In its first appeal against Grayscale’s Bitcoin spot ETF, a judge expressed concern about the SEC’s reasons, saying the SEC did not adequately explain why Grayscale’s claims were flawed. They also questioned the logic of allowing futures-based Bitcoin ETFs without approving spot-based ETFs.
What is the significance of an investor receiving shares in a trust compared to a Bitcoin ETF that trades in real time?
What are ETFs?
An Exchange Traded Fund (ETF) is a specific type of Exchange Traded Product (ETP) that trades on an exchange and usually follows a specific index. Investing in ETFs gives you access to an array of assets that can be bought and sold during market hours. This allows you to potentially reduce risk and exposure while diversifying your portfolio.
A Bitcoin ETF is a collection of Bitcoin-related assets traded as an ETF on a traditional exchange by a brokerage firm. These ETFs allow investors who are hesitant to invest in cryptocurrencies to gain access without owning them.
Direct investment in cryptocurrencies became difficult for individual and average investors when the price of Bitcoin skyrocketed to thousands of dollars. Brokerage firms have started developing bitcoin exchange-traded funds to meet the growing demand for investor access to bitcoin. The Winklevoss brothers were among the first to file for approval with the Securities and Exchange Commission (SEC) in 2013.
The Securities and Exchange Commission (SEC) has not approved Bitcoin ETFs that hold Bitcoin as an asset. Instead, it has approved a Bitcoin ETF related to Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME).
Key Takeaways About Bitcoin ETFs
- Bitcoin futures ETFs legal, spot ETFs illegal
- Bitcoin ETFs allow more people to invest in Bitcoin without the expense and hassle of buying Bitcoin.
- ETFs eliminate the need for security procedures and excess funds and provide a familiar investment type.
- ETFs remove the risk of custody of keys as investors own shares of the fund instead of owning cryptocurrencies.
- Bitcoin’s high price makes it difficult for the average investor to buy 1 BTC, but ETFs allow BTC within your budget, risk tolerance, and investment goals.
- Investing in Bitcoin ETFs can be done through a broker or advisor. Several Bitcoin ETFs are available on exchanges such as NYSE ARCA and Nasdaq, including BITO, BTF, XBTF and BITS.
Spot ETFs and Futures ETFs
On Greyscale’s spot ETF appeal, a judge questions the logic that futures ETFs are possible but not spot.
The argument lies in the fact that ETPs typically track assets that are regulated and therefore protected from price manipulation. Given that Bitcoin is not formally regulated as a commodity or security, the SEC states that futures are regulated by the Commodity Futures Trading Commission (CFTC), an independent agency of the U.S. government, so only Bitcoin futures are available. It claims to be acceptable for all kinds of ETPs.
The SEC’s refusal to approve a spot Bitcoin ETF application is arbitrary because regulators have already approved futures-based ETPs, according to Grayscale lead attorney Don Verili. was. Verrilli argued that both types of his ETPs are derived from the Bitcoin price and are essentially the same. Verrilli also said Grayscale is seeking regulation and is looking for ways to move forward.
