What is Bitcoin ETF?
A Bitcoin Exchange-Traded Fund (ETF) would allow bitcoin to be traded on SEC approved exchanges like common stocks, enabling bitcoin to be traded with both low cost and ease like a share, while maintaining the diversified holdings functionality of a fund.
ETFs, because they trade throughout the day and experience constant price fluctuations, do not have end of day net asset value (NAV) price calculations. Rather, they track an index and mirror its performance. This means that ETFs have lower operating costs than invested and managed mutual funds.
ETFs are similar to index funds in that they are passive investment opportunities and have low operating expenses; however, ETFs can be traded throughout the day on the stock exchange, while an index fund operates like other mutual funds.
A Bitcoin ETF would replicate the bitcoin benchmark index, tracking its performance, and allowing investors to participate in buying and selling cryptocurrency without dealing with the hassle of purchasing and storing it.
Bitcoin ETF Background and Future Options
Before a Bitcoin ETF can become reality, an ETF proposal must be approved by the US Securities and Exchange Commission (SEC). There are several notable Bitcoin ETF options in the works, and the SEC has until February 27, 2019 to make a final decision.
The most recent Bitcoin ETF proposal rejection was submitted to the SEC in 2013 by the WInklevoss twins, who operate US-based cryptocurrency trading platform Gemini. The Winklevoss ETF proposal was rejected by the SEC in late July 2018, with concerns such as price and market manipulation due to the ETF relying exclusively upon Gemini, a single cryptocurrency exchange, cited as factors in determining the rejection.
Other players vested in obtaining SEC approval and establishing a Bitcoin ETF include VanExk-SolidX and the Chicago Board Options Exchange (CBOE) It is likely that these will be approved prior to the SEC’s 2019 decision deadline, as SEC Commissioner Hester Pierce is an active proponent of the idea, despite being outvoted by 3 to 1 in the Winklevoss proposal decision.