Hot on the heels of BlackRock’s filing for a spot Bitcoin exchange-traded fund (ETF), global asset manager WisdomTree has followed suit by submitting an application for its own ETF. This new filing could be a big move forward in the cryptocurrency industry and potentially pave the way for more retail investment than ever before.
1. BlackRock Files for Bitcoin ETF Days Before WisdomTree
Investment firm BlackRock recently made headlines when it officially filed for a bitcoin exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission (SEC). This is ahead of rival firm WisdomTree, which also sought permission to launch a bitcoin ETF.
BlackRock filed for a proposed Rule 19b-4 with the SEC, officially making them the frontrunner in the race to become the first to launch a bitcoin ETF. Although the filing is still subject to the SEC’s review process, BlackRock’s eagerness to capitalize on the latest market trend is clear.
When it comes to investing in bitcoin, there are a variety of options for investors. However, a bitcoin ETF would give investors the ability to easily access bitcoin investments without ever having to directly own the cryptocurrency. This means investors will not need to worry about the storage and cybersecurity of their coins.
The SEC has raised concerns over the lack of regulations in the crypto space, and so far, has turned down every bitcoin ETF application. With multiple applications in the works and BlackRock taking the lead, it is unclear if the SEC will approve any of them.
WisdomTree was also considering to launch a bitcoin ETF, but their initial filing date remains unknown. The company filed a registration statement with the SEC in early March, but it is still unclear when they will move forward with launching a product.
Investors that are eager to tap into the lucrative bitcoin market without directly owning the cryptocurrency are likely keeping a close eye on developments with BlackRock’s proposed ETF. Whether or not the SEC will approve BlackRock’s application, and whether or not WisdomTree will launch a bitcoin ETF, remains to be seen.
2. WisdomTree Files for Spot Bitcoin ETF
Overview:
WisdomTree Investments, a major asset management firm, filed for a Spot Bitcoin ETF. The proposed ETF will offer investors a way to gain exposure to spot bitcoin prices on the world’s largest digital asset exchanges. It is expected to be listed on the Chicago Board Options Exchange. If approved, the ETF would be the first of its kind for US investors as there are currently no US-based exchange-traded funds dedicated to bitcoin.
Features of the Spot Bitcoin ETF:
The proposed ETF has several attractive features. Firstly, it provides investors with low-cost access to spot bitcoin through a single buy or sell order. Instead of worrying about fluctuating prices, investors can hold shares in the ETF and expect their investment to behave similarly to the underlying market. This means investors can benefit from bitcoin price movements without having to buy and sell cryptocurrencies themselves.
Benefits to Investors:
The Spot Bitcoin ETF has several potential benefits for investors. Firstly, it provides the opportunity to gain exposure to the price of bitcoin without buying and selling cryptocurrencies from exchanges. By investing in the ETF, investors gain a simple and low-cost way to access the digital asset. Furthermore, investors can benefit from the safety of the US financial system, as the ETF is supported by a series of custodians and brokers that are regulated by the SEC.
Risks of the Spot Bitcoin ETF:
The proposed ETF does carry some risks for investors. Bitcoin is a relatively new asset class and is still relatively untested, as it has been subject to wild price swings in the past. Additionally, the proposed ETF is not backed by actual physical bitcoin but instead offers investors access to the spot price. As such, investors must consider the volatility of the underlying market when assessing the suitability of the ETF for their portfolios.
Timeline for Approval:
The proposed ETF is still subject to approval from the US Securities and Exchange Commission. The SEC has yet to approve a bitcoin ETF in the US, so the timeline for approval is unknown. Should the ETF be approved, it will provide investors with a much-needed alternative to investing in cryptocurrencies through exchanges.
Proposed Charges for the ETF:
WisdomTree has proposed a total expense ratio of 0.55% for the Spot Bitcoin ETF. This is on the higher side when compared to other ETFs, but is still competitive when compared to the fees charged by cryptocurrency exchanges. Moreover, the proposed fee includes custody costs, broker and exchange fees, and other administrative costs.
3. What WisdomTree’s Bitcoin ETF Would Look Like
WisdomTree’s Bitcoin ETF, if approved, would be the first of its kind. Earlier this year, the company submitted a proposal to list its ETF on the Cboe BZX Exchange.
The proposal outlines how the WisdomTree Bitcoin ETF would work. Investors will be exposed to the daily price movements of Bitcoin, but will do so without purchasing any actual Bitcoin. They will instead indirectly invest in the ETF, allowing the ETF to buy and sell Bitcoin Futures Contracts on their behalf.
The ETF is not actively managed and intended to track the performance of the CME Bitcoin Futures Index, which tracks prices of Bitcoin Futures Contracts listed and traded on the CME. Financial advisors will be able to buy the ETF for their clients, who will not need to hold an account with the CME.
The shares of the WisdomTree Bitcoin ETF will be denominated in US dollars and investors will be able to buy and sell the ETF through a range of broker-dealers. Investors may also be able to turn to the secondary market to trade shares of the ETF.
The filing also outlines the following features of the proposed ETF:
- Fees: The ETF will have an expense ratio of 0.95%.
- Investor Eligibility: The ETF will be available to retail investors, institutions, and advisors.
- Market Maker Support: The ETF will have a market maker, provided by Tradebourne LLC.
An approval by the SEC would be a huge milestone for the crypto industry. It would open the door for a broad array of funds and institutions to invest in the digital asset, with the backing of an established asset manager.
4. Competitors in the Race to Release the First Bitcoin ETF
The competition to launch the first Bitcoin-based exchange-traded fund (ETF) is heating up. There are several major players vying to become the first to launch such a product and offer investors access to Bitcoin without having to purchase the actual asset.
Bitwise Asset Management is one of the most active contenders in the race to launch the first Bitcoin ETF. The firm has experience in the cryptocurrency space, since it already manages 10 crypto-focused funds. In March 2019, Bitwise filed with the Securities and Exchange Commission to list its Bitcoin ETF and is still waiting for its approval.
VanEck, another well-known financial services company, is also one of the main players in the race for the first Bitcoin ETF. In June 2018, VanEck submitted an application with the SEC to launch a Bitcoin ETF, however, the SEC postponed its decision on the fund until after the government shutdown ended. VanEck is still pursuing regulatory approval and is currently awaiting the SEC’s decision.
WisdomTree is yet another contender in the race to launch the first Bitcoin ETF. The investment firm filed with the SEC in December 2017 to launch an ETF that would track the price of Bitcoin. However, due to regulatory delays, WisdomTree is still waiting for the SEC’s approval.
Other major players in the race include:
- GraniteShares
- Direxion
- Cboe Global Markets
- Corgentum
- ProShares
The race for the first Bitcoin ETF has become increasingly competitive as more players enter the game. With the SEC still determining the fate of these ETFs, the race is still anyone’s game.
5. Potential Impact of WisdomTree’s Bitcoin ETF
Historical Correlations with Gold Prices
WisdomTree is the first ETF provider to launch a bitcoin fund. As such, its decision has already had an impact on the market. As prices reached new heights, it was likely in part due to the arrival of institutional investors having access to the digital asset for the first time. Moreover, the new fund has an interesting structure: it is associated with the price of gold with the intent to reduce risk exposure.
As WisdomTree’s bitcoin ETF has a 20% exposure to gold prices, this implies that the fund may experience greater volatility compared to more traditional ETFs. Analysts believe the two commodities could have a positive correlation, which could enable WisdomTree’s fund to weather any future market shocks. As such, WisdomTree’s fund appears to be well positioned in terms of capital adequacy and liquidity.
Increased Accessibility
The launch of WisdomTree’s fund may also drive increased interest in cryptocurrencies, and in particular bitcoin, from institutional investors. This could lead to an influx of capital into the field, which could benefit the entire industry. It may also lead to further economic opportunities, as institutional investors decide to invest in other cryptocurrencies.
The increased accessibility to bitcoin provided by the ETF could also lead to more widespread adoption of digital assets by individuals. This could be a boon for the European economy, providing a wider base for digital currencies. It could also impact blockchain technology more broadly, as more integration of digital assets could take place.
Regulatory Implications
The launch of a bitcoin ETF could also have implications for regulation in the sector. As digital assets become increasingly mainstream, they may require more oversight in order to protect investors. This could lead to more transparency around digital assets, as well as increased security measures. It could also lead to greater clarity on taxation issues for digital assets, which could impact how they are used.
Future Outlook
Despite the potential impact of WisdomTree’s ETF, the exact effect it will have on the market remains to be seen. In the short term, it could lead to higher volatility in the bitcoin market as well as increased institutional interest. In the long term, it could also lead to increased accessibility, more regulatory clarity, and greater adoption of digital assets. But only time will tell how WisdomTree’s ETF will shape the future of digital assets.
6. What Regulatory Hurdles Still Remain for Bitcoin ETFs?
Despite the surge of recent interest, there remain significant regulatory hurdles to getting an ETF approved. Until the Securities and Exchange Commission (SEC) gives it’s final blessing, a true Bitcoin Exchange Traded Fund (ETF) hasn’t made it to market. According to the SEC, the typical ETF routes involve at least three steps or components:
- The Custodian: A custodian must ensure that the ETF’s assets remain secure throughout the trading day. They must have custody of the underlying assets and maintain accurate records up to date.
- Registrars: This service is typically offered by a bank, and it’s responsible for issuing, tracking, and managing the customer deposits and securities.
- Authorizations from the Nation’s Self-Regulator: The SEC must approve all ETFs. That includes both the ETF itself, as well as the exchanges where it will be listed.
Throughout the process, the SEC and other relevant authorities must sign off on procedures to ensure investor safety is not compromised. Such procedures may include things like know-your-customer requirements, disclosure of holdings, pricing mechanisms, market surveillance, distressed asset management, and/or market making activities.
Despite efforts from prominent players in the space, including Gemini, Bitwise, VanEck, and SolidX, the SEC has yet to approve a Bitcoin ETF. In August 2018, the most recent announcement from the SEC rejected all proposed ETFs, citing that the underlying markets were not unique enough in terms of regulation, surveillance, and protects against fraud or manipulation.
Though the decision disappointed many, it has not deterred companies from continuing to pursue approval for a Bitcoin ETF. In May 2019, Bitwise filed their second application for an ETF while Cboe submitted their second filing with VanEck. There’s ongoing speculation that the SEC will have to grant an ETF sooner or later in order to keep up with the competition.
For now, the SEC continues to cite concerns over market surveillance, liquidity, and manipulation. As digital assets continue to gain traction, the industry may put pressure on authorities to find safeguards that support a Bitcoin ETF. But only time will tell whether or not these hurdles can be overcome.
As the bitcoin ETF market nears a tipping point, WisdomTree joins the race alongside BlackRock, Inc. to be among the first to launch a bitcoin exchange-traded fund, providing a new wave of liquidity and access to cryptocurrency for institutional investors. With such a high-profile filing, the future of bitcoin ETFs appears brighter than ever.