Cryptocurrency News

SEC Will Likely Allow Trading of First-Ever Bitcoin Futures ETF

By October 15, 2021 No Comments

In what could be a defining moment for the cryptocurrency industry, the Securities and Exchange Commission (SEC) will reportedly not block ProShares and Invesco Bitcoin exchange-traded funds (ETF) from trading that is scheduled to begin next week. 

ProShares and Invesco Ltd.Bitcoin ETFs are based on futures contracts

The cryptocurrency community has been waiting almost a decade for the first Bitcoin ETF to begin trading within the US. It seems that the long wait is finally over. As reported by Bloomberg, SEC Chairman Gary Gensler has said that recent proposals by ProShares and Invesco Ltd. offer “significant investor protections,” and that the agency won’t step in to prohibit the trading of new financial instruments, which is scheduled to take place next week. 

Both ProShares and Invesco Ltd. have taken a different approach than many previous Bitcoin ETF applicants. Both companies have decided to base their ETFs on futures contracts. Futures are financial instruments that allow investors to buy certain assets at an agreed-upon price at a specified time in the future. Futures contracts are an essential part of the financial apparatus and provide sellers and buyers with an opportunity to hedge against risk.

For the longest time, more precisely since the Winklevoss brothers filed the first BTC ETF application in 2013, US regulators have rejected every single application for 8 years straight. The SEC has repeatedly cited the potential of price manipulation, high volatility, and liquidity concerns in the cryptocurrency space as the main reasons for not greenlighting a Bitcoin ETF.

It is worth noting that the two Bitcoin ETFs that are slated to begin trading next week are based on futures contracts, and not directly on spot market activity. However, given the recent developments and the change at the helm of the SEC, we may see a non-future-based Bitcoin ETF in the near future. 

The US is lagging behind Canada and several European countries that have already approved Bitcoin ETFs and saw a considerable boost in trading action coming from institutional investors take place since then. For instance, Canada’s first BTC ETF managed to reach the $1 billion mark in AUM in just one month after the fund started trading in February 2021. 

After a series of delays, the review of VanEck’s BTC ETF proposal is scheduled for November 14. It will be interesting to see how the SEC handles the review process now that future-based Bitcoin ETFs are here. 

The price of the world’s largest cryptocurrency has been on a significant uptick in the past two weeks. Bitcoin price has increased from $43,600 on October 1 to a cycle high of $59,920 on October 15.