Now Is the Time to Approve Bitcoin Exchange-Traded Products Russell Rhoads, TABB Group 21 February 2019 The SEC has the potential approval of two bitcoin ETFs on its agenda. We have been down this road before, but the market is maturing, says TABB Group head of derivatives research Russell Rhoads, who offers four reasons why it finally is time to approve bitcoin ETFs. The SEC is fully open for business after the recent government shutdown and one thing on its agenda is the potential approval of two bitcoin ETFs. Both Bitwise Asset Management and VanEck/SolidX have filings in front of the SEC that are in the public comment period. We have been down this road before, but the market is maturing, which means it is about time to approve bitcoin ETFs. Four reasons why now is the time to approve bitcoin ETPs: 1) The bitcoin futures markets have a proven track record. Both CME and Cboe launched bitcoin futures in late 2017, and both contracts continue to put up respectable volumes and open interest. The chart below shows the open interest for both the CME and Cboe offerings as of the end of January. The trends are opposite, but the CME contract represents five bitcoins while the Cboe contract represents one, so the notional exposure actually has been growing despite the drop in Cboe’s open interest figures. Source: www.cftc.gov Also, both have a decent number of institutional customers, with the most recent Commitment of Traders (COT) report noting that both CME and Cboe had 41 customers with institutional-size positions that required reporting to the CFTC. Finally, on an operational and settlement basis, each exchange has a strong track record, with no operational issues and a several contract settlements completed. It should be noted that early in the bitcoin ETF filing process the SEC noted a bitcoin derivatives market is a step that would get the market closer to an ETF being approved. It appears this has been accomplished. [Related: “The Death of Institutional Interest in Bitcoin Futures Has Been Greatly Exaggerated”] 2) Crypto custody has improved. As the crypto market continues to evolve and institutions become more involved, the presence of custody providers has expanded and will continue to do so. The institutionalization of not just the acceptance of bitcoin as an asset, but on an operational basis should offer more comfort to regulators with respect to allowing bitcoin ETFs to be introduced to the marketplace. 3) Price volatility has come down in the bitcoin market. Although not necessarily a primary factor in the approval process, the lower price volatility in bitcoin recently relative to most of 2018 should be reassuring with respect to adding an ETF to the marketplace. The introduction of futures to this market just over a year ago created a bubble in the price of bitcoin that slowly deflated over the course of 2018. After that experience it is doubtful that the market would repeat the same mistake. 4) Retail investors are less likely to make investing mistakes using bitcoin ETFs. Bitcoin is now well known, even among non-professional investors. Also, all investors are aware of how quickly bitcoin may lose value, based on the price action over the past few months. A justified concern with regulators is that the investing public is informed before making investment decisions. Due to a combination of price action and publicity, the knowledge level of individuals is much higher than it was when bitcoin ETF proposals previously were in front of the SEC. [Related: “The SEC and Bitcoin ETFs – Another Chapter to Be Written Soon”] The current countdown for an SEC decision targets early April, at which time we may see an approval, extension for a decision, or an effective rejection. Bitcoin can be a good diversification tool, the futures markets have shown early success, and the speculative bubble nature of bitcoin price action is not as present as it once was. It seems like it is time for the financial markets to move to another avenue of access to bitcoin price action and allow the introduction of bitcoin ETFs to the marketplace.
bitcoin futures OI only about 5000 which I find is very low. look and gold futures. OI is about 360 000. I doubt Bitcoin ETF volume is going to be that great.
%% IBKR founder said ''bitcon has no fundamental value'' It may have value for short sellers, but pineapples sold for $8,000 each when first discovered. James Dole started his commercial plantation; guess what happened to the price of pineapples?? LOL. NOT sayin' any amount of bit con is worth one pineapple; its an example.