Friday, September 30

2021 will be remembered for the first bitcoin funds traded on Wall Street


Key facts:
  • Wall Street closed the year with three funds traded in bitcoin futures: BITO, BFT and XBTF.

  • The United States does not yet have spot bitcoin ETFs, unlike Chile, Brazil, and Canada.

Wall Street closes the year with 3 publicly traded bitcoin (BTC) funds, also known by their acronym “BTC ETFs.” Thus, 2021 becomes the year in which for the first time a cryptocurrency entered as a stock market asset in the financial center of the world, an achievement for some bitcoiners that took 8 years and marked a historic milestone since its entry into force two months ago.

Until now, The most traded of the three bitcoin ETFs on Wall Street is ProShares (BITO). It outperforms the other two by more than 95% with a market capitalization of $ 1.05 billion on the New York Stock Exchange (NYSE). Far below is Valkyrie (BFT) with $ 50 million on NASDAQ and VanEck (XBTF) with $ 9 million on NYSE. This is revealed by the live data from Investing.

The ProShares ETF has a market capitalization that exceeds the other two (Valkyrie and VanEck) by more than 95%. Source: CriptoNoticias, with data from Investing.com

What is a bitcoin ETF?

Named for the acronym in English of «exchange traded fund«, A bitcoin ETF is an investment fund that is publicly traded, based on the value of the cryptocurrency as if it were the stock of a company. This means that if the price of the currency goes up or down, the fund will consequently go up or down as well.

There are two types of bitcoin ETFs. On the one hand, the so-called spot or cash that are equated to the current price of the cryptocurrency. And, on the other hand, there are the so-called futures, which are supported by speculative agreements of potential prices of the cryptocurrency in terms of weeks or months. Currently, all three bitcoin exchange-traded funds in the United States are futures, unlike in other parts of the world where both types of ETFs operate.

Why was bitcoin’s going public on Wall Street so highly anticipated?

A question that many are asking is why invest in a bitcoin ETF when you can buy the cryptocurrency directly. The answer to this collective doubt is simple. What drives investment in a bitcoin exchange-traded fund is the search for a regulated instrument, which is of special interest to institutions and companies.

It is possible to invest money in an ETF through traditional brokers that offer company stocks. This, in addition to giving more security to traditional investors, facilitates access for those who do not know how to use wallets, electronic purses, and exchanges, cryptocurrency trading platforms.

“We believe that regulated futures that are traded in an ETF will open an opportunity to expose BTC to a lot of people who may have been waiting on the sidelines.”

Simeon Hymen, CEO de ProShares.

Although an ETF may seem unnecessary for those who directly operate the cryptocurrency, the truth is that the entry of the cryptocurrency to the main stock market of the world has been a great milestone for the community. It signifies the recognition of bitcoin as a high-interest financial asset on Wall Street.

One of those who believes this is Ben Johnson, the director of global ETF research at the Morningstar financial research agency. The investment expert manifested that traditional finance has caught the bitcoin rocket and turned it into something Wall Street will earn billions of dollars at.

Bitcoin ETFs were rejected for 8 years on Wall Street until 2021

Like all disruptive change, a time of adaptation and evaluation is necessary for it to be accepted. Eight years had to pass for the United States Securities and Exchange Commission (SEC) to allow the first bitcoin ETF.

Twin brothers Cameron and Tyler Winklevoss, who own the Gemini exchange, were the first to file for a bitcoin ETF in 2013. That year the cryptocurrency had a significant rise from $ 100 to $ 1,000. However, the proposal was rejected by the SEC, as were repeated requests that multiple companies made over the next few years to be the first to launch a bitcoin exchange-traded fund.

For an ETF to take effect, whether it be cryptocurrency or any other asset, there is no need for express authorization from the SEC. It simply requires that, during the mandatory evaluation period, the organization does not reject it and that is what finally happened in 2021.

Something changed on October 19 that for the first time the SEC failed to block a bitcoin ETF from being publicly traded, thus generating a turning point. This is ProShares, which had been bounced by the organization more than twenty times before. Then two more went into effect. These were Valkyrie on the NASDAQ on October 21 and VanEck on the NYSE on November 16. In this way, Wall Street closes 2021 with three exchange-traded bitcoin funds.

ProShares, the first and largest Wall Street ETF to date, closes the year trading at $ 29.78, down 28% since its launch. Fountain: investing.com

Will 2022 be the year of the first spot bitcoin ETFs on Wall Street?

As CriptoNoticias reported, the SEC continues to reject BTC ETFs for spot or spot that are equated to the present value of the cryptocurrency, since they indicate that these still do not provide sufficient security. The only three bitcoin funds that went public on Wall Street in 2021 (ProShares, Valkyrie, and VanEck) are all based on futures.

Gary Gensley, the SEC chairman, declared on the subject: «what we are trying to do is introduce new projects in the protected perimeter of investors». On this, he explained that BTC futures ETFs have been supervised with favorable results during the last four years by the federal regulator Commodities Futures Trading Commission and they have not yet achieved this confidence in spot ETFs.

Wall Street ends 2021 with the first three bitcoin ETFs: ProShares (BITO), Valkyrie (BFT)
and VanEck (XBTF). Fountain: @bolsamania / twitter.com

However, Congressmen Tom Emmer and Darren Soto caution that both types of funds carry the same level of risk. This makes them understand that, if futures are in force, spot should also be allowed, as has been done this year in Chile, Brazil and Canada, the other three countries on the continent that have bitcoin ETFs.

The fact that spot bitcoin ETFs are operating in other parts of the continent could serve as case studies for Commodities Futures Trading Commission to determine if they are safe. Especially Canada, which is the country that most resembles it in economic matters, unlike the two Latin Americans.

This scenario suggests that perhaps 2022 could have enough time to assess the performance of spot ETFs in the region and allow them on Wall Street if the SEC deems them safe.





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