Regulatory Rule Change Seen Coming to Allow Bitcoin ETFs

Regulatory Rule Change Seen Coming to Allow Bitcoin ETFs

Regulatory Rule Change Seen Coming to Allow Bitcoin ETFs


The US Securities and Exchange Commission (SEC) is considering a rule change that may allow bitcoin  ETFs to be listed on exchanges.

According to a document posted on the SEC website, the agency has begun the process to approve or disapprove a change in its rules that allows 2 Bitcoin ETFs to be listed on the NYSE Arca exchange.

The 2 ETFs are Proshares Bitcoin ETFs and Proshares Short Bitcoin ETFs.

Both proposed ETFs track Btcoin futures contracts on the Cboe and the CME. The latter ETF provides returns equal to the inverse of daily performance of Bitcoin futures.

The introduction of bitcoin ETFs could add further liquidity to Bitcoin markets by providing another venue for investors, institutional and individual, to bet on the cryptocurrency.

Currently Bitcoin-based ETFs trade on OTC markets and have reaped spectacular returns in the last year. But, those numbers are marred by the volatility of underlying unregulated exchanges that they track.

A regulated Bitcoin ETF could help tamp down the premiums and wild swings in prices by instituting controls and rules on their movement and requiring self-certification.

Currently, Bitcoin is trading at: 6,849.9951+284.48, or +4.33%, at the close: 5:02a BST

The SEC published a letter this January detailing its concerns about an ETF. Those concerns span a broad range of issues from custody problems due to Bitcoin’s digital provenance to arbitrage issues stemming from the absence of liquidity in Bitcoin markets.

The US agancy is not the only one worried about these issues.

In a note earlier this year, Goldman Sachs (NYSE:GS) said Bitcoin was much better suited as a crypto commodity rather than a cryptocurrency. “With no large institutions operating across exchanges, there is likely an insufficient scale of arbitrage,” the firm wrote in its note to investors.

But the introduction of Bitcoin futures at Cboe and CME last year has provided momentum to the movement again.

Proposals in the new crop of ETFs aim to track Bitcoin futures, which are regulated by the CFTC instead of prices at cryptocurrency exchanges helps allay the SEC’s concerns regarding unregulated exchanges.

Have a terrific weekend

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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