Bitcoin Futures ETF Approved, Grayscale Begins Submitting Bitcoin Spot ETF Application

Not surprisingly, the Bitcoin futures ETF issued by ProShares, a well-known ETF provider in the United States, will soon be listed on the New York Stock Exchange. According to Coindesk, the SEC has approved the ETF in an internal meeting.

Since the first bitcoin ETF listing application was rejected in 2013, the SEC has rejected more than ten related ETF applications. If the bitcoin futures ETF is successfully listed, it will become a milestone event.

It should be noted that there is a big difference between the bitcoin futures ETF and the spot ETF. The investment target of the former is not to directly invest in bitcoin, but to provide exposure to the bitcoin futures price of the Chicago Mercantile Exchange (CME). This means that the ETF holders do not directly hold Bitcoin spot, which is equivalent to only investing in a highly volatile price index.

Anthony Pompliano, co-founder of digital asset management firm Morgan Creek, believes that it would be better to approve a bitcoin spot ETF, both from the perspective of price tracking and fee structure.

According to CNBC citing people familiar with the matter, Grayscale Investment, which has not made any major moves for a long time, is planning to apply to convert its Bitcoin Trust Fund (GBTC) into a Bitcoin spot ETF fund. This will be Grayscale’s second application to list Bitcoin spot ETF. Compared with trust funds that only allow high-net-worth qualified investors and professional institutions to participate, Bitcoin spot ETF will greatly reduce the entry threshold, and retail investors can also enter the market through it .

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A bitcoin futures ETF is about to be listed on the U.S. securities market.

Last Friday, ProShares, a well-known ETF provider in the United States, disclosed a revised Bitcoin futures ETF document, which showed that its Bitcoin futures ETF plans to be officially listed for trading on October 18, local time, but the specific listing date has yet to be officially announced. Confirmation, it is not ruled out that it will be delayed for a few days.

ProShares' issuance of the letter symbolizes the completion of the process necessary to go public. Subsequently, the New York Stock Exchange High Growth Board (NYSE Arca) confirmed the listing approval and announced that the bitcoin futures ETF will be traded under the code "BITO", with a management fee of 0.95%.

According to the rules of the U.S. securities market, ETFs listed on exchanges still need to obtain permission from the U.S. Securities and Exchange Commission (SEC). As of October 18, the SEC has not given a written reply. However, according to a Coindesk report on October 16, five SEC commissioners have approved a Bitcoin futures ETF after a meeting. According to a person familiar with the relevant regulatory framework, as long as there is no complaint from the regulator, the ETF will be allowed to trade.

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SEC Investor Education Department Prompts Bitcoin Futures ETF Risks

Since the Bitcoin market has been growing, practitioners have been hoping to promote the listing of Bitcoin ETFs in the US compliance market. In 2013, the Winklevoss brothers, the founders of the Gemini exchange, first submitted a Bitcoin ETF listing application to the SEC, but were later rejected. In the ensuing 8 years, the SEC rejected the listing applications of more than ten Bitcoin ETFs, which made the process of this Bitcoin financial instrument enter the mainstream market very tortuous.

After 8 years of ups and downs, the Bitcoin futures ETF has finally been approved, which will undoubtedly become a milestone event for Bitcoin.

But what needs to be distinguished is that the Bitcoin futures ETF issued by ProShares is different from the Bitcoin (spot) ETF that people used to say.

According to Guo Yatian, president of Tianjiao Fund Company in New York, the ETF is a Bitcoin futures trading fund, and its investment target is not to directly invest in Bitcoin, but to invest in Bitcoin futures prices. According to the disclosure, it is based on the price of bitcoin futures on the Chicago Mercantile Exchange (CME).

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Grayscale started submitting Bitcoin spot ETF application

Although the Bitcoin futures ETF provides investors with an indirect exposure to participate in the Bitcoin market, in the eyes of many practitioners in the encryption industry, this step is not in place. Because it does not directly buy Bitcoin, it is only equivalent to tracking a highly volatile price index.

Anthony Pompliano, co-founder of digital asset management company Morgan Creek, believes that whether it is from the perspective of price tracking or fee structure, it would be better to approve a bitcoin spot ETF, but "beggars" cannot be picky from the beginning. In Guo Yatian’s eyes, if the Bitcoin futures ETF is opened, more similar financial products will be approved.

Indeed, the trend that the Bitcoin futures ETF is about to be listed will soon be transmitted to the market. Last Wednesday, the ARK fund owned by Cathie Wood, known as the "Goddess of Stocks", also submitted a bitcoin futures ETF application to the SEC. According to the latest news, Grayscale Investment (Grayscale), which has not made a big move for a long time, will also come out.

On October 17, CNBC quoted people familiar with the matter as reporting that Grayscale plans to apply to convert its Bitcoin Trust Fund (GBTC) into a Bitcoin spot ETF fund this week. Once the SEC approves the futures-based bitcoin ETF, Grayscale intends to submit an application to the SEC immediately, the person said.

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Grayscale manages 647,500 bitcoins

In fact, it is not Grayscale's original intention to deploy Bitcoin in the form of a trust fund. As early as January 2017, Grayscale submitted an application to the SEC for the listing of a bitcoin spot ETF, but because the SEC believed that the bitcoin market was extremely risky at the time, Grayscale withdrew its application in October of that year. Looking at it now, Grayscale has always had expectations for this goal.

Bitcoin trust funds only allow high-net-worth qualified investors and professional institutions to participate. In comparison, the threshold for bitcoin spot ETFs is much lower, and ordinary retail investors can also indirectly hold bitcoins by buying bitcoin ETFs. As a "giant whale" in the encrypted asset industry, Grayscale undoubtedly hopes that more investors can enter the Bitcoin market through compliant channels. Once the bitcoin spot ETF is approved, it also means that the US securities market officially recognizes bitcoin as an investable financial asset, which will bring massive incremental funds to this market.

However, in the eyes of some analysts, it is intentional that the SEC took the lead in approving Bitcoin futures ETFs instead of spot ETFs. At the Aspen Forum in August this year, SEC Chairman Gary Gensler once stated, "I very much hope that my colleagues will review the ETF based on CME Bitcoin futures." In his view, futures ETFs can provide better protection for investors.

This is mainly due to the fact that Bitcoin itself has spot characteristics and requires a set of compliant custody and private key security management solutions; in addition, there is no complete and compliant secondary platform for buying and selling Bitcoin at a fair price in the market Although trading platforms such as Coinbase and Binance provide Bitcoin transactions, in the eyes of regulators, these platforms cannot avoid risks such as price manipulation of Bitcoin. In contrast, regulators recognize traditional trading platforms such as Nasdaq and CME that have complete pre-market and after-market, market maker seats, and clearing and settlement systems.

Based on this concern, analysts believe that the SEC may not approve the Bitcoin spot ETF in a short period of time unless Bitcoin can be listed on the traditional trading market first.

In any case, if the Bitcoin futures ETF can be the first to be listed on the U.S. securities market, it will be a big step forward for Bitcoin over the past 10 years. In the eyes of the optimists among practitioners, the Bitcoin futures ETF may become a "Bitcoin" Ontology” is a springboard for entering the mainstream financial market.