A Bitcoin Exchange Traded Fund (ETF) is considered by many to be Bitcoin’s first step into true institutional investment. An ETF represents some asset or assets of value that are held by a company on behalf of investors of the fund. The advantage to an everyday investor of such a scenario is that they never have to invest into the assets directly, but rather simply invest into the fund itself. This is managed by a central company who look after the buying, selling and rebalancing of the fund.
A Bitcoin ETF would give investors access to invest in Bitcoin without ever having to handle the cryptocurrency assets themselves. A Bitcoin ETF eliminates many of the barriers currently standing in the way of investors investing in Bitcoin. Such a fund would eliminate the need for less technologically savvy companies and individuals to purchase and store their own Bitcoin. At present, this remains a huge barrier to entry. As the fund would be actively managed, investing in a fund is a much more well-known and accepted way of investing, rather than purchasing something that needs to be stored in a wallet.
Bitcoin ETF in 2019
A Bitcoin ETF proposal submitted by the Winklevoss twins was rejected by the Security and Exchange Commission in the US in 2018. This rejection was not based on whether or not Bitcoin has value, rather on the state of the market. At the time of rejection, market manipulation and protecting retail investors were both reasons given for not allowing a Bitcoin ETF. As it is the agency’s mission to protect investors, the ruling was intended to guard against losses from manipulation. As most of the trading volume comes from international investors, it was also acknowledged by the SEC that international market manipulation was a factor.
It’s unlikely that the SEC will allow a Bitcoin ETF in 2019, due to uncertainty around manipulation. There is no other cryptocurrency-based ETF to act as precedence, meaning Bitcoin ETF proposals are entirely new. This makes it hard to predict if an ETF will be approved for certain, however due to market conditions and desire to protect investors there is a high chance Bitcoin will not be approved in 2019.
Ultimately consumer demand will dictate the direction of such a fund, but it is not highly unlikely that we will see such a vehicle emerge in the near term.