The Future of Bitcoin Spot ETFs in the Industry Still Seems Unlikely


Many exchange-traded funds of bitcoin futures are available for trading, and lots more are to come in the upcoming days. ETF supporters believe the approval of recent bitcoin futures will lead to the endorsement of a spot ETF. While spot bitcoin ETF is hard to pin down, industry proponents anticipate that the approval of futures ETFs obtained under the same law governing spot bitcoin ETF application is an encouraging sign. However, the U.S Securities and Exchange Commission or SEC also has a list of concerns that need proper addressing.

Bitcoin futures Exchange-traded Fund (ETF) got approval for the United States market last week. The door for a spot bitcoin ETF opened by its structure in a way that is something the crypto world has always roared. The recent instances of ETF rejections indicate that the case may not be as simple as it may seem.  

Traders carry out bitcoin futures ETFs trading based on the value of bitcoin futures, whereas they would be able to trade a spot bitcoin ETF based on bitcoin value. Spot bitcoin has a larger market than bitcoin futures, which do not directly correlate to the bitcoin value. Crypto industry proponents believe trading bitcoin spot ETFs can be the right way to make a safe entry into the bitcoin market with no investment in the cryptocurrency.

The U.S Securities and Exchange Commission granted bitcoin futures approval last week. Unlike all of the previous bitcoin ETF applications filed under the investment company act of 1940, the Chairman of SEC filed this application under the Securities Act of 1933 and 1934.  According to Gary Gensler, the chairman of SEC, he was more comfortable with Act Funds of 1940 since it contains the investors’ legal protection and the surveillance tools supervising the future market. He said the bulk volume of ETFs is available on Chicago Mercantile Exchange, which has venerable surveillance tools installed.

The recent rejection orders by the SEC are concerning for the developers. The commission concluded that BZX does not meet its burden under the Exchange Law. It also does not satisfy the rules of Practice to exhibit that the proposal is according to the Exchange Act and the requirements of national securities exchange. It means Bitcoin Spot ETFs cannot prevent fraudulent acts and manipulative practices and protect the public and investors’ interest. The SEC rejected the NYDIF Bitcoin ETF in the identical language a month back.

However, a Nasfaq survey conducted by 500 financial advisers found that about 72 percent investors would comfortably invest in crypto if a bitcoin spot ETF was also there. It is a kind of crucial caveat that the survey contains 500 financial advisers who already consider investing in crypto. Therefore, the respondents did not necessarily have to be representative of the financial advisers in general in the United States.

Since the SEC has consistently spoken of its concerns as to market manipulation in the rejection of bitcoin spot ETF applications, it seems like the bureau will continue to reject new bitcoin spot ETF applications, at least for the predictable future.