Category Archives: etf

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SEC Makes it Easier for Bitcoin ETFs

The United States Securities and Exchange Commission (SEC) has proposed new rules for the approval of exchange-traded funds (ETFs) that makes it more likely that a Bitcoin ETF will soon become a reality. The proposed rules outline a plan that new ETFs can follow to streamline the approval process. This would eliminate the need for ETFs to get a special order from the SEC before they can operate.

Currently, there is USD 3.6 trillion in the United States ETF market, and if even a small fraction of this would be invested into a Bitcoin ETFs, it would cause a major price rally since the Bitcoin market cap is only USD 108 billion. BitMEX CEO Arthur Hayes thinks a Bitcoin ETF would cause Bitcoin’s price to go all the way up to USD 50,000, since a Bitcoin ETF would make investing in Bitcoin as easy as buying stocks. Currently, buying Bitcoin is a completely different process than buying stocks, but if the SEC approves a Bitcoin ETF then it can be bought on major institutional stock trading platforms. Likewise, cryptocurrency expert Michael Strutton says a Bitcoin ETF will drive Bitcoin’s price up to USD 35,000.

The SEC has asked for public comments in an announcement on 26 June 2018 on a Bitcoin ETF developed by SolidX and VanEck that, if approved, will be listed on the Chicago Board Options Exchange (CBOE). This ETF is one of the first to be backed by actual Bitcoins and was designed to address concerns from the SEC that caused previous applications to fail.

The SEC has reserved the right to put some ETF applications under greater scrutiny than outlined in this new proposal if the ETF is complex or leveraged. An ETF based on Bitcoin’s price that is backed by actual Bitcoins is fundamentally not complex and, therefore, Bitcoin ETFs should be able to follow the new streamlined process for approval.

It seems that a Bitcoin ETF is inevitable, it has become a question of when rather than if. Already, the SEC has warmed up to blockchain technology ETFs, and seven blockchain ETFs have been approved in 2018. Should a Bitcoin ETF finally get approved by the SEC in the United States, it will provide an easy avenue for institutional investment.


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Horizons Blockchain ETF Launching on Toronto Stock Exchange

The Horizons Blockchain Technology and Hardware Index exchange traded fund (ETF) will be launching on the Toronto Stock Exchange on 21 June 2018 under the ticker symbol BKCH. The co-CEO of Horizons ETF’s Management Canada Inc, Steve Hawkins, says this ETF will be different from others since it will focus on the hardware and services infrastructure that supports blockchain technology.

Hawkins said in a Bloomberg interview that “we know people will have to invest in the infrastructure to build out blockchain” and “It’s going to be these ancillary services to blockchain technology where the winners are going to be at the end of the day”. Further, he explained that investors would be encouraged to look into global blockchain infrastructure, instead of riskier startup development.

The BKCH ETF will be based on the Solactive Blockchain Technology and Hardware Index, divided into equal thirds:  companies that are focusing on the development of blockchain technology, semiconductor industry which builds cryptocurrency mining hardware, and companies that directly supply other necessary hardware for large-scale cryptocurrency mining operations. A few known stocks that will be part of BKCH are Blockchain Technologies Ltd which develops blockchain applications, semiconductor producer Nvidia Corp, and service provider Digital Trust Realty Inc.

This hasn’t been the best year for ETFs focused on blockchain due to the steep decline in Bitcoin’s price from USD 20,000 to less than USD 7,000 today. The Blockchain Technologies ETF from Harvest Portfolios is down 25% since it launched in February 2018, and the Evolve Blockchain ETF has fallen 20% since March 2018. That being said, there are signs that the Bitcoin market is near its bottom and this may end up being a good time to launch a blockchain ETF.

The Toronto Stock Exchange is the 9th largest stock exchange in the world with a market cap of USD 2.284 trillion as of March 2017. This market cap is eight times greater than the entire cryptocurrency market cap of USD 290 billion, and therefore it is a positive sign for the cryptocurrency markets that a stock exchange with such a large client base is listing a blockchain oriented ETF. This may lead to increased investment in companies that are developing blockchain hardware and technology.


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HB10: Trade 10 Assets With Huobi’s Blockchain Powered ETF

The Singapore headquartered Huobi has announced the debut of the crypto-based exchange-traded fund (ETF) HB10. This means retail traders will now be able to trade in various assets portfolios instead of trading in just one asset at a time.

“Retail traders have been used to the various investment options that accept transactions both in cryptocurrencies and in fiat money, but this investment instrument only accepts cryptocurrencies”.  The company confirmed when it announced its crypto-based exchange-traded instrument called HB10 on Friday.

Founded by Leon Li way back in September 2013, Huobi is focusing on the Chinese market and the Chinese retail investors. Despite focusing on this niche, the HB10 subscription is open to all investors across all blockchain powered investment networks. As reported earlier, the index reflects the overall performance on Huobi Pro using weighted samples.

According to the firm’s recent report, the foreign traders can also register and trade on the HB10. Registration can be done through the verification process on the Huobi website. Essential parameters to trade include personal information, email address and verification of the user’s real name.

In an attempt to disclaim the remarks, one of the company representatives told CoinDesk that the new product would have similar restrictions like the Huobi Pro despite being open for subscriptions. The new instrument excludes investors from the U.S. due to the hindrance from U.S. Securities and Exchange Commission (SEC) security concerns.

“Because of regulatory uncertainties this new offer is available to investors based in China only”. The representative remarked.

Huobi 10 index

Reports from the firm indicate that HB10 was invented to replicate the Huobi 10 index. The Huobi 10 index was used to track 10 assets in real time. The 10 assets were invested in a portfolio and tested for their liquidity and market capitalization on the Huobi Pro exchange.

Diversification of risks

As reported earlier, HB10 is expected to reduce investors’ exposure to risks of trading various cryptocurrency assets through diversification. This optimism is based on the Huobi Pro indication of market performance using weighted samples and data tracking.

As they announced the launch of the HB10 investment instruments, the company has also invited institutional investors to partake on the feasibility of the trade instrument.

“Because we are dealing with a portfolio of investment in various cryptocurrencies, the impact of institutional entry and exit on single cryptocurrencies will be eradicated”.

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DealBook – Winklevoss Bitcoin Trust

DealBook – Winklevoss Bitcoin Trust:

NY Times financial reporters Nathaniel Popper (@NathanielPopper) and Peter Lattman (@PeterLattman) broke the news that the Cameron and Tyler Winkelvoss have filed with the SEC a proposal to create a Bitcoin exchange-traded fund.  Excerpts:

“The plan involves an exchange-traded fund, which usually tracks a basket of stocks or a commodity, but in this case would hold only bitcoins.”

“The Winklevoss Bitcoin Trust could send digital money from the realm of computer programmers, Internet entrepreneurs and a small circle of professional investors like themselves into the hands of retail investors — virtually anyone with a brokerage account.”

“‘The trust brings bitcoin to Main Street and mainstream investors to bitcoin,’ said Tyler Winklevoss, co-founder of Math-Based Asset Services, which would operate the proposed fund.”

“Their proposal has the advantage of coming from the desk of Kathleen Moriarty [who had] a leading role in the creation of the first exchange-traded fund and popular gold- and silver-backed E.T.F.’s.”

“The Winklevosses [previously] went public with their own bitcoin hoard, amounting to about 1 percent of all outstanding coins, or about $10 million.”

“An exchange-traded fund would make it significantly easier to gain exposure to bitcoins, just as commodities-based funds have made investing in gold, silver and other precious metals more accessible.”

“The Winklevoss fund would buy one bitcoin for every five shares, making the value of a single share worth about a fifth of a single bitcoin.”

“‘Digital currencies are not going away,’ said Carol Van Cleef, the head of law firm Patton Boggs’s emerging-payments practice.”

 – (Proposal / S-1 Registration Statement)
 – (Further discussion)

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