Much crypto investor focus has been placed on decentralized finance over recent months. But an underlying narrative remains the potential for a U.S.-regulated Bitcoin exchange-traded fund, which should theoretically allow any investor to easily and securely build a bet on digital assets.
Firms such as Gemini and VanEck have made multiple attempts at launching a Bitcoin ETF for the masses, but all attempts have failed thus far.
Bitcoin ETF chances
Bitcoin ETF chances are increasing, pseudonymous analyst “Z” or “Split Capital” recently commented:
“Through the ashes of unregulated bitcoin exchanges emerges the possibility of a phoenix in the form of structured products for investors. BTC is just starting to make headlines in global markets, 2021 will be ripe for Bitcoin to start its regulated path.”
With all of the regulatory scrutiny attached to the digital assets space over the past few weeks, I find it important to look at a bigger picture of where this market is headed.
Of course, this means analyzing the potential of an ETF product.
— Z (@SplitCapital) October 19, 2020
He references two key trends in his comment.
First and foremost, there’s been an ongoing crackdown against unregulated exchanges. This culminated recently when the U.S. CFTC charged BitMEX for anti-money laundering violations.
Many in the crypto space see this as a net positive for the Bitcoin market as it removes a key unregulated player, which theoretically could have facilitated users that were manipulating markets. By ensuring that most volume is on regulated platforms, it can be ensured that price discovery is legitimate.
Secondly, Bitcoin is starting to have a macro impact and persona. This may increase the chances that U.S. securities regulators see a Bitcoin ETF as a needed instrument for investors.
Is an ETF even needed?
It’s worth asking if an exchange-traded fund for Bitcoin is even needed at this point.
Fidelity Investments, Kraken Financial, and other entities in the space are working on crypto prime brokerage services that should allow investors, from retail investors to institutional investors, to easily obtain exposure to Bitcoin, Ethereum, or other digital assets in a secure and cost-efficient manner.
We’re starting to see this with the number of institutions announcing large stakes in Bitcoin.
Business services company MicroStrategy purchased $425 million worth of Bitcoin in August and September to hedge inflation risks and other macroeconomic trends. The company proceeded to tell the world how it managed to accumulate that sum of BTC.
Square followed suit with a $50 million investment in BTC, representing one percent of its assets on its balance sheet. The company released a whitepaper telling Wall Street how it managed to accumulate those coins and the risks and opportunities in the crypto space.
There are also firms such as Robinhood, Square, and PayPal moving towards offering Bitcoin and crypto services.
It may reach a point where the user experience to buy physical Bitcoin or Ethereum is actually even more efficient than purchasing exposure through an ETF.
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