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Is Bitcoin Surging on ETF Approval Prospects?

Bitcoin is one of the most talked-about assets for the last one year, either for a good or bad reason. It was the hottest trade in 2017 but had a bad start to this year on overvaluation concerns, excessive red tape, several central bank warnings about the currency’s worthiness and reports of hacking on a cryptocurrency exchange.

In mid-June, bitcoin plunged to as low as $5848.26 from late December’s high of $19343.04, marking a decline of about 69.8%. However, this cryptocurrency rebounded lately to above $8000, representing a 40% jump in July, on hopes that the SEC could approve an ETF soon.

Renewed Prospects of ETF Launches

Bitwise Asset Management lately filed for an index fund that intends to follow the performance of a basket of the 10 largest cryptocurrencies. The product, namely the Bitwise HOLD 10 Cryptocurrency Index Fund, is likely to give exposure to about 80% of the market capitalization of the total cryptocurrency market.

The best part of this proposed fund is that it looks to offer a more diversified exposure than investing in a one particular coin. The index included bitcoin, ethereum, Ripple, bitcoin cash, Litecoin, Stellar Lumens, Dash, Monero, Zcash and Ethereum Classic as of June, per an article published on etf.com.

Recently, another money management firm VanEck made renewed efforts for a bitcoin exchange-traded product launch. In its third attempt, the company has collaborated with blockchain company SolidX. The plan is to make the product physical and not futures based.  This means the product will hold actual bitcoin, which will be “insured against any loss or theft.” 

How Far is SEC From an Approval?

Hopes were high about a probable bitcoin ETF debut this year since December 2017, when Cboe Global Markets launched three bitcoin futures contracts on the Cboe Futures Exchange. But SEC has so far been stringent on ETF launches.

SEC is worried about extreme price volatility in cryptocurrencies and liquidity in bitcoin-related funds. Several central banks issued warnings against it. South Korea, which makes up about 20% of global bitcoin trading, created a government department last week targeted at formulating policy initiatives around financial technology and cryptocurrencies.

All in all, things are still vague as the SEC said in June that it would require time until Aug 23 and Sep 15 to consider two rule changes, “regarding Bitcoin funds from ProShares and GraniteShares respectively -- and said last week that it would need until Sep 21 to evaluate another change for several Direxion-branded ETFs,” if we go by an article published on Bloomberg.

Are There Any Bitcoin Investing ETF Alternatives Around?

There are Blockchain ETFs available in the market, namely Reality Shares Nasdaq NexGen Economy ETF BLCN, Amplify Transformational Data Sharing ETF BLOK and First Trust Indxx Innovative Transaction & Process ETF LEGR. These funds look to track a portfolio of stocks from companies that are deemed to have strong exposure to blockchain technology development. But issuers are not allowed to use the word “blockchain” in the name (read: Forget Bitcoin, Bet on Blockchain With These New ETFs).

As per a source, “the blockchain in Bitcoin literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands.” So, if investors are not getting a bitcoin ETF now, they can definitely be in touch with the concept through blockchain ETFs.

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