The Bitcoin Exchange Traded Fund is a type of funding vehicle that uses Bitcoin as an underlying asset. Exchange Traded Funds are economic derivatives, which track the value of an underlying asset or numerous property and are tradable during the working hours on a stock exchange. They have main uses: the primary one is to offer traders with a fundamental return at minimal price. This return comes from the long-term growth in the value of the underlying property. Another possibility for income comes from day trading. Any ETF’s value modifications during the day, mimicking the movement of its essential property and short-term investors are capable of speculate on that.
The underlying property can be commodities, which includes gold or oil. An Exchange Traded Fund offers an easy way to capitalize on the value of these commodities in convenient surroundings of a stock exchange, in which the traders do not need to cope with actual gold ounces or oil barrels. In terms of Bitcoin Exchange Traded Funds especially, there is one extra essential benefit: they provide traders get entry to the blessings of Bitcoin while not having to address the related technical problems, like managing wallets and ensuring enough protection of the non-public keys.
There is one Bitcoin Exchange Traded Fund that has already been accepted and is traded on the NASDAQ Nordic exchange, the Bitcoin Tracker One. There are several Exchange Traded Funds put up for approval, just like the COIN by the well-known Winklevoss twins and GBTC by Barry Silbert’s digital currency group. These Exchange Traded Funds are already traded in unregulated surroundings on on-line exchanges. They provide little benefits over buying and selling or keeping Bitcoin immediately.
If approved by the United States Security Exchange Commission, the brand new Bitcoin Exchange Traded Funds might be tradable on stock exchanges – GBTC on the New York stock exchange and COIN on Bats global Markets. As such, they’ll serve as main gateways into Bitcoin funding for the those who do not actually care about the technology but interested to gain some profits from its monetary performance. Importantly, Exchange Traded Funds are property regulated by government, including the United States Security Exchange Commission. The result is a better degree of client protection than that provided by Bitcoin itself. The lack of government regulation in the marketplace of Bitcoin is a main deterrent for a number of the potential traders – an issue that Bitcoin Exchange Traded Funds solve, to some extent.
The reality that Exchange Traded Funds offer an easy way for a huge pool of ordinary traders to enter the marketplace of Bitcoin might also move the demand for the cryptocurrency up and therefore have an advantageous impact on its price. But, an negative impact is likewise possible, in case a regulatory body refuses to approve a proposed fund. The result of a slight panic preceding the United States Security Exchange Commission’s ruling on any of the Exchange Traded Funds is an increased volatility.
The Bitcoin community doesn’t seem to be bothered by the decision of the United States Security Exchange Commission to disapprove the Bitcoin Exchange Traded Fund – COIN created by the Winklevoss twins like many analysts expected. The market’s stability after the denial of the COIN Exchange Traded Fund led to discussions on why Bitcoin did not need an Exchange Traded Fund to begin with.
As Bitcoin expert Andreas Antonopoulos mentioned that the truly decentralized, transparent and secure financial network of Bitcoin is beginning to replace the financial industry and provide the public with a low-fee and faster financial network. Before considering the fact that hundreds of millions of dollars and potentially billions of dollars could have been poured into Bitcoin because of the approval of the COIN Exchange Traded Fund, it is important to ponder the purpose of Bitcoin as a financial network. Its real purpose within the global financial frame is to allow people to make peer-to-peer payments amongst each other, not to gather large investments within a highly and tightly regulated market.
Andreas Antonopoulos said:
“If you measure Bitcoin’s success by the approval of the incumbent and obsolete industry it replaces, you’re doing it wrong.”
Two main arguments presented by the United States Security Exchange Commission in their disapproval of the COIN Exchange Traded Fund were that the United States Security Exchange Commission could not protect investors from losses made while trading Bitcoin.
Since the Bitcoin network eliminates the possibility of recovering transactions or refunding payments, it forces users to be more responsible. On PayPal for instance, a centralized financial network, users can ask network moderators if they mistakenly sent incorrect transactions or processed payments to the wrong receiver. Within the Bitcoin network, no such administrative team exists and users are solely responsible for their money and transactions. If the United States Security Exchange Commission needs to guarantee investors and traders with an insurance policy. Which means that when Bitcoins are lost or stolen, the United States Security Exchange Commission should be responsible for protecting investors from any losses. It is highly unlikely that the United States Security Exchange Commission will never approve a Bitcoin Exchange Traded Fund.
The official document of the United States Security Exchange Commission states:
“As discussed further below, the Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”
The United States Security Exchange Commission nor any other government organizations should not be responsible for protecting investors from making independent financial decisions. In addition, it is almost impractical to introduce a highly regulated marketplace for Bitcoin if Bitcoin was created from the start to replace regulated markets and inefficient financial systems.