The cryptocurrency ecosystem was sent abuzz this week as the US Securities and Exchange Commission (SEC) published a report of two new applications for bitcoin exchange traded funds (ETFs) to be listed on the New York Stock Exchange (NYSE) Arca. Will the crypto gods finally answer some enthusiasts’ prayers for mainstream adoption?
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SEC Appears Closer to Okaying Bitcoin ETFs
This time might be different. That’s the mantra sweeping through ecosystem platforms. After what seemed like a permanent hiatus, the SEC is back, supposedly considering allowing the electronic exchange NYSE Arca to host the first Bitcoin ETFs.
Two Bitcoin ETFs are up for grabs, and both from Pro Share Capital Management LLC, Pro Shares. It’s a comparatively small asset manager, inching toward 30 billion USD. The company is known for its ETF products, dozens of them in fact, each with a focus or strategy. Typically, their products are split into alpha, ultra, short. Shorts are inverse market products, and the alpha is tethered to the Credit Suisse Index. Ultras beef up performance by a factor of two. Perhaps its advantage to bitcoiners is through low fees and taxes. ETFs can also serve as a long term savings vehicle, at times even beating traditional mutual funds.
The group has applied for a Pro Schares Bitcoin ETF and a Pro Shares Short Bitcoin ETF. Retail investors would get a shot at profiting from the decentralized currency without having to formally hold it with keys and wallets. Where the community openly worries is with the Short Bitcoin ETF. Recent experience with futures by market makers Cboe and CME, some enthusiasts insist, proves mainstreaming can have negative price consequences (since December of last year, when futures were introduced, bitcoin’s price has tanked).
Wording in the recent SEC document is particularly juicy, with verbs like “instituting” and “approved or disapproved.” Timing could be in response to an eight page open letter from Cboe’s Chris Concannon, President and COO, which was published last month around the same time the SEC began considering the Pro Shares requests. Mr. Concannon urged, “While cryptocurrency-related holdings do raise a number of unique issues, Cboe firmly believes that such holdings do not require significant revision to the well-established frameworks for evaluation related to valuation, liquidity, custody, arbitrage, and manipulation. Rather, each Cryptocurrency Fund and underlying cryptocurrency-related holdings should be evaluated on a case by case basis in a manner very similar to previous funds and their underlying holdings.”
Could be Weeks Away from Word
The SEC document ends with a call for comments, and asks commenters respond to a dozen questions. They range from fund-specific mechanics to what is to happen if the platform forks again. “What are commenters’ views,” the SEC asks in question 11, “on how an investor may evaluate the price of the Shares in light of the risk of potential price manipulation and fraud in the underlying bitcoin trading platforms and in light of the potentially significant spread between the price of the Bitcoin Futures Contracts and the spot price of bitcoin?” Comments can be made online, here.
Comments due: April 19, 2018; Rebuttal comments due: May 3, 2018.
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Images via Pixabay, SEC, Cboe.