By Peter Ward, Senior Consultant
What some believe to be a historic move for the crypto industry, this week marks the launch of the first bitcoin-linked ETF. The much-anticipated ProShares bitcoin-linked ETF made its official debut on Tuesday, October 19.
A measured approach
Not surprisingly, the SEC appears to be exercising caution when it comes to offering cryptocurrencies to the masses, as this initial approval is for a futures-linked bitcoin ETF only. This means the ETF will track bitcoin futures that trade on the Chicago Mercantile Exchange (CME), unlike a “spot” crypto instrument where an investor would be buying shares in a fund that tracks the current price of bitcoin directly. To some, this is a moderate step in the right direction, while others in the crypto community would rather see an ETF backed by physical bitcoin, which could offer lower overall fees to investors.
A flood of competition
The SEC approval is expected to result in a rash of subsequent crypto-related filings from other ETF providers. According to CNBC, these include Invesco Bitcoin Strategy ETF, the VanEck Bitcoin Strategy ETF, the Valkyrie Bitcoin Strategy ETF, and the Galaxy Bitcoin Strategy ETF. It remains to be seen when and if the SEC is prepared to approve a spot crypto ETF, as market manipulation is an ongoing concern.
For now, approving a bitcoin-linked future ETF provides the SEC with the assurance that comes with the regulated futures market. Should these ETFs prove successful, we may see additional approvals for other crypto-linked instruments on the horizon.