The Bitcoin exchange-traded fund (ETF) rollercoaster took another dive on Tuesday, perpetuating the ride that these investment vehicles have been on for over five years.
In a filing dated September 17th, VanEck and SolidX, the partners behind a leading Bitcoin ETF application, revealed that they had pulled their application from the Securities and Exchange Commission (SEC). This came ahead of the October 18th deadline for the SEC’s verdict on the product.
For Good Reason
While the documenting outlining the withdrawal made no mention of fears of a denial from the SEC, it seems that this move was a result of recent comments from the SEC’s commissioners.
Speaking to CNBC, SEC chairman Jay Clayton last week said that “there is still work left to be done” for this class of cryptocurrency products. Clayton went on to double down on his common critiques of the cryptocurrency market, casting doubt on the nature of Bitcoin’s underlying market as BTC “trades on largely unregulated markets” and the fact that Bitcoin custodial offerings may not be ready for institutions to use.
Are we any closer to seeing a Bitcoin ETF some day? SEC Chairman Jay Clayton to @CNBC: "yes, but there's work left to be done" @SEC_News @bobpisani @kellycnbc @CNBCTheExchange #bitcoin #crypto pic.twitter.com/iJP3nn9XHc
— The Exchange (@CNBCTheExchange) September 9, 2019
Similar applications on the market, namely the two from Bitwise Asset Management and Wilshire Phoenix, have yet to be pulled in the wake of the move from VanEck. Previously, Bitwise’s chief executive and head of research have asserted that the state of the Bitcoin spot market is improving, drawing attention to the fact that spreads are decreasing (a sign of liquidity), crypto insurance is being offered, and big-name market-making institutions are getting into the mix. Bitwise CEO Hunter Horsley also said:
“Right now, half of the money in the U.S. is managed by financial advisors. What a Bitcoin ETF would do is the same thing that a gold ETF or private bank ETF did: open up these major new areas of the market to a major segment of American wealth.”
Should these two applications remain in the mix, they will receive a final verdict in the coming month. But, analysts, including the counsel of DeFi application Compound, Jake Chervinsky, has said that this is a clear sign that there will not be a Bitcoin ETF launched in 2019 for the U.S. market.
Despite pulling the plug on the SEC application, VanEck is still expected to operate a more privatized model of the Trust proposed in the filing.
Earlier this month, the firm revealed that it would be utilizing a certain securities rule to offer a Bitcoin product to institutional clients that bypass certain thresholds.
Although a privatized Trust may seem fundamentally attractive to those institutions that desire cryptocurrency exposure, the vehicle has yet to truly get off the ground. According to a product webpage from VanEck, there are currently only 4,000 shares of the Trust, amounting to around $40,000 of Bitcoin — effectively zilch in the grand scheme of things.
Have No Fear, Bakkt is Here
While many in the cryptocurrency community laud a Bitcoin ETF as the one investment vehicle that would attract the “institutional herd”, this may not be true.
Next week, Bakkt, the crypto platform backed by the New York Stock Exchange’s owner, Microsoft, Starbucks, among other firms, will be launching its flagship product: physically-deliverable Bitcoin futures. Bakkt is reported by markets research firm Fundstrat Global Advisors to have a “critical mass” of institutions banging at its front door, ready to adopt the futures once they hit the market. Fundstrat has also written that Bakkt is likely to change the dynamic of how institutional investors involve themselves in Bitcoin for the better.
Sure, a physically-backed Bitcoin future is not an ETF. But, at least for now, it seems that Bakkt will have to do.