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Bitcoin ETF (Sort of) Being Unveiled

Fabio Carbone

Two firms have launched a limited version of an ETF this week in the hopes it could be a transition moment to a fully public ETF. VanEck Securities and SolidX Management are using a loophole of sorts to get around regulations. They will be offering the ability to trade shares in their VanEck SolidX Bitcoin Trust to institutions

For now, this will have to exclude retail investors and only be for hedge funds and banks. The fund isn’t a true ETF, as it is not exchange-traded, but shares are created and redeemed with the same mechanics as an ETF. The two firms have utilized an SEC exemption that allows qualified institutional buyers to traded private investments and securities among themselves. The unique non-ETF mechanics of the fund has earned it the colloquial BTF, or Broker Traded Fund. 

Gabor Gurbacs is an executive at VanEck in charge of digital asset strategies, and he clarified the eventual goal with the below quote: 

“We continue to support market structure developments in the digital asset space. This Qualified Institutional Buyers (QIBs) only 144A Bitcoin product may pave the way for institutional Bitcoin adoption and showcase that an appropriately regulated ETF structure can work in practice.”

Bid For Mass Adoption

Since Bitcoin began to grasp at the mainstream in 2017, tons of different companies have been vying for the right to bring a Bitcoin ETF to market. The SEC has postponed the decision or flat-out denied it, but it remains the high water mark of mass adoption. Every fund wants to be the first to offer it because of the much larger market they will be able to access with an ETF. 

Institutional capital has been a buzzword in the crypto sector over the last few years because it is viewed as the next frontier of capital that will enter the space. News over the last year (even the crypto winter) indicated that money has been flowing in. Although it isn’t always announced, you can see how big banks have changed their tune on Bitcoin, likely because they now have several ways to profit from it. 

Retail investors have the potential to be a form of institutional capital, at least in form. By purchasing an ETF, they would push the fund to make a purchase of the underlying cryptocurrency, further boosting the price of Bitcoin (assuming that is the first cryptocurrency to get an ETF). 

Bitcoin’s Price is Dependent

Anything that makes it easier to buy Bitcoin is viewed as a net positive for Bitcoin. Several years ago, there were very few fiat gateways, and getting money into the ecosystem required solid knowledge of the computer science space. Now, it is as simple as going through Coinbase or Kraken to convert your fiat into Bitcoin or another cryptocurrency. 

Anecdotally, when an April Fool’s prank was played on the crypto community announcing the approval of an ETF by the SEC, the price of Bitcoin jumped $5,000. This has been reflected in recent market swings that pushed up the price $900 in the 24 hours since the joint announcement of this limited ETF. 

 

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