The facts show that investors would rather invest in cryptocurrency through an exchange-traded fund. If President Joe Biden's appointment of Gary Gensler to chair the Securities and Exchange Commission is confirmed, Gensler should act quickly to encourage agency staff to move towards Bitcoin ETF approval, showing that the US not only understands cryptocurrencies, but is committed to protecting investors and supplying the country on an equal footing with the rest of the world. This step is long overdue. It is believed that the SEC is unnecessarily dragging out the issue of approving ETFs focused on cryptocurrencies. An unofficial Twitter poll I recently conducted showed that nearly 80% of the 2,192 respondents believed the SEC should approve a Bitcoin ETF. About 50% would be invested in one. I have conducted these polls for many years and this is the highest in favor of approval. My survey goes well with the bitwise survey of financial advisors. In this survey, 63% of respondents said ETFs were the preferred instrument for investing in bitcoin, compared with 16% for direct ownership of a digital coin and 10% for a mutual fund. People say this not as cryptocurrency supporters, but as fans and users of a very solid and effective ETF structure. They would feel the same way if the SEC turned down a gold ETF or a China A stock ETF, which are great examples of ETFs opening up new opportunities and successfully democratizing a unique asset class. Here are five reasons the SEC should approve ETFs: 1. The Grayscale Bitcoin Investment Trust premium is dangerous: Those looking for a digital currency investment vehicle in the US are usually left with a bunch of OTC trusts, similar to closed-end funds, but without the crucial creation process. or stock redemption offered by the ETF - a feature that allows arbitrage. The most popular of these is the Grayscale Bitcoin Investment Trust, which has grown from $ 2 billion in assets over the past year to over $ 20 billion. If Grayscale were an ETF, it would have ranked roughly 50th in size, placing it in the top 2% of all ETFs. Those who bought shares of the trust last year paid an average premium of about 18% more than the value of bitcoin - and that's less than in the past. The premium was 132% and only 3% in recent years. In ETFs, investors know they are getting a price that is very close to the price of the underlying asset. Of course, a Bitcoin ETF is also likely to trade at a premium, but it will be microscopic compared to the one that Grayscale trades. It will also not be exposed to artificial forces that tend to push the price of Grayscale shares lower, even if the price of Bitcoin rises, and vice versa. History shows us that ETF premiums will steadily decrease as more and more professional market makers become involved in the market. 2. They have proven themselves in Europe: over 20 crypto ETFs already exist outside the US, mostly in Europe. Exchange-traded notes like the Bitcoin Tracker EUR, introduced in Sweden over five years ago, typically trade at minimal premiums thanks to the arbitrage allowed by the share creation / redemption process. While a Bitcoin ETF in the US would be a much larger trade in terms of volume and assets, it would actually work the same way. While premiums and discounts to net worth are wider than most equity ETFs, they are pretty tough in every way and much tougher than Grayscale and the like. The sharp spike and then the fall in bitcoin prices served as an example of how the US Bitcoin ETF would react to such drastic moves. Looking at the multitude of ETFs and ETNs in Europe, most of them ended on January 11 (after a two-day 17.6% drop in bitcoins) at a 3% to 4% discount to net worth. It is clear that the "arbitration streak" was stretched, but not broken. Those who wanted to leave could. Place this in the US among the largest and best market makers, and I guess the discount would be half that. 3. There are many more volatile ETFs: While there is no precedent for ETFs that track a digital asset, the SEC has approved instruments that are arguably more volatile in terms of volatility. There are around 70 ETFs that are more volatile than Bitcoin. For example, an ETF approved and launched less than a year ago, the Direxion Daily S&P 500 High Beta Bear 3X Shares ETF has a 60-day standard deviation of 100% to 200% - depending on the month - while the Swedish Bitcoin ETN is between 25% up to 100%. 4. It would be obvious what it is: the risks of a Bitcoin ETF are obvious to average investors, as most of them know at least a little about cryptocurrencies as new, alternative and volatile. This suggests that it will be less likely to turn into an unpleasant surprise for uninformed investors, as has happened with some ETFs in the past. One example is the United States oil ETF, which is Like a wolf in sheep's clothing: it has a vanilla name and looks pretty innocent, but it contains futures contracts, and most of them do not understand how high the cost of "execution" of these contracts can be. Second, the broader bitcoin market, which the SEC says is prone to manipulation and fraud, is becoming more efficient with larger organizations involved. If anything, having ETFs will speed up the process and help further increase transparency and better oversight of cryptocurrency exchanges as they compete to attract professional market makers. 5. Don't worry about remembering your password: one of the reasons investors love ETFs is their convenience. Any individual investor can replicate any ETF - they literally tell you what they hold every day - and keep the expense ratio, but most investors want convenience. As an added bonus, investors don't have to worry about losing their digital wallet passwords; they just need to be able to log into a brokerage account.
