VYSYN Ventures Weekly Insights #71 — Prices react to ETF approval by SEC
In yet another signal that Bitcoin is closer than ever to mainstream approval, the first Bitcoin-focused ETF launched in the United States. The Proshares Bitcoin Strategy ETF tracks the prices of Bitcoin futures, rather than the asset itself. However, it remains the first ever Bitcoin-linked ETF to debut in America.
In the latest VYSYN Release, we highlight the details of the newly launched ETF and what it means for investors. We also examine the reaction of the digital asset marketplace and expert views on the subject.
First US Bitcoin futures ETF launches
On October 19th, 2021, the Proshares Bitcoin Strategy ETF (BITO) made its debut on the New York Stock Exchange (NYSE), after being approved by the Security and Exchange Commission (SEC). This event marks the highest government-related approval Bitcoin and digital currencies have thus far received in the US. It might open the gate for more cryptocurrency-backed ETFs in the future.
In a previous post, we talked about the imminent launch of a Bitcoin-backed ETF, and the short-term expectations of the market in response. The market has not disappointed so far, as buying pressure rose. Bitcoin climbed to $67,016, its highest price in six months, overcoming the previous all-time high (ATH) of $64,899, achieved on April 14th, 2021. As of the time of writing, Bitcoin price had retraced to $61,202.
BITO opened at $40 on the NYSE and jumped by 4.8% to close at $41.94 on its first trading day. With a trading volume of almost $1 billion on its opening day, BITO set a new record as the highest volume ever experienced by an ETF on debut. The price climbed on the second day of trading to $43.95, before pulling back a couple of days later. As of the time of writing, BITO’s price was at $39.49.
BITO is a Futures ETF that tracks the Chicago Mercantile Exchange (CME) Bitcoin futures. It remains an indirect investment vehicle since it doesn’t track the price of Bitcoin directly. From a regulatory perspective, US futures-based ETFs for cryptocurrencies are preferable since the SEC doesn’t have jurisdiction over trading venues outside the country’s borders.
Expats weigh in on first ever Bitcoin ETF
The launch of the Proshares Bitcoin Strategy ETF is being perceived as a positive development for Bitcoin and the rest of the cryptocurrency industry. Admittedly, some observers have a few reservations. There are mixed opinions as to how well the ETF could help in BTC’s mainstream adoption, with a few people citing the roadblocks it could potentially erect.
Bitcoin Foundation chairman, Brock Pierce described the launch as “a watershed moment” for Bitcoin and the cryptocurrency industry. Noting how numerous entrepreneurs and firms have sought ETF approvals for the past several years, Pierce described the launch as the beginning of a new era. Pierce also noted that this development will serve as further validation for Bitcoin and cryptocurrencies, both in the US and other parts of the world.
Anthony Bertolino, VP of growth at iTrustCapital, acknowledged that the launch of the Proshares Bitcoin Strategy ETF will provide an opportunity for an entirely new investor class to “experience the benefits of bitcoin as a legitimate asset”. However, he believes that for long-term purposes, this will not represent an ideal solution for mainstream Bitcoin adoption.
Bertolino explained that the round-the-clock liquidity of the Bitcoin spot market is what makes it highly attractive as an asset class. He predicts that in the future, investors would almost certainly prefer a spot-based physically-backed Bitcoin ETF, over the futures ETF. This might have a negative effect on BITO prices in the future, should a spot ETF ever become available.
Countering this line of thought is ProShares CEO Michael Sapir. According to him, ETFs like BITO “will open up exposure to bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider.”
Other Bitcoin ETFs await potential SEC approval
Valkyrie Investments and VanEck are two prominent institutions with Bitcoin ETF applications in the SEC’s pipeline. A decision on these is due in the next two weeks. Other ETF proposals that are pending with the SEC include NYDIG/Stone Ridge, WisdomTree, First Trust/SkyBridge, Fidelity/Wise Origin, Kryptoin, Galaxy Digital, Ark Invest, Global X, One River, and Invesco Galaxy Bitcoin ETF. Decisions on these proposals are expected in the coming months.
Many cryptocurrency fans believe that this is just the beginning of an entirely new era. There is bound to be an increase in awareness, education, and adoption as new categories of users make their way into an industry that is fast growing into considerable maturity.
It remains to be seen how this step will hasten mainstream adoption of cryptocurrencies. While the investing community has adopted BTC and other cryptocurrencies as an asset, a further catalyst is needed for people to adopt BTC as a primary store of value. Either way, there’s no doubt that BITO’s launch is a watershed moment for an asset that launched less than 15 years ago.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown to USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocations, versatile marketing support, and tech assistance.