While exchange-traded cryptocurrency ETFs have yet to be allowed in the U.S. due to concerns about “potential manipulation and thin liquidity,” a recent Bloomberg article reports that, “with the world’s largest digital coin rallying to new heights…the prospect of a first U.S. Bitcoin ETF appears to be rising.”
The article notes that crypto-tracking products already exist in Europe and that Canada approved its first Bitcoin ETF this year, but U.S. regulators have “repeatedly batted down attempts to introduce them citing concerns about potential manipulation and thin liquidity.” But that may change, it says.
The article cites the following considerations regarding a U.S. Bitcoin ETF:
- Several U.S. investment trusts already follow Bitcoin and are similar to ETFs but with restrictions, including the Grayscale Bitcoin Trust (GBTC), which has reportedly “swelled in size during Bitcoin’s bull run into early 2021.”
- Demand for crypto-related products has “been so relentless that investors piled into the trust even as its market value soared to 40% more than the value of the Bitcoin it held,” the article says, adding that investors are willing to pay such hefty premiums because shares can be bought and sold easily, “without the need to set up digital wallets or move money to a crypto exchange.” That said, it notes that industry experts contend such premiums would decrease if a Bitcoin ETF were approved.
- Regulators in the U.S. have shunned a Bitcoin ETF until now because, in addition to concerns about manipulation and liquidity, they worry that the cryptocurrency’s volatility may be excessive and question whether funds “would have the information necessary to adequately value cryptocurrencies or related products.” Recent wide price swings for Bitcoin have reignited those concerns, the article reports.
Some say the chances of a U.S. Bitcoin ETF may be improving, however, as big Wall Street names like Paul Tudor Jones and Stan Druckenmiller “adopt the cryptocurrency and the likes of Robinhood and PayPal make it easier to use and trade Bitcoin.”