Why are so many people looking forward to the Bitcoin futures ETF approved by the US SEC?

This is the original issue 1462 of the vernacular blockchain

Author | Fiona

Production｜Vernacular Blockchain (ID: hellobtc)

Last Friday, the US Securities and Exchange Commission approved the Bitcoin futures ETF issued by the fund management company ProShares for the first time and officially started trading this week.

In fact, in the article “At least 8 major events in the crypto world in 2019, there is still a chance to sweep the haze brought by 2018”, we talked about the passage of the Bitcoin ETF by the US SEC is one of the most anticipated things in 2019, but until It was only passed in 2021. Why?

1. What is a Bitcoin ETF?

The full English name of ETF is “Exchange-Traded Fund”, also known as “trading open-end index fund”. As an investment category, it has a history of 28 years and is a very mature financial derivative.

When you buy an ETF product, you are not buying actual assets, but an index that tracks the prices of multiple assets. Take the gold ETF as an example. The gold ETF foundation invests most of its funds in gold assets, so the ETF price and the price of gold are closely related. If you buy a gold ETF, it is equivalent to investing in gold.

At the same time, ETFs can be traded in the stock market, with a low investment threshold (a few hundred yuan can be traded), low commissions, good liquidity, and simple trading operations. The Bitcoin ETF refers to the gold ETF, and the principle is similar.

2. What does it mean that Bitcoin ETF can pass the US SEC?

Bitcoin ETF has passed the US SEC review, which represents compliance. It also means that existing investment institutions and individual investors can directly purchase Bitcoin ETFs on the stock exchange, which greatly reduces the investment threshold of the crypto market. You do not need to buy and Custody of Bitcoin assets does not need to bear the risk of key custody.

To put it simply, the launch of Bitcoin ETF may become one of the options for institutional and personal asset allocation, absorbing considerable incremental funds for the cryptocurrency market; and what will be the result of the increase in entry funds, everyone can imagine. Therefore, it is not difficult for us to understand why the market is full of expectations for the approval results of the Bitcoin ETF.

Since it is so anticipated, why does the SEC have repeatedly rejected applications for Bitcoin ETFs?

First of all, in a financial market with insufficient funds, the problem of insufficient liquidity is most likely to occur, resulting in fast transactions. Secondly, because of the small market value, market prices are easily manipulated, coupled with risks such as inadequate supervision of cryptocurrencies, which are enough to make many traders and institutional funds hesitate.

In the past two years, with the continuous development of the market value of the encryption field and the improvement of liquidity, the SEC must have a new assessment of the Bitcoin ETF.

3. Conclusion

The adoption of the Bit ETF by the US SEC can be said to have experienced ups and downs for the advocates of cryptocurrency ETFs.

Beginning in 2014, the Winklevoss brothers, owners of the Gemini exchange, filed their first application with the US SEC, and they have been rejected dozens of times. Therefore, the successful passage of the Bitcoin ETF this time is a qualitative breakthrough and an important historical testimony for the encryption field.

The US SEC passed the Bitcoin ETF. What impact do you think it will bring? Welcome to share your views in the message area.