Nov 1, 2021
A newly launched Bitcoin ETF has been growing at record speed
About two weeks ago the U.S. Securities and Exchange Commission has accepted the registration request for the first Bitcoin ETF which goes under the BITO tickler.
Bitcoin traded about $60,000 after the news broke in, which was its highest level since April.
Futures contracts are financial contracts the value of which depends on, or is derived from, the underlying reference asset. In the case of Bitcoin futures, the underlying reference asset is Bitcoin. The SEC had been holding steady for eight years, remaining silent about the once filed application regarding ETF. The cryptocurrency industry that had sought permissions from top regulator for so long that it can definitely be considered as a landmark victory. Another digital asset manager, Valkyrie, was the third company to announce the launch of its Bitcoin futures ETF following the initial approval from the SEC after ProShares and VanEck.
The ETFs proposed by ProShares and Invesco are based on futures contracts and were filed under mutual fund guidelines that SEC Chairman Gary Gensler thinks offer investors significant protection. Cryptocurrency hit the New York Stock Exchange on October 19 with the introduction of a new Bitcoin-linked fund. The fund quickly grew to over $1 billion in assets, becoming the quickest ETF to reach that threshold, according to the report by Bloomberg data analysts.
The new exchange traded fund offered by ProShares has marked a long-awaited milestone, although ahead of BITO’s momentous launches on the New York Stock Exchange, it had been unclear how much interest the new offerings would attract. Investors did rush in. On the first day of BITO, trading exceeded even the most optimistic expectations as the new ETF delivered a record-breaking volume. The ProShares ETF had the second-biggest trading debut for any ETF on record when it launched on October 19 — its share price jumped 4%. Another ETF offered by the Valkyrie Bitcoin Strategy ETF (BTF), started a few days later. It was set to trade on the Nasdaq under the ticker BTF and to track the value of Chicago Mercantile Exchange (CME) Bitcoin futures.
As much as this news has been the most exciting event in crypto industry recently, the question remains: why is this happening now?
First attempted to secure regulatory approval for a Bitcoin exchange-traded fund was made by the Winklevoss brothers eight years ago. Since then, the SEC had either rejected or repeatedly delayed decisions on multiple proposed Bitcoin ETFs. The regulator’s main concerns included possible Bitcoin price manipulation, insufficient liquidity, cybersecurity issues and lack of transparency of trading data needed to price the asset. SEC officials refused to comment on what particularly changed their mind.
Whatever had triggered regulators’ approval of the ETF, it is likely to be a net positive for crypto adoption and mainstreaming. A Bitcoin-related ETF that shorts the price of Bitcoin already exists in Canada and Europe. Both have launched this year and have added to the growing popularity of digital assets.
