The fast-growing popularity of Bitcoin and its rising market capitalization have investors questioning if and when a bitcoin exchange-traded fund will be traded in the United States. After all, there are already two successful examples of Bitcoin ETFs in neighboring country Canada.
If & when the United States will see its first Bitcoin ETF depends on the SEC as the ball is in their court now. After all, multiple applications are pending with the SEC for approval. If they approve even one of the Bitcoin ETF applications, the United States will soon see the launch of the first cryptocurrency ETF.
The SEC did not begin formally reviewing any of the pending Bitcoin ETF applications until recently. Now, the SEC has finally started a formal review of two Bitcoin ETF applications. These applications are for Fidelity’s Wise Origin Bitcoin & First Trust SkyBridge Bitcoin ETF.
The ETF applications of Fidelity and SkyBridge were submitted in March. The formal review of Fidelity Investments’ paperwork was recorded in a filing published on the official website of the regulator.
Reports say that SkyBridge Capital has partnered with investment adviser First Trust Advisors to develop a product that seeks to list shares on the NYSE Arca. On the other hand, the application of Fidelity depicts an ETF product that tracks Bitcoin’s daily price movements using a proprietary index derived from several price feeds.
What has the SEC’s Reaction Been on Bitcoin ETFs so Far?
The SEC has yet to approve a single Bitcoin ETF, citing concerns over price manipulation and volatility. However, the vocal proponents of Bitcoin ETFs think that this occasion will provide a different outcome given the increasing maturity of the asset class. It is also alleged that the adoption of a Bitcoin ETF would provide easier institutional access to the digital asset market, which will prove to be an advantage to the price of digital currency.
Rise of Bitcoin ETF applications in North America
The first exchange-traded fund (ETF) tracking Bitcoin was launched for trading in Toronto, Canada, in April 2021. The fund was made available both in the Canadian dollar and the United States dollar units. It was a potential milestone moment for both the cryptocurrency and ETF industries. After all, it provided exposure to the world’s largest cryptocurrency by investing directly in digital Bitcoin. However, in the United States, the regulator is still considering bitcoin’s hurdles and tailwinds in rendering a decision whether or not to signal a green light to the products.
What are the hurdles that experts say stand in front of the first US bitcoin ETF?
- Volatility of Bitcoin
Volatility would be one of the major considerations as Bitcoin is well-known for its wild price swings, with huge gains and losses in a single session. Hence, the SEC may find it difficult to balance the overwhelming desire for the market to have access to BTC via an ETF versus the inherent volatility that the asset class has at this stage in its life cycle.
- Market maturity
Given the denials for the last several ETFs by the SEC, it is reasonable to say that there was a concern among several of the officials that the bitcoin market was not adequately regulated. In their opinion, Bitcoin is susceptible to manipulation. However, following the bitcoin developments stated earlier, there is an increased likelihood that the SEC may signal a bitcoin ETF approval very soon.