The Implications of the Bitcoin ETF Decision

This could be a pivotal week for Bitcoin. The Security and Exchange Commission(SEC) is due to decide this week whether to green light a new Bitcoin Exchange Traded Fund(ETF). The decision could provide the crypto-currency with a robust regulatory framework and provide investors with an easier access to Bitcoin assets.

The specific ETF being evaluated is the Winklevos Bitcoin Trust(WBT) ran by Cameron and Tyler Winklevos. The twin brothers came to mainstream notoriety based on their controversial role in the early days of Facebook. In a great second act, the twins have become two of the most prominent thought leaders, champions and investors in the Bitcoin space. they have invested on several relevant Bitcoin startups and also own a Bitcoin exchange Thee potential green light of WBT by the SEC will consolidate the Winklevos brothers as the dominant investment powerhouse in the space.

Based on the initial application, the Winklevos ETF will trade on the Bats Global Market Exchange under the symbol COIN. The ETF will facilitate access to the digital currency to investors, hedge fund and other financial institutions.

WBT is not the only Bitcoin ETF pending SEC approval. Digital Currency Group recently filed with the SEC for listing its ETF on the New York Stock Exchange. Also, SolidX Management filed an application for a Bitcoin-based ETF last summer. Whichever ETF gets approval, the implications for Bitcoin can be profound.

5 Implications of a Bitcoin-Based ETF

Here are some of the implications that an SEC approval for a Bitcoin ETF can have in the market:

1 — Price Can Skyrocket

Bitcoin has been trading at extremely high values lately and a potential SEC approval for WBT could raise the prices considerably. Similarly, a potential SEC rejection can send Bitcoin prices down on a spiral.

2 — Winner Takes Most

The Bitcoin-based ETF race might be one of those scenarios on which the first vendor to market can have a decisive advantage. If we use gold ETFs as a reference, there is a significant market valuation difference between the leader (SPDR Gold Shares) and other ETFs.

3 — Currency Trading & Hedging Mechanisms

It is common knowledge that Bitcoin’s market behavior is sometimes related to the performance of the Chinese Yuan. A Bitcoin-based ETF will open the door to very interesting trading scenarios that involve Bitcoin and other currencies. Similarly, investors could hedge bets on Bitcoin with other asset classes. All that can be done today but requires a considerable amount of work.

4 — Sophisticated Trading Strategies

A Bitcoin-based ETC will create new opportunities for sophisticated trading strategies that haven’t yet been seen in the Bitcoin eco-system. This is not different to the advanced trading models available on other asset classes.

5 — Other Exchanges, Countries and Digital Currencies to Follow

A potential SEC approval of a Bitcoin-based ETC can be the beginning for new exchanges in other countries to open similar mechanisms to trade the crypto-currency. Similar vehicles may later involve other digital currencies. However, Bitcoin is still a very small asset class from a public market perspective and other currencies in the market are considerably smaller.

Written by

CEO of IntoTheBlock, Chief Scientist at Invector Labs, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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