Why There Was Such a Frenzy Around Bitcoin ETFs in October

Exchange-traded funds (ETFs) are making a comeback to the limelight as the year is winding down to a close. Even though the battle to get approval for a Bitcoin-related ETF has been raging for years, there have been significant signs that things could get much better.

Why There Was Such a Frenzy Around Bitcoin ETFs in October

The push is especially prominent right now as some crypto-related ETFs have debuted on stock exchanges and are now doing impressive numbers.

The Anticipation Builds

As explained, the push for ETFs has always been prominent. But, things got especially intense last week when Mike McGlone, a commodity strategist at Bloomberg Intelligence, reported that an ETF approval could come in October. Speaking with Stansberry Investor, McGlone pointed out that the United States has so far lost out to countries like Canada and Germany, which already have Bitcoin ETFs running in their economies. The government would be looking to cover some of this ground, so an ETF will definitely come soon.

When he was asked about a possible timeframe for potential approval of a Bitcoin ETF, McGlone pointed out that things could move forward “towards the end of October.” He maintained that the Securities and Exchange Commission (SEC) would most likely allow an ETF backed by Bitcoin futures, followed by a more established Bitcoin ETF coming soon.

Even better, the strategist pointed out that Bloomberg Intelligence believes that ETF approval could push Bitcoin past $100,000 before the year runs out.

Bitcoin Futures ETFs Get the Nod

With McGlone and other reporters sharing their beliefs about a possible ETF approval, the industry began to react very positively. Coins started October trading especially positively, and there was hope for a strong reaction from the SEC.

On cue, the agency responded positively. It approved the Volt Equity ETF, which exposures investors to “Bitcoin Industry Revolution Companies.” The approval was the first in the industry, and it brought a lot of attention to crypto once more.

According to its prospectus, the Volt Equity ETF will track companies that hold a majority of their net assets in Bitcoin - or companies that get most of their earnings from Bitcoin mining, transacting, and lending. So, instead of tracking the price of Bitcoin or holding the asset, the ETF simply invests in companies that have strong financial ties to Bitcoin. For now, it is the closest that the industry has to a full-fledged Bitcoin ETF.

The good news didn’t stop there. In the middle of October, the SEC approved the ProShares Bitcoin Strategy ETF. The ETF offers exposure to Bitcoin with futures contracts. The company’s ETF shares would be listed on the New York Stock Exchange (NYSE) Arca, with the ticker “BITO” according to a report from a Bloomberg analyst.

The ProShares ETF eventually launched on October 19, coinciding with a massive rally that got Bitcoin’s price back above the $60,000 mark. Even better, the ETF went on to break a record - it became the fastest ETF to hit the $1 billion mark, achieving the milestone in less than 48 hours.

With ProShares making massive progress with its ETF, Bitcoin had the momentum it needed to break through its previous all-time high. The coin crushed the $65,000 mark, and it set another high just below the $68,000 mark a few days later. This market bounce is what analysts had expected when they clamored for a Bitcoin ETF. Increased institutional exposure has always been an important part of cryptocurrencies’ growth for the past few years, and ETFs are expected to make this even better.

More to Look Out For

Another ETF that was gaining massive traction was the Valkyrie Bitcoin Strategy ETF. The SEC granted approval to the ETF, with Valkyrie Funds CEO Leah Wald claiming that it will be a massive opportunity for the industry.

“This launch is important because it’s further affirmation that U.S. regulators want to collaborate with the industry to regulate crypto assets rather than ban them. The more products that come to market, the more awareness they bring and, hopefully, more adoption. There are, of course, other filings for similar products, and it would make sense for them to come to market,” Wald said.

It is worth noting that the SEC might have shelved another ETF from Valkyrie. Eric Balchunas, a senior ETF analyst at Bloomberg, noted a Dow Jones alert that indicated the disapproval of a Valkyrie leveraged fund.

Valkyrie had applied for a leveraged Bitcoin futures ETF that would have offered 1.25x exposure to the coin. At the same time, Direxion, an ETF issuer, filed for a BitcoiN Strategy Bear ETF to allow speculators to purchase futures to short the Bitcoin price.

The Direxion product would invest in Bitcoin futures alone, while the Valkyrie product would invest in options, swaps, futures, and even forwards. But, it would seem that both products have been knocked back by the SEC as the agency is also looking to tread carefully.

Still, something interesting could be forming for the industry. Grayscale Investments, the industry’s largest asset management firm, appears to be looking to launch a Bitcoin ETF. Speaking at a virtual event organized by MarketWatch, David LaValle, the company’s head of global ETFs, said that the company is committed to transforming its Bitcoin Trust into an ETF.

LaValle explained that the company had applied to do so. They believe that this is a perfect time, with the SEC prime to focus on spot-based products after greenlighting several futures-based ETFs.

For now, the SEC would need to analyze ETF applications for 240 days. This means that Grayscale could get its approval sometime in July 2022. With the company controlling almost $40 billion in assets, its ability to become an ETF will definitely be a boon to the industry.

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