The rule change to allow bitcoin-based ETFs WILL NOT BE APPROVED by the SEC. The bitcoin price naturally followed suit, dumping to $950 USD on the news, before recovering quickly back above $1,000+.
The rule change was disapproved due mostly to the still unregulated nature of bitcoin markets says the regulator and to lack of surveillance agreements, but the SEC left the door open for future approval. You can read the official ruling here.
Anycase, ETF style investments already exist in the form of Swedish company XBT PROVIDER AB.
XBT Provider manages Bitcoin Tracker One and Bitcoin Tracker Euro. With these instruments, anyone can invest in Bitcoin as ETNs, exchange-traded notes, from anywhere in the world. XBT Provider’s prospectus is approved by the Swedish FSA (Finansinspektionen) and products are listed on Nasdaq Nordic in Stockholm.
Another professional based fund and parent company of XBT Provider, Global Advisors Jersey Limited (GAJL), was the first to create an institutional-grade bitcoin investment strategy, applying professional management.
Yearly returns at the GABI bitcoin fund stand at:
2014: -16.10%
2015: 37.42%
2016: 71.25%
YTD: 15.45%.
Not bad at all.
America is a free market (supposedly) so why wouldn’t the SEC not approve of such investment, there are some good reasons why this particular ETF instrument from the Winklevoss’ was not approved. The infrastructure of the fund didn’t cut the mustard for the SEC. Conflicts of interest such as basing prices off of Gemini (Winklevoss’ exchange, and their own pricing index, proved a conflict of interest and not the best barometer of trade, one wonders why they didn’t diversify vendors used to form the COIN ETF?).
This really is not that big of a deal and has been way over-hyped, but we will see what happens next. What will be interesting are bitcoin options markets getting approval by the CFTC in the form of SEFs and DCOs.
CBOE earlier this month completed its acquisition of BATS Global Markets, where this particular ETF security would list. CBOE owns ETF.com, a leading provider of ETF news, data and analysis; and Hotspot, a leading platform for global FX trading, a listing rule change seemed likely for approval, but not this one according to the SEC.
Whether you’re looking at investing for the long run in bitcoin on an exchange through margin to enhance potential profits, accumulating bitcoins and socking them away in a cold storage wallet, or by way of an ETF, there is ultimately not much difference for long term holders sake and their aim, the vehicle doesn’t matter if you want long term exposure to buy and hold.
The downside of an ETF is currency risk by investing through dollars if USD depreciates, would you have been better off just holding bitcoin outright?
The SEC noted that the CME and ICE recently announced bitcoin pricing indexes and looks to favor established market players for assets based on the nascent sector. In the future, regulated futures or derivative markets might begin to trade products based on these indexes they say, ignoring many of the finely developed indexes from companies such as TradeBlock (chosen by SolidX for their BTC ETF), BitcoinAverage, and others. It might take U.S. regulated bitcoin derivative markets to develop first before an ETF gets approved.
In the end, who really cares about a bitcoin ETF through, CryptoNinjas believes it’s much ado about nothing and just would have provided a boon to the Winklevoss twins being first to capitalize on an influx of assets.