The Securities and Exchange Commission (SEC) has finally approved the first Bitcoin futures exchange-traded fund (ETF) to list on the New York Stock Exchange (NYSE). The listing was also a success, asa investor interest flowed in immediately. A Bitcoin ETF is an investment vehicle that tracks the price of Bitcoin, which is often the standardized benchmarked price. As the name implies, a Bitcoin spot ETF monitors the immediate expense of Bitcoin, whereas a Bitcoin futures ETF tracks the cost of rolling over Bitcoin futures contracts. While the price of a Bitcoin spot ETF remains close to the spot price on crypto exchanges, a Bitcoin futures ETF may trade at a discount or a premium, depending on the demand for the underlying Bitcoin futures instrument.
However, both are listed on mainstream stock exchanges, bringing crypto investment products to the attention of average investors. These ETFs provide Bitcoin exposure, but the investor does not own any of the cryptocurrencies.
Why Bitcoin Futures ETF?
Several applications for Bitcoin spot ETFs have been denied by the SEC throughout the years. However, the agency’s preference for futures-based Bitcoin ETFs was disclosed after Chief Gary Gensler slammed crypto, referring to the market as a “wild west.”
The Bitcoin futures price of CME-traded Bitcoin futures is tracked by ProShares’ ETF, which is now listed on the NYSE Arca. It filed its application under the more stringent Investment Company Act of 1940, which provides better investment protection. Furthermore, spot Bitcoin trading in the United States is not federally regulated. The Commodity Futures Trading Commission, on the other hand, directly supervises Bitcoin and Ethereum futures trading because they are classified as commodities. A futures ETF was probably accepted before a spot market ETF because the CME futures market has been subject to the CFTC’s oversight for a few years now. As a result, the clearinghouse processes are in place, and any alleged manipulation of the futures market is less than that of the underlying bitcoin spot market. Although ProShare’s Bitcoin ETF only allows traders to take long positions on Bitcoin futures, a few other businesses request approval to offer inverse securities that will allow traders to short Bitcoin.
Demand remains high
More than a dozen spot Bitcoin ETF applications are still pending clearance, despite the first Bitcoin futures ETF listed on the US stock exchange.
The filing of ProShares’ ETF has inspired other industry titans, such as Grayscale, to seek a Bitcoin ETF as well. The business applied with the SEC to convert its trust fund, an AUM of more than $41 billion, into a Bitcoin ETF. Another point of contention is that introducing a Bitcoin futures ETF could jeopardize the approval of a spot ETF. If Bitcoin futures ETFs successfully meet market demand for Bitcoin investment, the SEC may argue that there is no longer a need to spot Bitcoin ETF.
However, Bitcoin is not the only cryptocurrency startup attempting to list on stock exchanges. A few applications for the creation of Ethereum ETFs were also received by the SEC.
We’re unlikely to see an Etherum ETF,” Sater added. Many analysts, however, see the current clearance as a watershed moment and anticipate that the US regulator will eventually permit spot Bitcoin ETFs and even Ethereum ETFs.