VYSYN Ventures Weekly Insights #70 — SEC moves closer to approving the first Bitcoin ETF as investor demand mounts
Market participants continue to believe that the United States Securities Exchange Commission (SEC) may approve the first Bitcoin ETF as early as 17th October 2021, as investor demand for a Bitcoin Exchange Trust Fund (ETF) increases. The establishment of an ETF has significant implications for the cryptocurrency as mainstream recognition will likely grow with it’s implementation.
In the latest VYSYN Release, we analyze the developments around the Bitcoin ETF, detailing events that are leading key players in the industry to express the belief that a Bitcoin ETF might soon be a reality. We highlight some of the likely candidates for initial approval and focus on the impact that such approvals could have on Bitcoin and cryptocurrencies.
Bitcoin ETF soon a reality?
The first application for a Bitcoin ETF was filed in 2013 by the Winklevoss twins, Cameron and Tyler, who were early adopters of the cryptocurrency. However, on March 10th, 2017, the SEC rejected their application citing that the proposal was “not consistent with the rules designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest”.
Since then, other funds managers have filed requests in the US. While the wait for an American Bitcoin ETF continues, other countries have moved on and established functional ETFs for the digital currency. Canada leads the way with several ETFs already in operation such as Purpose Bitcoin ETF (BTCC), Evolve Bitcoin ETF (EBIT), CI Galaxy Bitcoin ETF (BTCX), and 3iQ CoinShares Bitcoin ETF (BTCQ). Brazil and Dubai are a close second with fully operational Bitcoin-focused ETFs offered to investors of all sizes.
These countries’ ETFs were launched on June 23rd, 2021. QR Capital’s Bitcoin ETF, QBTC11 is Brazil’s first Bitcoin ETF and was approved in March 2021 and Canadian asset management firm 3iQ launched its fund in Dubai. These global moves have not shifted the SEC’s opinion even as applications continue to grow.
Currently, there are 13 high-profile Bitcoin ETF proposals in the US that are awaiting approval. They include proposals from VanEck, Valkyrie Investments, NYDIG/Stone Ridge, WisdomTree, First Trust/SkyBridge, Fidelity/Wise Origin, ProShares Bitcoin Strategy ETF, Kryptoin, Galaxy Digital, Ark Invest, Global X, One River and Invesco Galaxy Bitcoin ETF.
Investor sentiment piling pressure for Bitcoin ETF approval
Experts believe that sooner or later, the first Bitcoin ETF will be approved in the United States thanks to mounting pressure from the investing public. Mike McGlone, Bloomberg Intelligence’s senior commodity expert, predicts that the SEC could approve an application as quickly as late October 2021.
In a move that further indicates the proximity of approval, Fidelity, which applied for an ETF with the name Wise Origin Bitcoin Trust, held a meeting with the SEC on September 8th, 2021. Reportedly, Fidelity indicated that the Bitcoin market had reached maturity as evidenced by the significant trading volume and deep liquidity in the market. Bloomberg’s Chief ETF analyst, Eric Balchunas, believes that there is at least a 75% chance of approval for the futures ETFs before the end of October 2021, despite the SEC repeatedly delaying approval.
He also warned about the heightened expectations in the cryptocurrency industry, that the launch of a Bitcoin ETF by the SEC would trigger another explosive surge in crypto prices. Balchunas believes that the ratio of funds that will flow into the marketplace may not be big enough to satisfy the price expectations of many investors. He expects to see around $4 billion flowing into the industry in the first year. This is a small amount, compared to the current volume of funds circulating in the broader markets.
BTC prices rise as mainstream demand looms
Despite Balchunas’ views, the price of Bitcoin has surged. At the time of writing, Bitcoin trades at roughly $60k. The prospect of an ETF approval is having secondary effects in the institutional market which is further pushing prices higher. Mike Bucella, general partner at crypto VC firm Blocktower thinks that the current market activity is a reflection of traders “front-running” a futures-based Bitcoin ETF, squeezing short positions and forcing them to cover. In turn, this pushes prices even higher.
The market surge of early 2021 was driven by sentiment, after institutional investors made their way into the market. Investors seem to be betting on similar events occurring once again, assuming approval goes through. Interestingly, these events coincide with periods when the Bitcoin market has exhibited phase-changing characteristics.
There’s no doubt that a Bitcoin ETF will represent a positive development for the broader cryptocurrency industry. In investment terms, it will pave the way for a major influx of cash into the crypto markets. With Bitcoin trading at all-time highs, almost all holders may observe significant increases in their holdings if a US Bitcoin ETF is approved.
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.