Shunt Manukyan: Bitcoin ETFs to the Moon?
This article, first shared with IS Investment by İş Investment Global Markets Capital Manager Şant Manukyan, who is closely followed by the crypto money world, gives us important ideas about the possibility of Bitcoin ETFs realizing and the possible effects they will have on the market.. We hope you enjoy reading it.
Bitcoin Exchange Traded Fund: To the Moon?
Bitcoin is very serious lately With a rise, it came to $ 8350 in a short time. Leaving aside some technological upgrades or daily news, the biggest driving force should be September 21st at the latest, which was spoken as August 15th but was postponed to September as of yesterday, SEC’s The decision of the Bitcoin ETF, the exchange-traded fund.
This date is for Direxion’s ETF.. As you can see below, I am writing via VanEck, and if there is a similar postponement, it may be postponed until 2019 (SEC can postpone it by 240 days). In fact, ETF issuance is not a new issue.. In the following October 2017 e-mail, I mentioned what kind of criteria the SEC is looking for.. It seems like the right time has come for a little more detail.
When the Facebook twins applied for the ETF, the SEC rejected it for 2 reasons
1- Absence of SSA
2- The official status of Gemini exchange is Trust, not an exchange
The structure of Bitcoin and the status of Gemini exchange can be explained in this explanation. The application was also rejected because it did not comply.. (Update: The SEC has once again denied the twins’ application. Since SolidX has a different pricing method and appeals to a different investor audience, I tend not to see this decision as a precedent)
However, over time, futures contracts settled first, then Ether and BTC were not “security”. It was decided. In this case, there is no need for standard SEC regulation.. This time, the application for an ETF (actually VanEck and SolidX) via CBOE BZX, whose quality will not be in dispute, has been made.. The application is something like this and this page. Not only the names I shared above, but also some other issuers applied to create a fund using Bitcoin futures (like an oil ETF) this time, not Bitcoin, and the SEC has taken the matter under investigation.. ETFs have also emerged in alternative markets, meaning that the competitors of the US financial market have taken their hands faster.
We know that Bitcoin futures contracts are not directly related to the spot Bitcoin market. Therefore, it is a classical arbitrage. it’s hard too. However, since an ETF will have a direct impact on liquidity, the impact on prices will be slightly different.. Putting aside speculative purposes (in fact, they’re all speculative too..), Bitcoin futures have become an alternative for buyers who don’t understand spot Bitcoin or are worried about hiding it and don’t trust the exchanges.. Bitcoin was truly untouched as a cash settlement was made when it was due.. Again, the target is a similar audience, but if an ETF is carrying the spotlight, when there is an inflow, it has to divert money directly to the main asset, this time Bitcoin.. In other words, instead of the effect of “pushing demand out of the spot” created by the futures contract, the ETF will direct it to the spot.. An ETF can also enter into arbitrage or become the subject of itself.. This is very important and healthy.
I would like to draw attention to a couple of important details without mentioning the technical points in the prospectus:
1- “According to the Registration Statement, the Trust will issue and redeem
“Baskets”, each equal to a block of 5 Shares, only to “Authorized Participants” (as described below). Registration Statement, as of the date of the Registration Statement, each Share currently represents approximately 25 bitcoins.”
Especially 2 for investors. matter is important. It appears that we are not looking at a price that an ordinary investor can afford if a different ETF is not created or the nature of that ETF changes.. I think many commentators/marketers are not aware of this.. There may be two interrelated reasons for this type of move: 1- Targeting large funds 2- Keeping small investors away using only price and bypassing the SEC’s fear of excessive speculation.. It’s not a problem that can’t be worked around, there are some solutions but it’s good to know. Worst case, other ETFs will come to the fore.
This type of ETF requires a rule change to be successful.. Simultaneously with the application, the SEC started an investigation to change a rule from the 1940s. ETFs are actually created/managed by an exemptive relief rather than a set of regulations and are exempt from the 1934-40 regulations.. Therefore, a few stones need to fall into place for the application to be approved. In order not to prolong it.
When you read the analyzes on this subject, you will see that especially the Gold ETF will be brought to the agenda.. Below you can see the movement in the next 10 years after the launch of this ETF (the following years are a bit different, of course).
The habit of buying spot gold in our culture is not so much, especially in the West. A “share” that closely follows its prices has attracted a serious investor base in a short time.. The positive effect of this on prices is undeniable, but the level of real interest rates, Central Bank allocations, geopolitical developments, etc. was already a dynamic that pushed “Gold” up.. I agree with the notion that the Bitcoin ETF will draw in a certain amount of demand on the sidelines.. However, Gold is much easier to “understand/interpret” than Bitcoin.. When we go back a year or two, the SegWit discussions or the post-fork Bitcoin “Bitcoin” or Bitcoin Cash “Bitcoin” debate can be difficult to understand even for professional investors if they are not interested in the subject.. I’m not even going to get into the potential 51% attack, how to hold forks, etc.
As a result, the green light from the SEC will be extremely positive.. But the main dynamic that will determine the true value of any cryptocurrency should be its prevalence of use and acceptance. At this point, we see that all the main cryptos continue to fall short.. I conclude by sharing two more supplements.. In the past years, Bitcoin searches on Google Trends and price used to show very similar movements.. Now, while there is no increase in Bitcoin searches (below), there is a serious increase in Bitcoin ETF searches and we see that it has an effect on the price as I shared in the introduction.
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