The price of Bitcoin has been soaring lately. It crossed the $60,197-mark for the first time this month. Bitcoin has soared about 685.4% in the past year driven by institutional interest (read: Bitcoin at Record $60K: Which Way ETFs are Headed?).
Corporations’ increased acceptance in allowing customers to hold bitcoin and other virtual coins in their online wallets and several central banks’ intention of rolling out digital currencies have been favoring the cryptocurrency.
Notably, there have been repeated attempts in the past by ETF issuers to bring an exchange-traded-product on the cryptocurrency. But none received SEC’s nod. The SEC is seemingly looking for more proof of safety in this trade (read: 10 Most Popular ETFs of This Year).
Still, we are seeing renewed interest this year among issuers with regard to a bitcoin ETF, thanks to the rising tide for cryptocurrencies. North America’s first bitcoin ETF has been launched this year for trading in Canada. Currently, there are two products from Purpose Investment and Evolve Funds Group listed on the Toronto Stock Exchange.
VanEck has filed for a product in the United States after making some unsuccessful attempts in the past Most recently, Fidelity Investments filed for a Bitcoin exchange-traded fund that would track the cryptocurrency using pricing from U.S.-based exchanges. The firm’s Wise Orgin Bitcoin Trust would use underlying prices from exchanges that include Bitstamp, Coinbase, Gemini, itBit and Kraken (read: VanEck Files for a Bitcoin ETF All Over Again).
What Lies Ahead?
The tussle between the U.S. Securities Exchange Commission and ETF issuers over product launch has been going on for about five years now. Several issuers have restructured their proposed products to receive SEC’s green signal but no efforts were of any use.
However, it now looks like that the SEC may approve a fund in the coming days, given rising pressure from issuers. Since the coin has been performing extremely well in the recent months and its acceptance among various players has been increasing, SEC may give a green signal this time. The bulls are wagering on the probability of a continued run as many institutions are starting to launch projects using the underlying blockchain technology.
David Marcus, the head of Facebook Financial, also known as F2, said he hopes the cryptocurrency called Diem will hit the market in 2021. Diem has been rebranded recently from its erstwhile name Libra. It is run by a consortium called the Diem Association.
Then again, the volatility levels in the currency are still extremely high and could possibly be the reason behind the SEC’s yet another rejection on an ETF on bitcoin in the coming days. The crypto market is pretty unregulated at the current level. India is mulling over a ban on any activity on cryptocurrencies.
The issue is that virtual currency can be used to transfer money anywhere in the world too quickly without any intervention from regulated bodies like a bank or government. Illegal activities are thus commonly backed by cryptocurrencies.
Bitcoin’s Impact on the ETF World
While it is still unclear if we will get a bitcoin ETF soon, the sheer success of the cryptocurrencies should benefit semiconductor ETFs like iShares PHLX Semiconductor ETF (SOXX) and VanEck Vectors Semiconductor ETF (SMH). This is because mining of cryptocurrencies needs the usage of semiconductors. A hardware known as an ASIC (Application-Specific Integrated Circuit) is designed explicitly for mining bitcoin.
Also, if investors cannot lay their hands on a bitcoin ETF now, they can definitely familiarize themselves with the concept through blockchain ETFs like Amplify Transformational Data Sharing ETF BLOK. Such emergence of issuers’ interest should benefit blockchain ETFs at least in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
