Bloomberg: Pour some cold water on BTC ETF, don’t hold too high hopes

There are market rumors that the U.S. Securities and Exchange Commission (SEC) may pass it as early as this week. As the deadline for regulators to make a final decision approaches, the cryptocurrency market may stage a good drama of "buy rumors and sell facts."

If the U.S. Securities and Exchange Commission really approves a futures-backed BTC ETF this week, it could become a catalyst for the recovery of the spot BTC market. Many cryptocurrency market opinion leaders, including Morgan Creek founder Anthony Pompliano, have admitted that "this thing could make the market crazy."

However, the reality may not be what everyone imagines.

Juthica Chou, head of over-the-counter options trading at Kraken Digital Asset Exchange, said that it is easier to enter the cryptocurrency market now than a few years ago, so it may not be reliable to assert that the launch of a Bitcoin ETF will trigger a surge in market demand. In fact, retail investors can now buy and sell digital assets through crypto exchanges around the world or through channels and platforms such as PayPal and Square. On the other hand, despite the persistent discount, institutional investors have been able to gain cryptocurrency exposure through tools such as the Grayscale Bitcoin Trust for many years.

In an interview with Bloomberg’s streaming show “QuickTake Stock,” Juthica Chou said:

“Compared to the cryptocurrency market in 2017, the current cryptocurrency market is actually better, safer, and has lower barriers for individual and institutional investors. The impact of ETFs on the digital currency market is definitely positive, because ETFs can expand the scale of people participating in Bitcoin trading, but in the current market environment, the impact of BTC ETFs may not be as great as imagined a few years ago, because we have already expected that institutional demand will not be high.”

Nevertheless, the optimism about the upcoming launch of the BTC ETF still adds fuel to the digital currency market. This week, the price of Bitcoin broke through $58,000, setting a record high since May this year, an increase of more than 80% from the low of $30,000 in July.

However, in the past few months, the cryptocurrency market has not shown a stable development trend. From Coinbase's listing on the U.S. stock market in April to El Salvador's positioning of Bitcoin as legal tender in September, many events have affected market sentiment.

Stephane Ouellette, CEO of cryptocurrency platform FRNT Financial Inc., said that the approval of the BTC ETF is undoubtedly good news, but it is far from "bringing about huge market changes" and cannot be called a "game changer". Stephane Ouellette said:

“I’m not sure if a BTC ETF would add more avenues for investors looking to enter the space, but it’s also conceivable that if a BTC ETF is approved, all U.S. trading platforms would offer exposure to Bitcoin assets, whereas currently only a few platforms offer this exposure to investors.”

It’s been a long road for those who support a BTC ETF. Cameron and Tyler Winklevoss, the twin brothers who accused Facebook founder Mark Zuckerberg of plagiarizing their ideas, first submitted an application for a BTC ETF in 2013.

In August, Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), said that policymakers might be more lenient if the ETF was based on futures rather than cryptocurrencies themselves, which could set the final direction for the current futures-based Bitcoin ETF application. On September 30, Gary Gensler reiterated his support for Bitcoin futures ETFs rather than Bitcoin spot ETFs.

Eric Balchunas of Bloomberg Intelligence said that even if approved, a fund with futures as its underlying asset may have very limited impact on the market . He believes that the main reason is that ETFs linked to futures are not "ideal", which may affect performance due to the special nature of futures. More opinions believe that the spot-based BTC ETF is the main factor that brings real driving force to the digital currency market.

Eric Balciunas explains:

“Investors generally don’t like derivatives, and a lot of financial advisors don’t like derivatives either. I think if the SEC approves a futures-based BTC ETF, it’s probably going to be a very small catalyst, and a physically-backed BTC ETF is going to be the real catalyst.”