The Long-Awaited Approval of Crypto ETFs

After years of waiting, it seems the United States might finally be opening its arms to cryptocurrency exchange-traded funds (ETFs). The crypto world is watching closely as more countries, including Canada and Brazil, have already welcomed their own versions. So, what’s taken the SEC so long? Well, grab your popcorn and let’s break it down.

A Shift in Regulatory Winds

Just when it felt like a cold winter for crypto enthusiasts, SEC chief Gary Gensler sent a wave of optimism through markets. His indication that the SEC is warming up to futures-based Bitcoin ETFs had analysts buzzing. Unlike the famous “chicken or the egg” debate, we’re about to choose the chicken — or, in this case, the futures.

• Big Names Interested: Notable firms like ProShares and VanEck have thrown their hats in the ring for Bitcoin futures-based funds.
• Future Focus: Gensler’s belief in futures offering a layer of investor protection has made this route more appealing.

Futures ETFs vs. Physical ETFs

While a futures-based Bitcoin ETF might seem like a light snack compared to the full-course meal of a physical ETF, it’s important to understand the differences. Futures ETFs don’t directly track Bitcoin — they track futures contracts. This could lead to all sorts of inefficiencies.

As Kapil Rathi from CrossTower points out, investing in futures can be costlier due to trading and rollover expenses. However, as Neena Mishra from Zacks Investment Research highlights, if investors find no other options, they’ll opt for futures ETFs. Sometimes, you’ve gotta settle for the non-alcoholic beer!

The Road To Approval: What’s Next?

Mark your calendars, folks! With potential timelines hinting at approval in the coming months, the excitement is palpable. Analysts are hoping to see multiple approvals by November, setting the stage for possible physical ETF approvals in early 2022. It’s like waiting for the next season of your favorite show — and you might just binge-watch on the first day!

Investor Protection and Market Manipulation Concerns

Despite the cause for optimism, concerns about market manipulation in the futures market persist. This is the same market that’s suffered from its fair share of scandals and shenanigans. Gensler might believe that oversight from the CFTC will mitigate risks associated with futures, but critics point out that it opens a new can of worms.

“While the regulation is tighter, futures are derivatives. They don’t directly interact with Bitcoin, which raises questions about the reliability of tracking expenses,” noted Rathi.

Conclusion: A Taste of What’s to Come

So, will we see a futures-based Bitcoin ETF soon? The outlook seems promising, and who knows, it might not be long before the SEC takes another stab at physical crypto ETFs. While they may seem like the less preferred choice for now, futures ETFs could function as a stepping stone to a fully-fledged crypto investment landscape in the U.S. Dollars and Bitcoin may finally start shaking hands more frequently, but for now, let the countdown begin!