Category Archives: Bitcoin Futures ETF

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SEC Poised to Decide on Bitcoin Futures ETF

The Securities and Exchange Commission (SEC) of the United States has a deadline of 23 August 2018 to make a decision on two Proshares exchange-traded funds (ETFs) based on Bitcoin futures. One of them is a long position, meaning traders make money on the price of Bitcoin futures going up, and the other is a short position meaning traders make money on the price of Bitcoin futures going down.

The SEC has received many different types of Bitcoin ETF proposals and has so far stalled decisions before ultimately rejecting them. With the Proshares Bitcoin futures ETFs, the SEC has already stalled the maximum period allowed and will have to reject or approve it. The market should react positively if these ETFs are approved but it is unlikely to happen. The SEC has recently rejected the Winklevoss Bitcoin Trust ETF and delayed the decision on the VanEck SolidX Bitcoin ETF.

The Winklevoss Bitcoin Trust ETF and the VanEck SolidX Bitcoin ETF would have used actual Bitcoins, providing a way for people to purchase actual Bitcoins via an ETF. An ETF is listed on all the major stock trading platforms, so it would have opened the door for a tremendous amount of institutional investment into Bitcoin.

However, these Proshares Bitcoin ETFs are based on Bitcoin futures contracts which are traded on the Chicago futures markets. The futures trading contracts which have been approved by the Commodities Futures Trading Commission (CFTC) are backed by cash reserves and are settled for cash and, therefore, don’t have a direct impact on Bitcoin’s spot price. Further, Bitcoin futures contracts at this point are essentially paper Bitcoins, which is bad for the market overall since paper versions of commodities tend to suppress a commodities’ price. This can be seen in the gold market, where paper gold on COMEX is suppressing gold price.

Recently, a Bitcoin exchange-traded note (ETN) was approved for use by United States investors, based on actual Bitcoins, which makes it far better than the Proshares Bitcoin futures ETFs. Also, Bakkt is projecting a launch of physical Bitcoin futures by November 2018. Essentially, a Bitcoin ETF is not the only game in town; institutional investors will have the tools they need to invest in Bitcoin with the ETN and the physical Bitcoin futures.

 

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