Over the last few years, a particular bitcoin discussion that has repeatedly made headlines is about the Bitcoin ETF. On the downside, the headlines have mainly painted the words ‘rejection’ and ‘SEC.‘
Since 2019, a list of notable institutions and firms has forwarded their proposal for a Bitcoin ETF to the U.S. Securities and Exchange Commissions. However, the result has always been the same as the SEC kept shooting down all the filings. The latest to bite the dust came from Wilshire Pheonix in March 2020 and the firm expressed its disappointment after the SEC had rejected their proposal.
Despite the fact that the Bitcoin ETF is being played out, again and again, it is important to note that the institutional funds have not stopped flowing in.
Accredited interest in Bitcoin and a possible ETF
As previously reported, the 1st Bitcoin index fund in Hong Kong underlined the fact that accredited investors had raised the demand for Bitcoin in the markets. The interest can also be identified from Grayscale’s recent Q1 2020 report.
According to the Grayscale, in spite of the current global financial meltdown, an allocation of over $389 million was made into the Grayscale Bitcoin Trust or GBTC from January to March 2020. The report suggested,
“88% of inflows this quarter came from institutional investors, the overwhelming majority of which were hedge funds. The mandate and strategic focus of these funds is broadly mixed and includes Multi-Strat, Global Macro, Arbitrage, Long/Short Equity, Event Driven, and Crypto-focused funds.”
With respect to the above data, a legitimate case can be made that the Bitcoin ETF could be approved in 2020. The major reason for the approval of an ETF would come down to the reduction of premium rates.
Longhash’s recent report had suggested that accredited users are used to trading Bitcoin at a whopping 30 percent in GBTC. That means, if the market price of Bitcoin would be traded at $10,000, the investors would be investing BTC worth over $13,000 at Grayscale.
Such differences were likely to be removed as some of the past ETFs claimed that a reduction in premiums would be facilitated and standardized pricing would be manifested for the crypto asset.
Grayscale also received a higher premium because there were no alternatives to the Bitcoin ETF other than GBTC. Hence, under high demand, BTC and ETH would consistently trade high premiums on Grayscale.
But now that current institutional interest is on the upswing, the Bitcoin ETF could be quite inevitable. SEC Commissioner, Hester Peirce has also been a vocal supporter of the ETF in the past, as she said in February 2020.
“Permitting institutional investors and regulated exchanges to enter this market would lead to more robust protections for retail investors (who, to be clear, are already active in the underlying spot market), to better custody solutions for Bitcoin, and to more effective surveillance for market manipulation and other fraudulent activity.”
