Over three years ago, in 2013, the organization of the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the very first proposed bitcoin ETF, the Winklevoss Investment Trust, looking to trade in the HFT-dominated BATS exchange. The SEC is anticipated to generate a decision on it by March. A 2nd group, SolidX Partners followed last July seeking SEC approval because of its bitcoin 401k, SolidX Bitcoin Trust, that would be listed on the NYSE.
Then on Friday, Grayscale Investments, a unit of Barry Silbert’s Digital Currency Group filed together with the SEC to list out its own Bitcoin Investment Trust around the New York City Stock Exchange: similar to the previous two attempts, the fund hopes to get SEC approval to grow the audience to the virtual currency. Initially, the trust will seek to launch with $500 million, the filing said, though the target is susceptible to change. At Dec. 31, it had about 1.8 million shares outstanding. Based upon a net asset worth of $89.39 a share, its assets under management totaled $164.2 million.
As 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. Together with the new filing if approved, the trust would operate being a traditional ETF, meaning that specialized traders would create and retire shares depending on demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., are in discussions to offer as authorized participants, in accordance with the filing. Additionally, the fund’s trustee will be Delaware Trust Co., along with the transfer agent will probably be Bank newest York Mellon Corp., in line with the filing.
The aim of a bitcoin-based ETF is usually to provide an product that could be easier for investors to access and would mute no less than some of bitcoin’s volatility, even though it would hardly eliminate everything, which could still turn it into a riskier investment than other ETFs.
Furthermore, approval “could prove an earlier test for how an SEC run by way of a Donald Trump appointee will greet innovations which may raise investor-protection or any other market-structure issues.” Furthermore, the advantages of being first over a major exchange may be big, assuming that bitcoin does have the ability 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 number of the same reasons as bitcoin… even when many physical hard-core “gold-stacker” fans mock both the thought of a paper gold representing their physical holdings, while relentlessly ridiculing the concept that “digital money” found in a server somewhere, is in any respect safe (following recent dramatic breaches of the Chinese bitcoin exchange, there is a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there is certainly significant pent-up demand in the investment public for such a vehicle” although he conceded that “the possibility of one being approved in 2017 was extremely low, expecting the SEC could be cautious about this sort of risky asset.”
Indeed, as the lawyers who helped craft the application form for which is the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he or she is doubtful the SEC will approve such a request whenever soon. The critique, courtesy of former Gemini general counsel David Brill, is particularly relevant as his old employer’s last and final deadline to obtain approval to the experimental item is on 11th March.
Though Brill is quick to point out he is a “proponent” of the development of bitcoin ETFs and pro-bitcoin regulation more broadly, the prognosis is not going to bode well for the success. In conversation with CoinDesk, Brill explained that he believes factors such as China’s affect on the price tag on investing in bitcoins make an approval unlikely.
Specifically, he stated that “It seems unlikely, among the rest of the reasons, the commission will almost certainly wish to advance using a product where major trading is completed with an exchanges that might not be following our AML guidelines.” Quite simply, China’s domination of bitcoin trading – as much as 98% of recent bitcoin transactions took place in China – would likely force the SEC to deny the bitcoin ETF applications.
Blame China: “a career lawyer for 25 years, Brill worked at Thompson Financial from 2003 through 2010, in the event it acquired Reuters. Just before departing Gemini just last year, Brill worked as being the New York City-based exchange’s general council, where he was quoted saying he helped create the legal infrastructure of your exchange and craft a number of responses to amendments to its S1 filing.”
Though Brill does think that that the bitcoin ETF will ultimately be allowed to do business with a major stock exchange, he was quoted saying the SEC will likely be unlikely to do this while just as much as 95% of all the bitcoin transactions are conducted in China.
That, in addition to the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, creates an even less likely approval, he was quoted saying.
“It’s more the overwhelming majority of trading is not really being done in the united states, and being done within an area in which the regulations are not consistent with all the rules here,” said Brill.
Based on Brill, among the big hopes for more acceptance and expansion of bitcoin is the one and only Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he or she is “cautiously optimistic about a more promising environment for bitcoin companies in the foreseeable future.”
From your strictly small business perspective, he predicted Trump would likely have a pro-bitcoin stance. However, considering concerns about a possible “trade war” with China following Trump’s expected policies, Brill said the predominance of bitcoin trading in the nation may well be a hindrance. He concluded: “I want to try to see what approaches might work to really make it easier for bitcoin companies to expand across the US. Because at this time, it is quite difficult because every state has something different that they want.”
Ultimately, bitcoin investors may need to make do without smartbitcoininvestments for a while, particularly when as some suspect, not only Chinese traders, but local HFTs took over trading of the extremely volatile product. Still, that could be a very important thing: neglecting to get ETF approval only will keep bitcoin extremely volatile, and this is why it is the darling asset of any subset of traders starved for volatility inside a world where central banks have eliminated almost any daily gyrations in the equity class. As a result, we would expect bitcoin vol to merely grow, not decline, during this process making the attainment from the bitcoin “holy grail” very much more improbable.