4 July 2020

Since its launch back in 2008, Bitcoin has become one of the most popular cryptocurrencies ever. Every hour, news about Bitcoin is released. Its community keeps growing. Bitcoin developers have created different tools for this protocol. One could ask, “what’s next for Bitcoin?”. Truth is, there is something relatively new: Bitcoin ETF. But first, we need to know what an ETF is.

What is an ETF?

ETF stands for exchange-trading fund. An ETF is a basket of securities (stocks, bonds, commodities, etc.) that are traded on a secondary market. Likewise, an ETF share can be traded or exchanged at any moment. 

They are also used in many investment strategies as DCA for their low cost. They are tax-efficient, and they behave like a regular stock. ETFs offer you diversity. They do this by holding thousands of shares in various industries around the world.

A curious thing about ETFs is that their purpose is to replicate the behavior of a reference index. This is like buying all the shares that are in the said reference index in a single operation. 

An ETF allows the investor to save time (and money) on broker fees and expense ratios. Also, it is liquid enough to maintain buy and sell prices throughout the trading session.

Bitcoin ETF: A secure alternative for investment

Cryptocurrencies can be an unknown world for most investors. Bitcoin ETFs represent an investment opportunity for investors who wish to enter the crypto market. They combine traditional investment tools and the largest cryptocurrency in the world. These ETFs offer you all these advantages along with the benefits of this new market.

A Bitcoin ETF replicates the prices of the cryptocurrency. It works just like a traditional exchange-trading fund. The investor can buy into ETFs without going through the process of trending Bitcoin. 

Benefits of a Bitcoin ETF

Furthermore, investors will not directly invest in Bitcoin itself. This means they do not need to be worried about legal frameworks, storage, and security. 

Another advantage of a Bitcoin ETF is that investors do not have to deal with exchanges. They can buy and sell the ETF using traditional exchanges and markets. They can build positions in the crypto market by using a known investment tool. This may help increase the adoption of cryptocurrencies soon. 

Bitcoin ETFs and the SEC

 

The introduction of Bitcoin ETFs into the marketplace is attractive for some firms. Yet, this investment tool is still on the road. Cameron and Tyler Winklevoss, founders of the Gemini exchange, were the first to introduce this. They tried bringing this financial product to the market in 2013. They made their petition to launch a Bitcoin ETF called the Winklevoss Bitcoin Trust. 

The U.S Securities and Exchange Commissions (SEC) rejected their petition in 2017. According to the SEC, tax fraud and other types of frauds can be committed with Bitcoin. This is because Bitcoin operates in poorly regulated exchanges.

VanEck and SolidX Proposal

 

The Winklevoss twins were not the only ones interested in launching a Bitcoin ETF. VanEck and SolidX, a blockchain startup, were looking to become the first company to launch a Bitcoin ETF. They proposed a project called the VanEck SolidX Bitcoin Trust ETF (XBTC). 

Their main target was institutional investors. The purpose of this project was to track an index related to a Bitcoin trading desk. But their petition was removed before the SEC could decide.

Conclusion

The SEC has rejected nine Bitcoin ETFs projects in the last six years. But, The SEC has opened Bitcoin ETFs application to public comments. This has made investors, analysts, and the crypto community remain optimistic. There could be the beginning of a possible approval soon. It is just a matter of time before the SEC decides to approve a Bitcoin ETF project.

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Edmund McCormack
Tech industry veteran and blockchain technology investor. Simplifying cryptocurrency for almost a decade.

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