A decision from the Securities and Exchange Commission (SEC) regarding a number of bitcoin ETFs is imminent. In recent weeks, several significant players (Fidelity and VanEck, amongst others) in the corporate world have thrown their weight behind cryptocurrencies and attempted to enter the digital market using ETFs, sparking debates about what an approval would mean for the crypto and blockchain sphere.
Below are some expert insights from the crypto industry:
Rachid Ajaja, CEO and CoFounder of AllianceBlock, the first globally compliant decentralized capital market, said:
“The approval of a bitcoin exchange-traded fund would enable wider access to and encourage institutional participation in Bitcoin through the likes of retirement accounts and other standard investment vehicles, further legitimizing both it and the wider crypto assets industry as a new asset class. The lack of an ETF to date is hurting investors, as it has led to significant premiums in the Grayscale Bitcoin Investment Trust, which is one of the most popular ways for US citizens to gain Bitcoin exposure. A move to approve a bitcoin ETF would highlight a change in attitude from the SEC under Gary Gensler, but it would also bring about renewed interest, capital inflows, and crucially, help make Bitcoin an even more efficient market. This, in turn, would help bring more investors to the space, creating a more symbiotic relationship that encourages further capital flows.
Li Jun, founder of Ontology, the public blockchain specializing in decentralized identity and data said:
“The approval of a bitcoin exchange-traded fund would be a huge step in the right direction for the mainstream adoption of cryptocurrency trading. Bitcoin’s growing acceptance as an alternative to traditional finance is happening quickly and regulators need to catch up. Without approval from the SEC, crypto-hungry investors enter the market at their own risk. An SEC endorsement of a Bitcoin ETF would see the doors of digital finance open for millions of new users, as well as the freeing up of access to millions of dollars. The United States need only look to the successful launch of the world’s first bitcoin ETF in Canada to see the massive economic benefits that can be gained from embracing this asset class. Regulators should embrace the chance to control digital currencies’ flow into mainstream markets. In doing so, they will harness the huge potential that this new asset class holds while placing effective guardrails on this new currency.”
Sheffield Clark, CEO and Co-founder of Coinsource, the world’s leading provider of Bitcoin ATMs, said:
“A Bitcoin ETF would be another important milestone on the way for Bitcoin to achieve mainstream adoption. Bitcoin has traditionally been a retail market and accordingly, the solutions available on the retail side are quite broad and mitigate different preferences, like instant and direct purchases, no pre-funding of accounts, no connecting of exchanges with personal bank accounts, and self-custody.
On the institutional side, issues with onboarding with exchanges, custody, and pre-funding of accounts keep professional investors from engaging with the asset class. ETFs are one solution to solving a lot of those problems and allowing investment managers to include Bitcoin into their portfolio in a much easier way. As a result, it will drive indirect exposure of fund investors and retail clients to Bitcoin.
Additionally, allowing the issuance of ETFs in the US would allow US regulators to catch up with other regulators and ensure to attract not only local but also global capital that seeks exposure to Bitcoin but in a compliant and institutional grade way. Examples in other jurisdictions like Europe show that ETFs and ETNs work just fine. There is a risk that if ETFs get further delayed, and the momentum of the asset keeps growing, people will look for direct ways to get exposure. While there are many good and safe solutions out, this may open opportunities for scammers.
The crypto market in general, but also Bitcoin in particular, shows significant volatility and sharper price corrections are regularly happening, which in some instances result in drawdowns of 50% or more. There have, however, been ETFs that have been approved with higher volatility than Bitcoin. Bitcoin in large parts of 2020 has shown less volatility than the S&P. From an Institutional Investor standpoint, Bitcoin has been considered largely derisked with the many Bitcoin purchase announcements of large corporates, investment funds, and family offices. This is what is expected to drive down volatility in the course of the next phase of evolution. An ETF would naturally be a further component driving down volatility and allow to soften future price developments. As ETFs would tap into demand for Bitcoin which may not have been addressable through other Bitcoin products, we can assume that the approval of ETFs would have a positive impact on the price development of Bitcoin.”
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