What is an ETF
ETF is the acronym for the Exchange Traded Fund
Let’s break this down into simpler more elementary term. The prefix “Exchange Traded” mean that it is traded on a major stock exchange; US examples being the NASDQ and NYSE. Fund means that there is a collection of preselected stocks,bonds, etc to help diversify your investments as well as manage/reduce risk. To make this simpler think of the fund as owning the shares of stock, bonds, commodities, and forex; then dividing the ownership of those assets into shares for you to buy. Three of the most popular ETFs that are traded are SPDR, QQQ, IWM.
To help understand why you would buy and ETF instead of…lets say…an individual stock would be diversification, less risk, less management, and lower costs. When buying a preselected range of stock/other securities, if one of your stocks gets “rekt” then you are not in it 100% and you have other stocks that could outperform just that individual one. This benefits you because there is also less work involved in it because you have already left the selection of stocks and bonds to be chosen by the professionals. Doing this could in fact lower your costs depending on who you go though, it could cut exchange costs.
What is a bitcoin ETF
A bitcoin ETF would essentially buy a predetermined amount of actual bitcoin and distribute those funds into shares to be bought by shareholders. A majority of the proposed bitcoin ETFs roughly state that they would be tracking price through the available trading options of bitcoin and bitcoin futures that are already on Cboe and CME. Currently there are no bitcoin ETFs that are being traded as of writing this article.
But to investors that are wanting to potentially get on board with the blockchain revolution; fear no more, there are already actively traded blockchain ETFs. A blockchain ETF invests in those that are working in the blockchain space regardless of if they are just a company that is using it or a new start up. While there was a glimmer of hope that we would see a potential bitcoin ETF, it all was lost this past week.
The SEC
The news of the SEC denying the imposed Winklevoss Twins bitcoin ETF made major headlines this past week. According to CoinDesk’s report, the SEC has rejected the Winklevoss bitcoin ETF because the proposal is not "consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.”
Notably so the SEC is scared of the possible and potential manipulation of bitcoin. The community behind bitcoin is strong and is very protective of bitcoin. Many of these member read all of these actual proposals and actively tweet to the SEC to bring it to their attention. The Winklevoss twins have actually done a lot for the crypto space moving forward and are fairly neutral in the crypto community. They do run a very clean and user friendly exchange name Gemeni, I do not actively use it, but I do have an account on it. It is not that they wouldn’t have run a great bitcoin ETF, it’s just that it is more than likely still to early to tell for the SEC.
With the monthly close ahead of us and the weekly close of bitcoin behind us, we saw it drop hard; Past the 8000 levels nearing the danger zone. It just goes to show where bitcoin still stands in the adoption process. We are still early in the process and it is ok that these things are happening. I would much rather this happen now and see a refined, polished system than see a rushed one just to make a quick money grab. As they say pressure creates diamonds, and bitcoin has been under alot of pressure lately.
Will we ever see a bitcoin ETF?
More than likely we will. There is a notable picture of the chart of gold being compared next to bitcoin’s highlighting the similarities and differences of where we are in the process. See below it is a very accurate picture and really puts things into perspective.
Like I always say to my friends when they ask my position, I say that I am short term bearish but long term bullish. I still think that we have some way to go down before we see capitulation get the moon that everybody wants. Think about it; the door would be open for every one trading on a major stock exchange. They now the have access to buy bitcoin without having to use a crypto exchange. The influx sheer amount of money as well as the economics behind the token supply/inflationary rates would see bitcoin rising in value. However, I do not think that now is the time for bitcoins rise or ETF; but with in the next year or two expect a new proposal to shake things up again.