December 2, 2023

Zavyalov Ilya Nikolaevich about Bitcoin ETF.

Before you dive into the article, pay attention to the fact thatthe fact that none of theis financial advice, please do your own research to make a more informed decision.

ETF (Exchange Traded Fund) is an organizationcarrying out portfolio investments in various groups of assets. Retail investors can also make portfolio investments by purchasing shares of ETFs. In turn, the price of these shares follows the price of the underlying assets, that is, the shares that the fund purchases. Such a fund collects securities based on an index, commodity sector or any other asset. Roughly speaking, this fund is a rich guy who bought shares of other companies, and then took and threw his shares on the stock exchange. That is, when you buy the guy’s shares, you immediately invest in the shares of several companies.

Zavyalov Ilya Nikolaevich about Bitcoin ETF.

Bitcoin ETF is an exchange traded fund thatwhich only includes BTC. It is this tool that gives TradFi investors access to the world of digital assets. If it seems to you that an ETF can only be useful for attracting funds from US retail traders to the market, then this is true, but only partly. In fact, Bitcoin ETF is a tool for attracting investments from a large number of US funds. For example, if only BlackRock (one of the many institutional players in the US market) bought BTC for just 0.2% of its assets, then the price of BTC would immediately increase by 36%. Cryptocurrency ETFs can be of two types: spot and futures. If you understand the difference between spot and futures trading, then the difference between these ETFs will be obvious to you. If not, then the easiest way to draw the following boundary:

  • Spot ETFs are pure BTC purchases;

  • Futures ETFs are buying BTC, just like buying contracts for the delivery of BTC

  • Why is ETF useful for cryptans?Not in all countries you can buy crypto directly on the exchange. Because of this, many companies wishing to invest in digital assets face obstacles in the form of legal restrictions. Where it is possible to invest in crypto, taking a conservative approach to investing may be a problem. If there are no representatives of those interested in crypto on the board of directors, the likelihood of investing in crypto is noticeably reduced.

    Bitcoin ETF aims to solve these problems:

  • ETF is a completely legal subject of trade, since the investor

  • invests its assets directly into the fund, not into crypto.

  • ETF investing is more conservativeand, as a result, more familiar to large companies. Since crypto is not something legal in the USA, and therefore this huge money cannot contribute to the development of the market. Bitcoin ETF will provide an opportunity to open up a huge flow of money into crypto in the United States, which will contribute to the development of this industry. The history of the relationship between companies wishing to implement Bitcoin-ETF and the SEC. US companies have been trying to create crypto ETFs for several years, but are facing an obstacle in the form of the Securities and Exchange Commission (SEC). Between 2017 and 2020, there was a surge of interest in launching a cryptocurrency ETF, but under the leadership of SEC Commissioner Jay Clayton, this decision was not approved.

    Zavyalov Ilya Nikolaevich about Bitcoin ETF.

    In 2021, the leadership of the SEC passed to GaryGensler, who was known for his interest in decentralized finance through his lectures at MIT. Companies hoped for positive changes, but Gensler also rejected most applications for the creation of Bitcoin-based ETFs.

    In September 2021, Gensler explained hisposition, pointing out potential risks due to the uncertain status of Bitcoin in the financial market. However, he highlighted the possibility of creating ETFs based on Bitcoin futures, which are completely legal.

    The market reaction was quick:already in October 2021, ProShares launched a Bitcoin futures ETF called BITO. Other companies then followed suit, including Teucrium's SEC-approved ETF in April 2022. In June 2023, interest in Bitcoin ETFs increased, with the BlackRock fund, which collaborates with the Nasdaq exchange, becoming the center of attention. BlackRock specializes in increasing the return on client assets through investment or rental properties. Following BlackRock's announcement, other major players such as Fidelity, Invesco, Wisdom Tree and Valkyrie also filed, but the SEC said the filings were "inadequate." In response, Nasdaq and BlackRock changed their offering to include crypto exchange Coinbase.

    Zavyalov Ilya Nikolaevich about Bitcoin ETF.

    Coinbase, the first cryptocurrency marketplace in the US,которая прошла публичное размещение акций, которые торгуются на площадке Nasdaq. Ее вклад в этот проект подразумевает контроль и сотрудничество с Nasdaq, что усиливает прозрачность предлагаемого инструмента.В данный момент, компании ожидают решение от SEC. Эксперты из Bernstein полагают, что этот новый этап в заявках на запуск будет успешным, и под этим мнением подписывается Джереми Аллэйр, соучредитель и глава Circle. Майкл Сейлор, основатель MicroStrategy (одного из ведущих инвесторов в биткоин среди публичных компаний), верит, что этот новый биткоин-ETF привлечет триллионы инвестиций. Такой инструмент может привлечь дополнительные инвестиции на рынок криптовалют и поспособствовать к получению им официального статуса.

    Why won't the SEC approve ETFs?In general, as you can understand, the SEC is the main antagonist of the entire crypt. The main problem is that the SEC often recognizes tokens as “security tokens,” that is, securities. Such recognition for projects is a rather unfavorable outcome, since projects begin to be subject to the same financial reporting requirements as large American companies that have listed their shares on the stock exchange.