HOKIE: About the Bitcoin ETF

发表时间:2021-11-02

An ETF is a publicly traded investment vehicle, like a stock, but can track the performance of an underlying asset or index rather than a company. The Bitcoin ETF tracks the current price of Bitcoin and moves roughly in sync with its price movements, and it works in much the same way as any other ETF.

Why is a Bitcoin ETF needed?

For most traditional investors, their investment style tends to be prudent or conservative, and they are generally concerned about the risks of bitcoin and cryptocurrencies.

They are also unfamiliar with buying and holding methods. Lack of understanding of how to use cryptocurrency wallets (including securing private keys) and lack of trust in crypto exchanges. Some degree of education is required in unfamiliar areas.

Bitcoin ETFs will be more comfortable for traditional investors, as easy and convenient as stocks, without worrying about the security of private keys, and as attractive as accessing the cryptocurrency market without the hassle of buying and saving.

Bitcoin ETFs are managed by companies that buy and actually hold bitcoins, and their price is tied to the number of bitcoins held in the fund. The company lists etFs on traditional stock exchanges, and investors buy and sell them as if they were shares. Bitcoin ETFs also offer new types of trading opportunities, including short selling, in which investors can bet on bitcoin.

That's why so many hedge funds and investment firms have filed bitcoin ETFs with the SECURITIES and Exchange Commission. As of April 2021, there were at least seven high-profile applications for Bitcoin ETFs on the market, from Fidelity, VanEck, SkyBridge Capital, Bitwise and others.

The first bitcoin ETF application was made in 2013 by the Winklevoss Twins, founders of Gemini (Winklevoss Bitcoin Trust). In 2018, the US Patent and Trademark Office granted the Winklevoss brothers a patent for an "exchange-traded product" but did not approve its ETF or any other ETFs.

A brief history of bitcoin ETFs

• July 2013: Winklevoss Bitcoin Trust submits the first Bitcoin ETF proposal.

• June 2018: THE SEC rejects a second Bitcoin ETF proposal from Winklevoss.

• October 2019: THE SEC rejects Bitwise's bitcoin ETF proposal.

• February 2020: Wilshire Phoenix becomes the SEC's latest case to reject its bitcoin ETF.

• September 2020: The world's first Bitcoin ETF goes public on the Bermuda Stock Exchange.

• December 2020: VanEck submitted its latest proposal for a Bitcoin ETF after withdrawing its previous proposal before being formally rejected multiple times.

• February 2021: Canada's first Bitcoin ETF is launched, the Purpose Bitcoin ETF (BTCC). Two more will be approved in the same month: Evolve Bitcoin ETF (EBIT) and CI Galaxy Bitcoin ETF (BTCX).

What makes bitcoin ETFs special

If the SEC approves a Bitcoin ETF, it is expected to bring mainstream trust and acceptance to bitcoin investment. In 2020 and 2021, large public companies, including Square and Tesla, bought bitcoin as investments on their balance sheets, spurring the cryptocurrency's popularity, but many conservative investors still see the activity as a risky choice, even gimmicky.

The SEC's approval of a Bitcoin ETF means it will be easier for institutional investors to speculate on bitcoin prices. It would functionally bring bitcoin to Wall Street, allowing bitcoin ETFs to trade in the same locations as stocks, bonds, gold, oil or any other traditional asset, potentially driving bitcoin's price significantly higher.