The Securities and Exchanges Commission (SEC) may approve four bitcoin Exchange Traded Funds (ETFs) on its desk for a decision this month.
Gary Gensler, the Biden appointed SEC chairman, has strongly hinted that ETFs under the more stringent Investment Company Act of 1940, rather than the Securities Act1933, may be approved.
A number of such ETFs have been filed, and they’re now for a decision with James Seyffart, an ETF analyst at Bloomberg Intelligence, stating:
“We are pretty bullish on approval here. We just can’t see Gensler and the SEC going out of their way to state positive comments about a 1940-act Bitcoin futures ETF at the end of September and then denying all of them less than a month later.”
Such potentially approved ETFs are expected to be based on bitcoin futures with Barry Silbert, who runs the stock traded Grayscale bitcoin and crypto trusts, stating: “word of the day: contango.”
Contango is a situation where the futures price of a commodity is higher than the spot price. His suggestion obviously being there will be more demand for an ETF than spot buying.
Such a situation can only arise if there is no arbitrage opportunity. That may be the case with a futures based ETF as you can’t redeem the asset, but you can potentially hedge.
A futures ETF moreover would be more volatile as it would be subject to expiring futures contracts at the end of each month. A spot ETF thus would probably be more appealing for long term investors, but it would probably be more expensive due to insurance requirements for custody holdings.
“Ready to tango,” Zhu Su of Three Arrows Capital said in reply to Silbert, suggesting some in the crypto space are excited about these new potential ETFs.
“The odds of approval in the next month are better than 50/50,” said Dave Nadig, chief investment officer at data-provider ETF Trends.
So eight years on, crypto may finally get its ETF which could open the way for more institutional long term investors.