Over 36 months ago, in 2013, the corporation of the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the initial proposed bitcoin ETF, the Winklevoss Investment Trust, looking to trade in the HFT-dominated BATS exchange. The SEC is anticipated to make a decision onto it by March. A 2nd group, SolidX Partners followed last July seeking SEC approval because of its bitcoin IRA, SolidX Bitcoin Trust, which also can 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 its unique Bitcoin Investment Trust about the Ny Stock Exchange: just like the previous two attempts, the fund hopes to acquire SEC approval to expand the viewers for your virtual currency. Initially, the trust will attempt to launch with $500 million, the filing said, even though the target is subject to change. At Dec. 31, it had about 1.8 million shares outstanding. According to a net asset price 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. With all the new filing if approved, the trust would operate being a traditional ETF, and therefore specialized traders would create and retire shares based upon 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 likely be Delaware Trust Co., and also the transfer agent will be Bank of the latest York Mellon Corp., in accordance with the filing.
The aim of a bitcoin-based ETF would be to present an product that would be easier for investors to gain access to and would mute at the very least a number of bitcoin’s volatility, even though it would hardly eliminate everything, which will still make it the riskier investment than most other ETFs.
Furthermore, approval “could prove an earlier test for how an SEC run with a Donald Trump appointee will greet innovations that could raise investor-protection or any other market-structure issues.” Furthermore, the advantages of being first with a major exchange could possibly be big, assuming that bitcoin does find a way to establish itself 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, draws investors for some of the same reasons as bitcoin… even if many physical hard-core “gold-stacker” fans mock both the idea of a paper gold representing their physical holdings, while relentlessly ridiculing the notion that “digital money” contained in a server somewhere, is in any way 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 from the investment public for this sort of vehicle” although he conceded that “the chance of one being approved in 2017 was extremely low, expecting the SEC might be cautious about this type of risky asset.”
Indeed, among the lawyers who helped craft the application form for which will be the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he or she is doubtful the SEC will approve such a request any moment in the near future. 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 for the experimental item is on 11th March.
Though Brill is quick to indicate he or she is a “proponent” of the roll-out 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 he believes factors including China’s influence on the cost of bitcoin investing make an approval unlikely.
Specifically, he was quoted saying that “It seems unlikely, among the rest of the reasons, how the commission is going to want to advance by using a product where major trading is performed with an exchanges that will not be following our AML guidelines.” Put simply, China’s domination of bitcoin trading – around 98% of recent bitcoin transactions happened in China – would likely force the SEC to deny the bitcoin ETF applications.
Blame China: “a career lawyer for 20 years, Brill worked at Thompson Financial from 2003 through 2010, if it acquired Reuters. Prior to departing Gemini this past year, Brill worked as the New York-based exchange’s general council, where he explained he helped produce the legal infrastructure of your exchange and craft a number of responses to amendments to the S1 filing.”
Though Brill does think that that the bitcoin ETF could eventually be allowed to complete business on the major stock exchange, he explained the SEC will probably be unlikely to do this while around 95% of most bitcoin transactions are performed in China.
That, along with the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, makes for a level unlikely approval, he was quoted saying.
“It’s more the overwhelming most of trading is not really being carried out in the usa, and being carried out in an area the location where the policies usually are not consistent together with the rules here,” said Brill.
In accordance with Brill, one of many big hopes for even more acceptance and expansion of bitcoin is none other than Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he is “cautiously optimistic about a more promising environment for bitcoin companies in the foreseeable future.”
Coming from a strictly local company perspective, he predicted Trump would likely go on 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 within the nation can be quite a hindrance. He concluded: “I would like to try to view what approaches might work so it will be easier for bitcoin companies to expand throughout the US. Because today, it is rather difficult because every state has something different which they want.”
Ultimately, bitcoin investors may have to make do without smartbitcoininvestments for some time, particularly when as some suspect, not merely Chinese traders, but local HFTs took over trading from the extremely volatile product. Still, that could be a good thing: failing to get ETF approval will simply keep bitcoin extremely volatile, which is why it has become the darling asset of a subset of traders starved for volatility within a world where central banks have eliminated almost any daily gyrations from the equity class. Therefore, we would expect bitcoin vol just to grow, not decline, during this process making the attainment of the bitcoin “holy grail” that much more improbable.