The bitcoin exchange-traded fund (ETF) scene is heating up as the U.S. Securities and Exchange Commission is appearing to ready itself to finally begin approving one or more. Bitwise Invest CIO, Matt Hougan, reported that the firm has become the latest to file for an exchange-traded product with regulators in the United States.
In a Tweet on Oct 14, Hougan said that there was already a separate BTC futures-based Bitwise ETF filing, but this new one would actually hold BTC.
As reported by BeInCrypto, the firm filed the application for its Bitwise Bitcoin Strategy ETF in September, joining the long queue of exchange-traded products awaiting SEC approval.
Hougan explained why he thought a BTC fund was better than futures, stating that it could cost over 5-10% per year to roll the futures “contango.” Contango is a situation where the futures price of a commodity is higher than the expected spot price of the contract at maturity.
He added that ETFs cannot hold 100% BTC futures due to rules so most aim for 85% meaning they are diluted with other assets. He also cited “tail risk” which is the chance of a loss occurring due to a rare event,
“A futures-based Bitcoin ETF comes with ~6-12% all-in costs, ~15% dilution, and tail risk. Useful for certain investors, but not ideal. A direct BTC ETF avoids all that.”
ETF approval likely on the horizon
According to senior ETF analyst for Bloomberg, Eric Balchunas, the SEC is poised to approve a Bitcoin futures product next week. He cited insiders at the media giant, stating:
“Bitcoin futures ETFs said not to face any opposition at SEC, according to multiple sources confirming this (aside, I’m hearing same thing). Pretty much done deal. Expect launches next week.”
The ProShares Bitcoin Strategy ETF is likely to be the first one approved as the decision deadline is Oct 18. The following day is the deadline for the Invesco Bitcoin Strategy ETF and both VanEck and Valkyrie are awaiting EFT approvals on Oct 25.
On Oct 14 Ark Invest joined the ETP queue with an application for a fund that will invest in bitcoin futures when they are finally approved.
Bitcoin closes on $60,000
Bitcoin prices have reacted positively, adding to the momentum that has been building over the past month.
During the morning of Oct 15, BTC came within a whisker of $60,000, tapping $59,939 at the time of press according to CoinGecko.