- A Bitcoin ETF to provide investors exposure to BTC in a regulated manner
- Charles Schwab’s study shows millennials growing interest in BTC
- Most popular crypto app has 30 million accounts, more than Charles Schwab, TD Ameritrade, and E*Trade’s combined
- But these Bitcoin access avenues have high fees, limited disclosures, & security risk
in response to their decision to disapprove the proposed rule change to list and trade shares of the Bitwise Bitcoin ETF Trust under NYSE Arca Rule.
Though the company is disappointed with the Staff’s decision, it is not giving up and aims to provide additional context to review Staff’s decision.
“Bitwise is committed to creating a bitcoin ETF that provides all investors with the ability to
access bitcoin in a regulated and familiar fund format with the transparent and robust disclosures required by the federal securities laws.”
Such an ETF, it said would provide protection for the current millions of US investors using other avenues to access BTC market.
Meeting SEC’s Requirements for an ETF
Bitwise in its letter dated Dec. 18, reiterates that two requirements found by the Staff in terms of the bitcoin market being resistant to market manipulation and fraudulent activity and that the listing exchange has entered into a surveillance sharing agreement with a regulated market of significant size are satisfied by BTC market.
Because the BTC price is set in the open market, Bitwise argues it is resistant to the kind of market manipulation scandals that occurred in markets that rely on coordinated fix pricing. Bitcoin’s inherent fungibility and the market’s distributed nature allows for effective arbitrage that it said helped insulate bitcoin from attempts to manipulate individual markets.
As for the market to be need to be resistant to a comprehensive set of market manipulation vectors to qualify, “This is a standard that, historically, even the most well-regulated, arbitraged, and liquid markets, such as the U.S. equity index options market, have not met.”
Bitwise’s research also pointed out that CME bitcoin futures — the largest US bitcoin market by notional volume — is a regulated market of significant size.
Why Does A Bitcoin even ETF Matter?
But why exactly the market needs a Bitcoin ETF? Bitwise notes that a large number of US investors are investing in Bitcoin but they need to do so in a safe and efficient manner.
The company illustrated Charles Schwab’s recent study that showed Grayscale Bitcoin Trust is the fifth largest holding in millennial retirement accounts, ahead of companies like Berkshire Hathaway, Walt Disney, and Microsoft.
GBTC it said is the only tool that retail investors can access Bitcoin through a traditional brokerage account. However, it’s ability to offer high-fidelity exposure to BTC is limited. Also, it is traded on the secondary market at a premium to its net asset value (NAV) as high as 140%.
Another primary means for retail investors for accessing bitcoin is via crypto apps. Coinbase is once such incredibly popular one that has 30 million accounts, more than the number of active brokerage accounts at Charles Schwab, TD Ameritrade, and E*Trade combined. But they have their own challenges in terms of high fees, limited disclosures, and security risk.
“Our goal is to demonstrate that there is significant retail demand for bitcoin exposure, and to note that this demand is currently forced into products that forgo the protections and disclosure requirements that would be required of an ETF.”