The resurrection of bitcoin? Several firms try again to extract ETFs backed by cryptocurrency
Van Eck Associates and SolidX Partners have joined together to ask the SEC, the US market regulator, to issue an ETF linked to bitcoin. At the beginning of the year, it imposed harsh conditions on the promoters of listed products to curb the expansion of crypto currencies to private investors.
Van Eck Associates and SolidX Partners are among the thirty firms that withdrew applications for the launch of bitcoin-linked ETFs. The SEC rejected some proposals last year and established about thirty specific conditions on liquidity, security and valuation of assets to begin considering the requests.
The two firms hope to have deciphered the regulator's questionnaire to create the first publicly traded product backed by bitcoin. Van Eck Associates and SolidX Partners submitted the request to the SEC. The fund will have physical backup, which means that it will have bitcoin in custody, and will be insured against loss or possible theft.
The SEC, in addition to tightening the approval conditions with the questionnaire, requested the withdrawal of applications. Last year he rejected the request of the Winklevoss brothers, the twins who denounced the founder of Facebook, Mark Zuckerberg.
SolidX and VanEck hope to have successfully addressed the SEC's concerns after introducing changes following the regulator's guidance. Daniel Gallancy, CEO of SolidX, explained to Bloomberg that they have raised the price of the ETF share and have taken into account the value of the cryptocurrency exchange companies.
Change of perspective
But the main change is that it is oriented to institutional investors. Gallancy recognizes that at this time the regulators would not allow a product for private investors. The launch of futures contracts on bitcoin was the first step to open the world of cryptocurrency to the rest of the financial industry. The next step that was expected was the creation of ETFs, quoted funds, to reach the maximum possible public.
The main advantage that bitcoin would have with ETFs in the market is the increase in liquidity when trading as one share. It would allow the investor to enter and exit at different prices. To date, the most common option requires opening an account in bitcoins and going to the online trading platforms that offer the investment in the virtual currency, with all security problems and slowness. But not only that, today many investment funds can only have certain assets that meet certain regulatory standards, such as the approval of the SEC. So if you decide to approve this measure it would be much more accessible to include it in your portfolio.
"I'm skeptical that a bitcoin ETF will be approved this year, but in any case you have to try and this extra noise from VanEck and SolidX could help you get ahead of the future," said Eric Balchunas, an analyst at Bloomberg Intelligence's ETF.
The problem of having a real bitcoin valuation wants to be corrected by SolidX and VanEck based on the prices of an index that traces the over-the-counter trade of institutions based in the USA.
High price for participation
VanEck manages more than 45,000 million dollars in assets and manages more than 70 products listed on the stock exchange. SolidX is a financial technology company headquartered in New York, which develops cryptography software and capital market products.
If your ETF is approved, the product will be priced at 25 bitcoins per share, which equates to about $ 188,000 at the market price. The price of participation would be very high considering the usual in the sector. In practice it would be a barrier for small investors.
Firms have not yet determined commissions for the fund, but Gallancy has indicated that it is likely to be more expensive compared to other ETFs, since they must take on the additional risk of a digital currency.