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Disclaimer: Investing into Cryptocurrency Involves Risk
At the time this article is published, I hold less than $1,000.00 investment in bitcoin, and do not hold or promote any of the investments mentioned in this article. I do not encourage anyone to buy into any investment before consulting with your personal financial expert (i.e. Accountant, Financial Advisor, Investment Broker). There is an extreme risk (and possible rewards) involved with investing in a volatile cryptocurrency, especially bitcoin.
A Brief History of ETF Rejections in Recent Years
There are many investors that are excited about the future of cryptocurrency, and rightfully so. We hear about Bitcoin in the news on a daily basis. Everybody wants to know why there aren't any Bitcoin ETFs available yet. The reason will be explained in this article.
Famous Investors Cameron and Tyler Winklevoss Denied Bitcoin ETF
Even the famous investors Cameron and Tyler Winklevoss (linked to the founding of Facebook, see movie "The Facebook"), were rejected twice for a proposed bitcoin ETF. In response, Cameron Winklevoss said: "Despite today's ruling, we look forward to continuing to work with the SEC and remain deeply committed to bringing a regulated bitcoin ETF to market and building the future of money."
According to Dale Brady, writer at Coindesk, the SEC rejected nine different ETF proposals in August 2018 from firms ProShares, Direxion, and GraniteShares.
Why Non-Tokenized-ETFs Keep Getting Rejected
There is a reason why so many ETFs have been rejected to date, and the main reason is that non-tokenized ETFs track the price of Bitcoin, but the SEC believes that Bitcoin's price is "prone to manipulation."
Don't Lose Hope in a Bitcoin ETF, but there is a Catch
Maxim Nurov, a fund manager of Black Square Capital, says that "the main focus of the SEC is investor protection."
Despite all of the ETF applications being rejected to date, that doesn't mean that there is no hope for the future of bitcoin ETFs, but there is a catch.
The former chairman of the SEC, Jay Clayton said in a webinar with the Chamber of Digital Commerce: "It may very well be the case that [stocks] all become tokenized," and in reference to ETFs, he said, "We're willing to try that; our door is wide open. If you want to show how to tokenize the ETF product in a way that adds efficiency, we want to meet with you, we want to facilitate that."
To sum it up: For an ETF application to be accepted by the SEC, it should be tokenized, to guarantee more protection to investors.
It should be noted that Jay Clayton served as the Chairman of the SEC until December 23, 2020, and the new Chairman may have a different opinion.
A Second Firm Files Application to Offer Bitcoin ETF on NYSE in January 2021
Valkyrie Digital Assets, a cryptocurrency subsidiary of Valkyrie Investments, is ready to offer a bitcoin exchange-traded fund (ETF) on the New York Stock Exchange (NYSE), pending first the approval from the US Securities and Exchange Commission (SEC). It should be noted that there is a rather long history of bitcoin ETFs getting rejected by the SEC in recent years.
This is the second firm to file an application with the SEC, after investment firm VanEck attempted first in 2019 unsuccessfully, and refiled an application again in December 2020 with the hopes that they can offer the "VanEck Bitcoin Trust."
As of the date of this article, no bitcoin ETFs have yet been accepted. I will explain why that is in this article.
Grayscale Bitcoin Trust is a Bitcoin Investment, but it is not an ETF
As far as investing into bitcoin, the Grayscale Bitcoin Trust (GBTC) is currently available as an investment in bitcoin, but it is not an ETF. Tim Hakki, writer at Decrypt, says that Grayscale investment offering often "sells shares worth far more than the Bitcoin it represents."
The company profile says that the fund invests in Bitcoins. It invests through derivatives such as futures, swaps and other CFTC-regulated derivatives that reference digital currencies. The fund seeks to track the performance of the TradeBlock XBX Index. Grayscale Bitcoin Trust was formed on September 25, 2013 and is domiciled in the United States.
Grayscale's website says: "Grayscale Bitcoin Trust is solely and passively invested in Bitcoin, enabling investors to gain exposure to BTC in the form of a security while avoiding the challenges of buying, storing, and safekeeping BTC directly."
According to Lark Davis in his YouTube video (below), he says around the 8:19 mark in the video: "If Grayscale was an ETF, it would actually be a 'Top 50 ETF by the amount of Bitcoin they hold..."
Bitcoin ETF News by Lark Davis
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If you enjoyed this article, please read my other article: Bitcoin Could Become "Digital Gold" in 2021, According to JPMorgan
The following sources were used in researching this article:
Dale, Brady. "VanEck Proposes ETF for Bitcoin, Once Again." Coindesk. Article URL: https://www.coindesk.com/vaneck-proposes-bitcoin-etf-again
Decrypt Staff. "SEC Chairman Open to Crypto-based Exchange-Traded Fund." Decrypt. Article URL: https://decrypt.co/43803/sec-chairman-open-to-crypto-based-exchange-traded-fund
Grayscale company website. URL: https://grayscale.co/bitcoin-trust/
Hakki, Tim. "Valkyrie Digital Assets Becomes Latest Company to File for Bitcoin ETF." Decrypt. Article URL: https://decrypt.co/55141/valkyrie-digital-assets-becomes-latest-company-to-file-for-bitcoin-etf
"SEC Rejects 9 Bitcoin ETF Proposals" Coindesk. Article URL: https://www.coindesk.com/sec-rejects-7-bitcoin-etf-proposals
Valinsky, Jordan. "The Winklevoss twins' bitcoin ETF was rejected." CNN Business. Article URL: https://money.cnn.com/2018/07/27/technology/business/winklevoss-twins-bitcoin-etf/index.html
© 2021 Zeke Love