcoin ETF and are still awaiting approval. In a recent CNBC interview, he said:

“It would be short-sighted by the SEC to allow a future-based product into the market before a particular product,” Sonnenshein told CNBC’s “Squawk Box” on Tuesday. “They really have to allow both products into the market at the same time and let investors choose how they want.”

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Of course, he invests a lot in this result. His company’s Grayscale Bitcoin Trust is incredibly successful, but if they manage to transform it into an ETF, the scale could be parabolic. However, he is not the only one who thinks so. In the Bloomberg article, another expert deepened the limits of the Bitcoin Futures ETF:

“With future products, you have introduced an additional cost, more complexity, you have future contracts that need to be fulfilled,” Geraci of the ETF store said. “It’s just a suboptimal option for investors.”

Anyway the approval of Bitcoin ETF is just speculation. Gary Gensler said he is looking forward to reading his staff’s review of the fillings, which is no guarantee of any fantasy.

Featured Image by Markus Winkler from Pixabay - Charts by TradingView



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