Bitcoin ETFs, the SEC stalls with Grayscale
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The SEC has again delayed Grayscale’s request to turn the Grayscale Bitcoin Trust into an ETF to be listed on an exchange.
However, the Securities and Exchange Commission has issued a request for comment on the matter.
The SEC rejects Grayscale’s ETF
Grayscale submitted its application to the SEC via the NYSE in October 2019, right around the time that Proshares’ first futures-based Bitcoin ETF (BITO) was being approved. Grayscale’s ETF, however, would aim to convert the existing Bitcoin Trust, which currently holds $26 billion in assets.
The SEC’s concerns, on which it opened the consultation, relate to risks of market manipulation and fraudulent activities. Respondents were also asked about their opinion on the liquidity and transparency of Bitcoin and its market and the viability of Bitcoin as an underlying asset to an ETF.
The demand for ETFs on spot Bitcoin
After the approval of ProShares’ ETF, the door was opened for US investors to possibly also have an ETF based on Bitcoin as an underlying asset and not Bitcoin futures. The SEC, however, has always been concerned about Bitcoin’s price volatility and the risks of market manipulation. But according to some, these are fears that don’t make sense because the Bitcoin futures market, the one on which ProShares’ ETFs are based, is also not exempt from the same risks.
It’s also true that ProShares’ ETF has been less successful than expected. BITO was launched on the market at $41 per share, while it is currently worth about $25, a loss of nearly 40% from its initial value.
Perhaps the decline in interest is to be found precisely in the desire to have an ETF based on physical Bitcoin, which at the moment the SEC is stubbornly not approving.
Grayscale ETFs
While waiting to see its ETF on Bitcoin approved, Grayscale has launched an ETF that tracks the performance of some of the most important companies in finance, technology and digital assets. It’s called the Grayscale Future of Finance Index (GFOF) and was launched on 1 February.
It tracks the performance of companies like Coinbase, Robinhood, PayPal, Block, Hive Blockchain, in short, all businesses related to fintech and cryptocurrencies. It is currently worth around $24 and is meant to be a clear signal of Grayscale’s desire to position itself in the ETF market, with or without Bitcoin.
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