Cryptocurrency enthusiasts may turn out to be their own worst enemy when it comes to an exchange-traded fund backed by bitcoin.
The largest virtual currency has soared about 40 per cent to more than $8,000 since the start of July as speculation mounts that a Bitcoin ETF could be approved by the US Securities and Exchange Commission within weeks.
It’s more than a little ironic. Valuation, and the potential for volatility, was one of the key concerns that the SEC expressed in a January letter on the prospects for these funds after watching the currency surge above $18,000. The regulator asked would-be issuers to withdraw their applications until they could address its questions. Yet rumours that a bitcoin ETF could be near have triggered price swings, boosting the currency past $8,000 for the first time in two months.
“The SEC doesn’t want any part of adding to or influencing some speculative bubble,” Eric Balchunas, a senior ETF analyst with Bloomberg Intelligence, said of bitcoin’s recent rally. “It’s like deja vu, but I’m 10 times more pessimistic” about a fund being approved.
The latest bout of speculation seems to stem from Cboe Global Markets Inc.’s 20 June request for SEC permission to list a bitcoin ETF created by VanEck Associates Corp. and SolidX Partners Inc. Since then, the regulator has received a deluge of messages lobbying for the fund, with crypto fans parsing SEC rules to variously predict a decision by mid-August or “by September.”
Don’t count on it. At least three other requests from exchanges that want to list bitcoin ETFs have been pending since January. The SEC said in June that it would need until 23 August and 15 September to consider two rule changes—regarding bitcoin funds from ProShares and GraniteShares respectively—and said last week that it would need until 21 September to evaluate another change for several Direxion-branded ETFs. It has extended its considerations several times.
However, the ETF industry is certainly upping the pressure. Last week, VanEck responded to the SEC’s questions from January, declaring that its fund would be “consistent with the commission’s mission to protect investors” and Bitwise Asset Management, which already runs a private indexed crypto fund, said Tuesday that it is seeking approval for a new ETF that would track the performance of the 10 largest virtual currencies.
A spokesman for the SEC declined to comment.