The writer and market observer behind Tyler Durden of prominent financial news website Zero Hedge, doesn’t expect the SEC to approve a bitcoin hedge fund anytime soon, in light of how long it has taken the agency to act on the Winklevoss ETF and other factors, including China’s dominance of bitcoin trading. Durden thinks the delay in getting a bitcoin ETF approved will keep cryptocurrency volatile, which he thinks is good since it’s an asset traders are looking for given the lack of volatility in other assets.
More than three years ago, Winklevoss Capital Management LLC, launched the Winklevoss Investment Trust, the first proposed bitcoin ETF. In June of 2016, the trust filed to trade on the BATS exchange rather than on the New York Stock Exchange (NYSE). The SEC was expected to make a decision on it by March.
A second group, SolidX Partners last July sought SEC approval for SolidX Bitcoin Trust, another bitcoin ETF, to be listed on the NYSE.
This past Friday, Grayscale Investments filed with the SEC to list its own Bitcoin Investment Trust (BIT) on the NYSE. All three funds are looking to expand bitcoin’s audience.
Initially, the Grayscale trust will seek to launch with $500 million, the filing said, although the target is subject to change. As of Dec. 31, 2016, it had about 1.8 million shares outstanding. Based on a net asset value of $89.39 a share, its assets under management totaled $164.2 million.
The benefits of being first on a major exchange could be big, assuming that bitcoin can establish itself as a viable asset class.
The SPDR Gold Shares ETF, launched in 2004, has $31 billion in assets. The iShares Gold Trust ETF, launched in 2005, has $7.7 billion in assets. Gold, a commodity not backed by any government, has some of the same appeals to investors as bitcoin.
Needham analyst Spencer Bogart wrote earlier this month that there is significant pent-up demand from the investment public for such a vehicle, but the probability of an approval in 2017 is very low due to SEC caution about such a risky asset.
Gemini general counsel David Brill believes factors such as China’s impact on bitcoin’s price make an approval unlikely since the major trading is done on exchanges that might not be following the SEC’s AML guidelines.
Brill said one of the best hopes for further acceptance of bitcoin is newly-elected U.S. President Donald Trump. However, considering a possible “trade war” with China following Trump’s expected policies, Brill said the predominance of bitcoin trading in China could be a hindrance.
Not having an SEC approved bitcoin ETF could be a good, thing, Durden concluded. It will keep bitcoin extremely volatile, which is why it has become the darling asset of traders starved for volatility in a world where central banks have removed daily gyrations from the equity class.
Increasing volatility will, in turn, serve to make SEC approval of a bitcoin ETF all the less likely.
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