- The SEC has started reviewing applications for bitcoin exchange-traded funds, which have yet to launch for trading in the US.
- The regulator will consider bitcoin’s volatility and market maturity in rendering a decision whether or not to greenlight the products, experts say.
- The SEC recently pushed back a decision on a bitcoin ETF until at least this summer.
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Bitcoin’s fast-growing popularity, increasingly elevated profile in corporate America and swelling market capitalization above $1 trillion have retail and Wall Street investors alike questioning if and when a bitcoin exchange-traded fund can be traded in the US. Those questions are currently before the Securities and Exchange Commission which is being asked in at least nine applications for the green light to launch what could be the first cryptocurrency ETF in the country.
But a decision may have to wait at least until mid-June. The SEC this week delayed rendering a decision on a bitcoin ETF from asset manager VanEck that, if cleared, would be listed by CBOE Global Markets. The Commission said it was “appropriate” to take more time for consideration.
The arrival of a bitcoin ETF in 2021 would follow this month’s start of trading in shares of Coinbase, the first cryptocurrency exchange to go public, as well as expanding acceptance of bitcoin as payment methods by companies including electric vehicle maker Tesla. Meanwhile, investment bank JP Morgan is preparing to introduce its first bitcoin fund for wealthy clients.
These and other bitcoin developments may signal the increased likelihood that a bitcoin ETF will gain approval, but the SEC has rejected other attempts.
Institutions “are getting in from hedge funds on Wall Street to PayPal, to Venmo, to Visa. So [the SEC] can’t really ignore this because the market is deciding that they want to be involved,” Ian Balina, founder and CEO of Token Metrics, a data-driven cryptocurrency investment research platform, told Insider.
Here are three hurdles and tailwinds that experts say stand in front of the first US bitcoin ETF:
1) Bitcoin volatility
The world’s most widely traded digital asset is well-known for its wild price swings, with gains or losses of 10% during a session not uncommon.
“The SEC has a difficult job balancing the clearly overwhelming desire for the market to have access to BTC via an ETF versus the inherent volatility that the asset class has at this stage in its life cycle,” George McDonaugh, co-founder of digital asset investment firm KR1, told Insider. “Volatility would be one of the major considerations. Bitcoin is very scarce and comparatively still a very young asset class. The volatility should dampen over time but that might be long after the market loses patience waiting for [a bitcoin ETF].”