Our experts analyze the growing interest in the Bitcoin-ETF. And why the approval of applications for exchange-traded funds from BlackRock and Fidelity will not be the main reason for the growth of the cryptocurrency price
Optimism among cryptotraders has increased dramatically. This happened after the world’s largest investment management company BlackRock applied for the launch of the first spot exchange-traded fund (Bitcoin-ETF) in the United States. The mood of investors was reflected in the price of the first cryptocurrency – Bitcoin exchange rate exceeded the $30,000 mark.
The application from BlackRock is different because almost all attempts of the company to launch ETFs for other assets have been successful. That said, other players’ bids to create ETFs. And based on Bitcoin trading as an underlying asset, the Securities and Exchange Commission (SEC) has rejected more than 30 times.
On June 29, Fidelity Investments also filed for a bitcoin exchange-traded fund. Fidelity manages more than $11 trillion in assets for 42 million clients.
A spot Bitcoin-ETF is a product that tracks the actual price of Bitcoin. The idea is for investors to access BTC through a regulated and familiar product. And without actually owning bitcoin at the same time.
Exchange-traded funds based on futures are different from spot funds. They offer investors access to futures contracts and not to any asset. When you buy a spot fund, you’re actually buying Bitcoin on the market. If big players show interest in such a product, it may have an impact on the price of the asset.
The conventional wisdom is that a regulated asset in the world’s largest investment market will attract more investors and capital. Proponents hope that the financial strength of BlackRock and Fidelity will succeed where others have failed.
Dozens of asset managers applied for the launch of such a fund.
The first of them were the Winklevoss twins, who filed their first application back in 2014. And when Bitcoin was trading below $1,000, however, the SEC did not accept such applications. And explaining that the cryptocurrency was traded on unregulated exchanges. The agency says it cannot provide investors with assurances that the market is free from fraud and manipulation.
Following the news of BlackRock’s involvement, companies such as Invesco, WisdomTree, Bitwise, Ark Investment Management and Valkyrie. They resubmitted applications to register their own Bitcoin-ETFs, making some changes to the paperwork.
The only crypto-ETFs approved by the U.S. are based on Bitcoin futures contracts. And which are listed on the Chicago Mercantile Exchange (CME). Several futures ETFs have also been able to be launched by smaller players. But that hasn’t led to an influx of institutional interest in cryptocurrency. And buying shares of such funds had no effect on real trading in the crypto market – futures act only as a derivative instrument.
This situation itself is even more interesting because BlackRock chose to apply for the fund during a period of strained regulatory turmoil. This may suggest that the company is looking positively at the state of the crypto industry in the near medium to long term.
Our experts point out that we are likely to see another round of volatility on the news of the application process. Although the procedure is governed by specific deadlines, but as the periods of the past years show. Then the SEC can make various adjustments and change the deadlines at its discretion. And in doing so, adding, for example, the collection and analysis of public comments. It makes no sense to be tied to specific dates: denial, postponement, and approval can happen at any time.
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