Bitcoin ETF – Cryptocurrency Electronic Trade Fund Legal Status?
The internet has been buzzing about rumors of a Bitcoin Exchange Traded Fund (ETF) for several months. In March, the SEC rejected the Winklevoss Bitcoin ETF (COIN). However, investors believe the ETF could be given a second shot.
What’s The Current Status Of A Bitcoin ETF?
Let’s take a closer look at what’s going on.
First, there is a bitcoin fund you can buy into today. It’s called the Bitcoin Investment Trust (GBTC). The trust is designed to track the asset price of bitcoin. However, as of June 8, the fund was trading at an enormous premium.
As reported by CNBC, the trust holds 174,174 bitcoins. If you multiply that by the current price of bitcoin, then divide by the number of shares outstanding, it gives you a price in the $250 range. This past week, the fund was trading at $528.
“For investors buying into the fund, such large premiums are a disaster waiting to happen”, analyst Sumit Roy wrote in a statement for ETF.com.
GBTC isn’t truly an ETF. It’s similar to an ETF because it’s passively managed and has been seeking to replicate the movement of bitcoin. It’s also been on the market since May 2015. However, it’s not listed on any major exchange. You buy into the fund in the “pink sheets” market, or over the counter (OTC) market.
However, GBTC does allow investors to invest in digital currency without needing to actually purchase bitcoins on their own – which is similar to the way an ETF works.
Officially, GBTC is an open-end investment trust. That means it can sell unlimited shares (different from a closed-end fund). However, the fund stopped issuing shares in an effort to convert itself into an ETF.
The Winklevoss Bitcoin ETF
Twin brothers and Gemini founders Cameron and Tyler Winklevoss have unsuccessfully tried to introduce a bitcoin ETF to the market over the past few months.
On March 10, 2017, the Securities and Exchange Commission (SEC) rejected the application for COIN, a proposed bitcoin ETF.
On May 25, however, the price of bitcoin surged as it was revealed that the SEC is giving COIN a second shot by reviewing their decision.
What About An Ether ETF?
It was revealed in April that the SEC was reviewing an Ether-based ETF proposal. The proposal was submitted by EtherIndex, which was seeking approval for its Ether Trust ETF.
Some analysts actually believe that an Ether ETF will come before a bitcoin ETF. The SEC released a statement where they argued that Ether was designed as more of a usable currency than bitcoin:
“The Exchange represents that unlike bitcoin, ether was not designed to function purely as a store of value. Instead, ether was meant to pay for specific actions on the Ethereum Network. However, according to the Exchange, ether’s market is currently supported by many of the same online exchanges and the same infrastructure that has developed around the bitcoin network.”
That statement caused a surge in the price of Ether.
Will We Ever See A Bitcoin ETF?
The introduction of a bitcoin ETF would make it easier than ever for people to invest in bitcoin. It could change the future of bitcoin – or it could have a limited impact. Like most aspects of cryptocurrency, even the best industry analysts have no idea what the future holds.
Stay tuned for more information as the SEC continues to review the status of the Winklevoss twins bitcoin ETF. If that ETF is approved, other cryptocurrency ETFs – including Ether ETFs – are sure to follow.