Over 3 years ago, in 2013, the company from the Winklevoss twins, Cameron and Tyler, Winklevoss Capital Management LLC, launched the initial proposed bitcoin ETF, the Winklevoss Investment Trust, planning to trade about the HFT-dominated BATS exchange. The SEC is expected to make a decision onto it by March. Another group, SolidX Partners followed last July seeking SEC approval due to its bitcoin IRA, SolidX Bitcoin Trust, which can be on the NYSE.
Then on Friday, Grayscale Investments, a unit of Barry Silbert’s Digital Currency Group filed with all the SEC to list out their own Bitcoin Investment Trust about the New York City Stock Exchange: as with the previous two attempts, the fund hopes to obtain SEC approval to grow the target audience for your virtual currency. Initially, the trust will attempt to launch with $500 million, the filing said, though the target is subjected to change. At Dec. 31, it had about 1.8 million shares outstanding. Based upon a net asset importance 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 the new filing if approved, the trust would operate being a traditional ETF, which means specialized traders would create and retire shares based on demand.”
Two Wall Street firms, KCG Holdings Inc. and Wedbush Securities Inc., will be in discussions to provide as authorized participants, based on the filing. Additionally, the fund’s trustee will probably be Delaware Trust Co., and the transfer agent is going to be Bank of brand new York Mellon Corp., based on the filing.
The goal of a bitcoin-based ETF is usually to provide an product that will be easier for investors gain access to and would mute no less than several of bitcoin’s volatility, while it would hardly eliminate all of it, which will still make it the riskier investment than many other ETFs.
More importantly, approval “could prove a young test for the way an SEC run by way of a Donald Trump appointee will greet innovations which may raise investor-protection or any other market-structure issues.” Furthermore, some great benefits of being first with a major exchange could possibly be big, assuming that bitcoin does find a way to establish itself as 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, attracts investors for several of the same reasons as bitcoin… even when many physical hard-core “gold-stacker” fans mock both the concept of a paper gold representing their physical holdings, while relentlessly ridiculing the notion that “digital money” incorporated into a server somewhere, is in any respect safe (following recent dramatic breaches of your Chinese bitcoin exchange, these people have a point).
Earlier this month, Needham analyst Spencer Bogart wrote that “it appears there is certainly significant pent-up demand through the investment public for this kind of vehicle” although he conceded that “the possibility of one being approved in 2017 was really low, expecting the SEC may be cautious about this type of risky asset.”
Indeed, as the lawyers who helped craft the application for what will be the first-ever bitcoin exchange-traded fund (ETF) told Coindesk, he is doubtful the SEC will approve this sort of request whenever anytime soon. The critique, thanks to former Gemini general counsel David Brill, is especially relevant as his old employer’s last and final deadline to obtain approval for that experimental product 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 its success. In conversation with CoinDesk, Brill explained that he or she believes factors for example China’s affect on the buying price of bitcoin investing make an approval unlikely.
Specifically, he was quoted saying that “It seems unlikely, among all of those other reasons, the commission will wish to advance by using a product the location where the major trading is done upon an exchanges that may not be following our AML guidelines.” Quite simply, China’s domination of bitcoin trading – as much as 98% of recent bitcoin transactions happened in China – would likely force the SEC to deny some of the bitcoin ETF applications.
Blame China: “a career lawyer for 20 years, Brill worked at Thompson Financial from 2003 through 2010, in the event it acquired Reuters. Prior to departing Gemini a year ago, Brill worked as the The Big Apple-based exchange’s general council, where he was quoted saying he helped create the legal infrastructure in the exchange and craft numerous responses to amendments to its S1 filing.”
Though Brill does feel that which a bitcoin ETF may ultimately be permitted to accomplish business with a major stock exchange, he explained the SEC will likely be unlikely to do this while around 95% of all the bitcoin transactions are performed in China.
That, in conjunction with the China government’s recent crackdown on cryptocurrency exchanges and anti-money laundering practices, results in an even unlikely approval, he said.
“It’s more the overwhelming most of trading is not really being done in the usa, and being carried out in an area the location where the regulations and rules are not consistent with the rules here,” said Brill.
As outlined by Brill, one of several big hopes for further acceptance and continuing development of bitcoin is none other than Donald Trump. Speaking shortly before Donald Trump’s inauguration as President, Brill said he or she is “cautiously optimistic in regards to a more promising environment for bitcoin companies in the foreseeable future.”
From your strictly local company perspective, he predicted Trump would likely require 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 could be a hindrance. He concluded: “I would like to try to discover what approaches might work so it will be easier for bitcoin companies to grow all over the US. Because right now, it is quite difficult because every state has something different they want.”
Ultimately, bitcoin investors may need to make do without smartbitcoininvestments.com for a while, especially if as some suspect, not just Chinese traders, but local HFTs have taken over trading of the extremely volatile product. Still, that could be the best thing: failing to get ETF approval will just keep bitcoin extremely volatile, which is also why it has become the darling asset of the subset of traders starved for volatility within a world where central banks have eliminated virtually any daily gyrations through the equity class. As a result, we will expect bitcoin vol to simply grow, not decline, at the same time making the attainment of the bitcoin “holy grail” so much more improbable.