Let's talk about Bitcoin ETFs or Exchange Traded Funds.
I'm aware that there are more than a few investors longing for one to be approved ever since probably the beginning of 2018. Unfortunately, I have some bad news. Fortunately, it might not be as bad as you think. I'm not gonna make any promises though so just hear me out.
Recently, crypto entrepreneur, analyst and ETF fund manager Brian Kelly voiced his opinion on the subject and according to him, there is no chance for any Bitcoin ETFs to be approved in 2019. Frankly, I think its negligent to make such predictions at start of the year. It is flashy though. Good way to make it to headlines though.
The SEC rejected several Bitcoin ETF applications including from the Winklevoss twins in 2018. I understand the frustration in this to some of you guys. It is a highly anticipated event. Some might say, a prerequisite for major institutional investors to enter the crypto market. Do we really need it though? Think about this. Cryptocurrencies were born out of the need to liberate ourselves from the clutches of financial institutions.....BUT NOW WE SUDDENLY NEED THE SAME INSTITUTIONS BACK?....
Don't you find it funny how ironic life can be? Don't worry, I'll take pragmatic approach for the rest of the video. Your self-interest is afterall my self-interest.
So now let's discuss Brian Kelly. Before cryptocurrencies, he already had some experience founding companies and managing hedge funds. Graduated with a degree in Finance, also got an MBA. Typical corporate background. Turns out he is the founder of a digital currency investment firm BKCM LLC. He also wrote a book called "The Bitcoin Big Bang – How Alternative Currencies Are About to Change the World."
A few months back he had this to say:
The ETF was rejected because one, there wasn't a US regulated exchange and two, there was no US regulated custody. And then there was Bakkt, problem solved right? Not quite.
Just 2 days ago, Kelly was interviewed by Cointelegraph. When asked what are the chances of a Bitcoin ETF receiving government approval this year, he said that there is and I quote “no shot” for that. "there is too much that is unresolved.” According to him, it will take more than a year to settle the existing issues.
For those of you from outside the US, like me, you need to know that they are currently enduring a partial government shutdown nationwide and its affecting the SEC operations. SolidX Bitcoin ETF is still scheduled for February 27, 2019.
So all things considered what does this mean?
If Bitcoin ETFs do get approved this year, then what? Well, Bitcoin will be traded on regulated exchanges but not the Bitcoins themselves but a share of a Bitcoin fund under a custodian. With this, the technical barriers to entry will be gone and more people will have access to Bitcoin than ever before.
But…it has its drawbacks. Andreas articulates it very well. Watch the full video
So there’s that. And it’s insightful to corporate that thought with the Ethereum Constantinople Hard Fork that was supposedly scheduled yesterday but was postponed in February due to the vulnerability. Now imagine if there was an Ethereum ETF that held billions worth of Ethereum. We’re talking institutional grade here the entire crypto marketcap is a small shrimp in comparison.
Now what if the fund manager who lacked technical expertise, chooses to go on as planned and ignore the bug in Ethereum’s protocol. That would be disastrous for the ecosystem. Not to mention it will expose the crypto market to levels of manipulation the likes have not seen before. Because institutional money is a double edged sword. I doubt it can destroy Bitcoin, but it will likely damage the ecosystem.
Now personally I am not against ETFs. I just want everyone to be careful what they wish for.
Damn it feels good to be in crypto.
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