There has been some negative movement in the Bitcoin market lately that can be traced back to a variety of causes, including manipulation due to the heightened possibility of US regulators approving a Bitcoin ETF. The struggle to get this particular asset to market has been a long, arduous journey that has spanned years and still has no clear end in sight. Here’s how the possibility of a US-approved crypto ETF continues to affectthe market today and how it may influence it moving forward.
What is a Bitcoin ETF?
An ETF (Exchange-Traded Fund) enables traders to gain exposure to a market without holding the asset directly. You may think that this strategy doesn’t make much sense, but when you delve deeper, there are many reasons why not holding an asset directly could be the best option for a particular strategy.
One of the main benefits and the primary reasons why so many people are pushing a Bitcoin ETF in the US is that it would open the door for large institutional investment firms to join the market and gain exposure to digital assets using others funds. Prior to the approval of an ETF, the lack of regulatory framework has left most traditional trading firms in an odd position.
They would like to offer access to digital assets to their clients but are unable to risk regulatory backlash at a later date. ETFs solve this problem because they are regulated assets that enable users to pool their funds and share in profits. The main thing to understand is that this is an indirect way of accessing profits created by digital assets such as Bitcoin.
Why a Bitcoin ETF in the US is Vital
An ETF would then fall under SEC jurisdiction, which would make it the ideal way for the many large hedge funds and trading firms to offer these services to their clients without risk of legislative reprisal. The US market is already woefully behind in terms of offering a crypto ETF to the public, with other nations long providing this option to their major trading firms.
The US needs to step up and embrace the digital economy if it seeks to remain a global economic force in the decentralized economy of the future. A Bitcoin ETF would signal to the world that the US has upped its blockchain participation and is ready to become a global player in the market. Here are some of the pros and cons of such a maneuver.
Pros
There are a lot of reasons why a Bitcoin ETF is the right move for the US market. For one, it would give the fledgling blockchain industry in the country a nod of approval and stimulate a wave of new projects. This boost in confidence could correlate to long-term gains for many projects in the market.
It would also signal a shift in the market towards larger, more traditional firms. This shift could result in a flood of new products geared towards massive trading firms entering service in the coming months. Most analysts agree that the maneuver would enable the market to tap into billions of VC funding.
The listing of a Bitcoin ETF on any major stock exchange in the US would signal a massive leap forward in crypto adoption. It would also help legitimize these assets and provide access for millions to the decentralized economy indirectly. For these reasons, the Bitcoin ETF dream remains alive and more vibrant than ever.
Another major benefit is that a Bitcoin ETF could result in a number of other projects getting their own ETFs. Projects like Ethereum are mature enough and have enough users to become prime candidates to be the next ETF approved if Bitcoin makes it to market. In the end, there could be ETFs for most of the top projects in the market.
Cons
There are some cons that people have brought up regarding the Bitcoin ETF. For one, Bitcoiners worry that the approval of an ETF will cause the token to slip back into a store of value role rather than a digital electronic cash system. The integration of the off-chain protocol, the Lightning Network, has made it possible for Bitcoin to regain its lost title as electronic cash recently.
Another downside of the Bitcoin ETF struggle so far is that the delays and lack of regulatory uncertainty continue to cause firms to seek friendlier shores. These startups and blockchain projects are leaving the US in search of better options, which has resulted in the US falling behind in the market to offshore and unregulated options.
History of ETF SEC Struggle
There has been years of back and forth between blockchain ETF funds and the SEC (Securities and Exchange Commission). The SEC continues to put forth a variety of unfounded excuses that have left many people wondering when, if ever, a Bitcoin ETF will hit the US market. These questions seemed to take a turn towards the positive as recently some of the world’s largest financial firms have entered the Bitcoin ETF race.
It’s one thing for regulators to snub a crypto exchange, but it’s an entirely different scenario when a firm such as BlackRock, one of the largest real estate funds in the world, decides to submit an ETF filing. Now, for the first time in the entire Bitcoin ETF fiasco, it appears that there is enough momentum to get these products to the market.
The journey to this point has been nothing short of a struggle. The SEC has been both vague and inconsistent in their responses and denials. Here are some of the most valiant attempts to bring a Bitcoin ETF to market and some insight into why the SEC denied their submissions or delayed their response.
Notably, the filing by BlackRock has led to a flood of previous filings being resubmitted. Many of the first ETF funds are now back on the SEC’s table awaiting fresh eyes. Here are the most vital ETF filings and why they matter.
VanEck.
The VanEck Bitcoin ETF is credited as one of the first to get denied by the SEC. This attempt was brought to regulators way back in 2018. At the time, the SEC said that the market was too unregulated, and they feared that manipulation was too prevalent. Both of these reasons were later debunked, as there are gold ETFs, which is another highly unregulated asset.
In December 2020, VanEck again entered the ETF race. This time they set their goals on a spot Bitcoin ETF to be listed on the CBOE exchange. Again, the SEC denied their efforts. This go-around, they claimed that the market wasn’t at the point where it could sustain an ETF. Of course, this was another unfounded excuse, which bought regulators more time.
In July 2023, VanEck again entered the ETF race with another filing. This time, the firm has some serious upgrades to their approach, including the knowledge that other larger firms are now pushing for the same products. This added confidence and momentum could be enough for VanEck to finally complete their multiple-year journey towards Bitcoin ETF access in the US.
Winklevoss
In 2018, the first Bitcoin billionaires, the Winklevoss twins, Cameron and Tyler, filed with the SEC to approve a Bitcoin ETF. The two are the current founders of the regulated Gemini exchange based out of New York. Their goal was to use their regulated exchange status to help bring the ETF to the market in a secure manner.
The SEC denied their early attempt, claiming that there wasn’t enough investor protections in place and that market manipulation was still a major concern. This denial was felt throughout the market, with Bitcoin losing some value directly following the announcement. Today, Gemini remains a powerhouse in the exchange sector, and the Winklevoss twins are more eager than ever to introduce ETF features to their platform.
Fidelity
Fidelity is another major firm that has entered the Bitcoin ETF race in the US. The team is responsible for submitting the Wise Origin Bitcoin Trust ETF in 2021. The fund would’ve enable institutional investors to participate in the market indirectly while retaining the confidence provided by the Fidelity name. The SEC rebuked the claim and denied the ETF on similar grounds to the previous attempts.
In July 2023, Fidelity retried its efforts after filing for a spot Bitcoin ETF. This effort would have a structure more conducive to regulatory approval. For example, the ETF would leverage multiple Fidelity entities to provide more security and regulatory oversight. The Fidelity Digital Assets firm would be the registered custodian of the BTC while the service company would be the admin.
Bitwise
Bitwise is another major blockchain firm that is now on its second attempt to get a Bitcoin ETF approved in the states. The firm originally attempted to get a spot ETF approved back in October 2021 with no success. As with other attempts, the SEC just passed the buck and gave some non-specific excuses without any real means to solve the issues.
In August 2023, the popular crypto platform refiled for an ETF. This maneuver was prompted by the filing by Blackrock and other major firms such as Fidelity. Bitwise executives feel that the market is now mature enough, and regulators need to step up to provide access to these financial tools as soon as possible.
BlackRock
The Bitcoin ETF debacle seems to have hit a high point as the world’s largest asset manager, Blackrock, has now stepped into the fray. This massive firm controls + $8 trillion in assets, which makes it a force to be reckoned with even by the SEC. Blackrock’s filing marks a major milestone in terms of adoption. It also represents a shift in stance from Blackrock’s original anti-Bitcoin stance.
The Blackrock ETF leverages a regulated crypto exchanges to make the product more appealing to regulators. For example, Coinbase, the largest and most trusted exchange in the US, will act as the custodian. The massive exchange will also be tasked with providing accurate spot market data. Additionally, BNY Mellon will be responsible for custodianing the cash reserves.
More Delays from SEC
The SEC is now feeling the pressure as large firms such as Blackrock can’t be just shrugged off like startup crypto companies. The SEC, recognizing this fact, has already made a statement saying that it will postpone any official approvals until early next year. This maneuver will give regulators more time to figure out what, if any, excuses they can pull forth to prevent the inevitable.
What to Expect
The immediate effects of the recent Bitcoin ETF push by Blackrock have left Bitcoin prices plummeting. This maneuver isn’t a big surprise as the firm seeks to gobble up as much cheap Bitcoin as possible before the price suddenly spikes due to a flood of institutional funding entering the market.
The long-term effects will be a further strengthening of the Bitcoin community and other crypto projects. The Bitcoin ETF will almost certainly lead to the approval of other digital asset ETFs and the creation of an entire decentralized ETF market for traders. These developments will provide more opportunity and could lead to major financial reforms, such as local banks supporting digital assets in the coming months.
A Bitcoin ETF will Happen Sooner than Later
Unlike in 2018, when many regulators were still unfamiliar with digital assets, today’s regulators are more informed than in the past. They have seen and experienced firsthand the crypto market’s development and expansion. Blockchain technology isn’t a mystery to these regulators, and they possess the tools to delve deeper into these options to ensure safety and prevent manipulation.
These factors make a Bitcoin ETF an all-around good thing for traders. The growth afforded by this maneuver will build confidence and add profits to those holding these assets. This growth will come despite the short-term losses brought on by large trading firms seeking to drive prices down to stock up their reserves prior to the official approval.