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  • Fund Watch
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When will the first bitcoin ETF launch in the US?

October is shaping up to be a big month for bitcoin. The biggest news so far has been that the SEC could approve the first bitcoin ETF, despite the US regulator wanting greater oversight of the cryptocurrency.

Elsewhere, U.S. Bancorp [USB] has started to offer custody services for the cryptocurrency in anticipation of bitcoin ETFs being launched in the US. However, despite some bullish expectations, investors and traders might have to wait a little longer to start trading bitcoin funds in the country.

 

What’s happening with the price of bitcoin?

Bitcoin has whipsawed so far this year. Having surged to an all-time high of $64,000 in April, the price of bitcoin against the dollar plummeted going into the summer. However – despite China’s crypto ban and a tightening of the regulatory belt in the US following USDC coin backer Circle’s SEC subpoena – the coin has been more than resilient. Since starting at $29,796 on 22 July, the cryptocurrency has surged over 85% (as of 10 October). On 6 October, bitcoin topped $55,000, its highest level since May and was trading at around $55,260 on 10 October.

 

Appetite for a US Bitcoin ETF grows

Bitcoin is continuing its journey into the financial mainstream. U.S. Bancorp (also known as US Bank) is now providing custody services featuring three cryptocurrencies to fund managers. This represents an increasing interest in cryptos as a diversified asset class.

As the fifth-largest retail bank in the US the bank’s decision is a major lead forward for cryptocurrencies transition into the mainstream financial world. The bank will offer to store private keys for bitcoin, bitcoin cash and litecoin with the help of NYDIG, which will act as a sub-custodian. Support for coins like ethereum is expected to follow.

“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class,” Gunjan Kedia, vice-chair of the US Bank’s wealth management and investment services division, said. “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”

“Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class. I don’t believe there’s a single asset manager that isn’t thinking about it right now” - Gunjan Kedia

 

The product is only available for institutional investors in the US and Cayman Islands. When the SEC approves the first bitcoin ETF, demand could increase.

“We have a lot of funds [which] are hoping to invest in ETFs,” Kedia said. “Some literally want custody contracts signed the day the SEC approves an ETF.”

 

The wait for the first US bitcoin ETF continues

When will the SEC approve the first bitcoin ETF? – is the big question. There are dozens of Bitcoin ETFs waiting for SEC approval. Under chair Gary Gensler, the regulator is taking a cautious approach for fears of market manipulation according to Business Insider. So far, not one bitcoin ETF has been approved in the US.

There had been signs of a softening in attitudes at the SEC. Gensler indicated in September that he is open to the idea of a Bitcoin Futures ETF as this would offer investors greater protection under the Investment Company Act of 1940.

“We are pretty bullish on approval here,” James Seyffart, an ETF analyst with Bloomberg Intelligence, said. “We just can’t see Gensler and the SEC going out of their way to state positive comments about a 1940-act Bitcoin futures ETF at the end of September and then denying all of them less than a month later.”

However, in something of a curveball, the SEC has delayed the decision on a quarter of bitcoin futures ETFs by 45 days until 21 November, with offerings from Global X, Valkyrie, WisdomTree and Kryptoin all pushed back, according to the Financial Times.

“We are pretty bullish on approval here. We just can’t see Gensler and the SEC going out of their way to state positive comments about a 1940-act Bitcoin futures ETF at the end of September and then denying all of them less than a month later” - James Seyffart

 

SEC looking to appear forward-thinking on bitcoin ETF

After years of waiting, approval would mean that the US could finally join the bitcoin ETF party with products already launched in Canada and across Europe.

The SEC has approved several bitcoin ‘lite’ ETFs, funds that track companies involved with the cryptocurrency, rather than directly holding the cryptocurrency. Among these are Volt Equity’s ETF, which tracks companies that derive their income from bitcoin or hold most of their assets in the cryptocurrency.

Not helping things is the wrangling in Congress that has seen bitcoin come under greater scrutiny. SEC chair Gensler told Congress during the week ending 8 October that he would like to see crypto products registered in the same way security is, according to the Financial Times. Minnesota representative Tom Emmer, who chairs a group of politicians, disagrees, suggesting that the SEC is overstepping its remit and that cryptocurrencies should be treated in the same way as a physical currency or commodities.

“If the SEC were to deem one of these coins a security, the value of that token would plummet,” the lawmaker told the Financial Times.

November is now a must-watch month for those interested in a US bitcoin ETF. A move to approve Bitcoin Futures ETFs could allow the SEC to appear forward-thinking, although given that Gensler told the House of Representatives that the cryptocurrency was the “wild west”, no breaths should be held.

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