Flagship cryptocurrency, Bitcoin has broken through the $60,000 resistance zone for the first time since the May 2021 market crash. This bullish momentum in the trading session seems to be fueled by a Bloomberg report, which cited unknown sources, that the United States Securities and Exchange Commission (SEC) will approve the first U.S. Bitcoin futures exchange-traded fund (ETF) to begin trading next week.
The report cites the people, who asked not to be named and explains that it is unlikely the financial watchdog block the products from starting to trade next week. The source stated, “The regulator isn’t likely to block the products from starting to trade next week.”
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Unlike Bitcoin ETF applications that the regulator has previously rejected, the proposals by ProShares and Invesco Ltd are based on futures contracts and were filed under mutual fund rules that SEC Chairman Gary Gensler has said provides “significant investor protections.”
A futures product is likely to be the first one approved since they are viewed more favourably by regulators. Futures are governed by the Chicago Mercantile Exchange (CME) and require investors to put down cash on margin to trade them.
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What they are saying
Bloomberg senior ETF analyst, Eric Balchunas, stated that he is confident that the ProShares Bitcoin Strategy ETF could be the first one launched as the decision deadline is Oct. 18. The Invesco Bitcoin Strategy ETF may be approved the following day, barring any further delays by the SEC.
He tweeted, “JUST IN: Bitcoin futures ETFs said not to face any opposition at SEC, according to multiple sources confirming this (aside, I’m hearing same thing). Pretty much done deal. Expect launches next week.” He further stated, “Like I said tho until these little F-ers (ETFs) are literally trading on the exchange I’m not ready to close this case. But odds now over 90% IMO.”
However, Eric shared his views stating that the futures ETFs are flawed. He said, “Most ppl reading this thread from crypto world are prob pumped but just note these ETFs are flawed be rolling futures and will prob not sweep the nation, rather demand prom muted. My guess is only. 3-4b in first year (1% of ETF flows). But def a BIG step after 7yr wait.”
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Bottomline
Approval has for many years, been out of the grasp of issuers amid numerous rejections; and many have tried to get a variety of different structures cleared for trading. Over the years, there have been plans for funds that proposed to hold Bitcoin via a digital vault or that could use leverage to juice returns. Others sought to mitigate Bitcoin’s famous volatility, a key point of contention for the SEC.
SEC Chair, Gary Gensler has voiced favour for funds based on CME-traded Bitcoin futures filed under a 1940s law, adding more weight to the potential of a long-awaited approval.