Will VanEck’s Renewed Attempt to Launch Bitcoin ETF Work?

Bitcoin is one of the most talked-about assets for the last one year, either for a good or wrong reason. It was the hottest trade in 2017 but has simply plunged 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.

The crypto-currency is now trading at around $6,500, down from the high of $19,343 hit in mid-December, but up 162% from the year-ago level.


Renewed Prospect of an ETF Launch

As far as rolling out ETFs on bitcoin is concerned, several attempts were made earlier by issuers, but all in vain. However, recently, a ray of hope has been noticed with money management firm VanEck making another effort for a bitcoin exchange-traded product launch.

AXIR Consulting

On 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.” The VanEck SolidX Bitcoin Trust will have a ticker symbol “XBTC.”

Each share of the VanEck SolidX Bitcoin Trust is set to price investors as high as $200,000, according to a filing with the Securities and Exchange Commission. Such a pricing shows that the issuer’s target client is mainly institutional, not retail. If everything goes well, the proposed product may see the day of the light in the first quarter of 2019.

The fund will follow a bitcoin index from VanEck's subsidiary MVIS that deploys prices from over-the-counter trades rather than electronic cryptocurrency exchanges, per CNBC.

Before this, SolidX’s proposal for a physically backed bitcoin ETF was dismissed by the Securities and Exchange Commission in March 2017 and VanEck took away its application for a futures-based bitcoin ETF in January, per etf.com (read: Bitcoin Soars to Record High: Fork, Futures and ETFs Explained).

Will SEC Give a Nod?

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.

Still, given the repeated attempts by industry players, we think that XBTC can receive regulators’ approval. There are a few factors that seem positive about the formation of XBTC. First, the underlying currencies will be insured, which makes it insulated against any kind of a hacking attack. Secondly, the issuers purposely kept retail investors far from the proposed fund, which reduces the broad-based risk factor associated with this kind of a product (read: Will the SEC Finally Approve Bitcoin ETFs?).

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 the 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, “blockchain, the renowned Bitcoin wallet provider, has partnered with SFOX to make it more convenient to buy and sell cryptocurrencies and digital assets.” 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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