Why do we need a bitcoin ETF
There is a growing surge of bitcoin ETF applications for a futures-based product, after the SEC said that it would probably approve a bitcoin ETF that holds bitcoin futures rather than the crypto itself. SEC Chairman Gensler views futures as a more regulated area of the market and one where he thinks investor guardrails are more sound.
Futures are usually a wager on an underlying commodity such as oil or gold and there is a growing bitcoin futures market run by CME Group. Bitcoin futures trade separately from the underlying asset and values don’t always align.
Rhind told ETF Wrap during a Wednesday phone interview that there may not be any substantial point to the current rigmarole around trying to be the first to offer a bitcoin-backed ETF beyond the optics of it.
Back in 2017, Rhind said the thesis for providing a bitcoin ETF was clear.
“We felt bitcoin and other [crypto] currencies seemed like that was an asset that people wanted to trade and they couldn’t easily,” he said.
That dynamic has changed substantially over the past three years, he argues, because access is easier for the average investor due to platforms like Coinbase Global and other venues, such as PayPal that offer exposure to bitcoin.
“The best expression of an ETF has always been market access,” he said. “It can be lightening in a bottle when you combine a genuine need…there’s demand for a particular class and [the ETF],” addresses that need and unlocks value.
“But by now this is no longer a market-access story,” Rhind said. “People can already get access.”
The GraniteShares pro also said tax benefits that one might derive from a stock ETF wouldn’t likely be in play for a bitcoin futures ETF.
“The chances are that the tax treatment will be the same as it would if you owned the underlying futures directly,” he said.
John Hyland, CFA, and director of Matthews International, told ETF.com that so-called roll costs, as futures contracts expire, could also create idiosyncrasies in ETF prices and trading.
“Bitcoin futures will likely always be in a mild contango, much like gold futures–a small, but not welcome, outcome,” Hyland told ETF.com in an interview. Contango is a condition where prices are higher for longer-dated contracts.
“So even if a bitcoin futures fund is small and can easily trade their futures, they will still likely underperform the spot price every year if using futures,” Hyland told ETF.com in an interview.
All of that is worth thinking about amid all the hullabaloo around a bitcoin ETF. Is it worth it, even if one gets approved by October?
Some crypto purists also like to point to the paradox of owning a decentralized asset, such as bitcoin or Ether on a centralized platform, like a fund traded on a public exchange. SOURCE Who needs a bitcoin ETF, anyway? It may hold little value for investors now—Here’s why. (msn.com)