Hot demand for Bitcoin ETFs as “Wild West” meets Wall Street

Wall Street opens the door to the crypto industry this week as the first Bitcoin funds traded on US exchanges raised over $ 1 billion in investor cash and sent the prices of the largest digital currencies to new highs. opened.

Similar vehicles are already trading elsewhere, but the launch of crypto ETFs on the world’s largest stock market represents an important milestone for crypto supporters after eight years of lobbying for regulatory agencies. I am.

For the first time, mainstream investors have been able to hold US-listed Bitcoin-linked securities in their portfolios, along with traditional financial assets such as stocks and bonds.

“This is the fastest ETF to reach $ 1 billion in assets … In terms of asset growth and trading volume, this is unprecedented and a sign of stagnant demand,” said CFRA’s ETFs and investments. Todd Rosenbluth, Head of Trust Investigation, said.

Popular debut An overview of Bitcoin ETFs shows how traditional financial companies are competing to take part in the digital asset industry. It also emphasizes the perception among many financial watchdogs that the sector is growing too fast to be wiped out.

According to JP Morgan data, retail investors account for only about 12-15% of net ProShares ETF purchases in the first two days of trading, showing great interest among institutional investors. Analysts expect another similar vehicle sponsored by Valkyrie Funds, launched on Friday, three days after the ProShares product, to be duplicated many times.

For other announcements this week, Big hit funding The crypto exchange FTX round, backed by the clutches of the best investors, has been added to the hype surrounding digital assets.

These signs of growing interest, and the increasing number of professional traders using crypto as a base Sophisticated market bettingFor the first time on Wednesday, it helped raise the price of Bitcoin to over $ 66,000, before it fell to about $ 61,000 by Friday. Shares in Coinbase, the largest listed exchange, soared by more than 10% in the days leading up to its launch.

However, many analysts have told the Securities and Exchange Commission that the launch of ProShares ETFs should allow products that provide a direct connection to the less regulated crypto market to be traded on the Wall Street stock exchange. He says it’s just the beginning of a much longer battle to convince.

For the SEC, the decisive factor driving the ProShares ETF forward was that the vehicle held futures contracts traded on the Chicago Mercantile Exchange, a fully regulated venue, rather than a fully digital coin.Cryptocurrencies are usually bought and sold in various parts of the market owned by Commission Chair Gary Gensler. reference As “Wild West”.

“Here is a product that has been monitored for four years. [the Commodity Futures Trading Commission] And it’s wrapped in something within our jurisdiction. .. .. We have the ability to bring it into investor protection, “Gensler said in an interview with CNBC.

Retail broker Interactive Brokers announced a crypto transaction for financial advisors on Monday, but its chair, Thomas Peterffy, is more cautious about the value of holding a ProShares fund or such a fund to investors. bottom.

Peter Fee, who Helped the guide Calculating on Wall Street in the 1970s, where he used machines to help calculate the value of securities and options, the only usefulness of cryptography is the fall when the currency or banking system experiences some problems. Said it was as a back.

“I believe these ETFs will incredibly discount the value of coins when such troubles occur, so I don’t think it’s practical. Unless people think about it, the price Will move with the price of Bitcoin. “

Others have pointed out that futures-dependent ETFs may not be glued to the assets they are supposed to track. USO, a $ 2.9 billion oil ETF, Divergence Significantly from US crude oil prices over the last decade.

One factor is “roll cost”. That is, when the fund manager regularly transitions to a new futures contract when the previous futures contract expires. This can be more costly if the market expects Bitcoin prices to rise in the future. A situation where futures prices are higher than spot prices could mean that ETFs are about 7% less than the returns offered by a wholly owned Bitcoin, said Regent Atlantic’s Co-Chief Investment Officer. One Andy Kapyrin said. bn Registered Investment Advisors Group.

As a result, the product will be more expensive for investors who want to maintain their position over the long term, Capillin added. “This will drive us into a short-term trading portfolio rather than a long-term holder,” he said. This is an “advisor off-limits” that encourages you to hold a long-term position, but admits that it is a “good product for trading.”

As a result, some asset managers are already pushing to allow the SEC to launch funds that are directly linked to crypto prices. Some ETF sponsors have also withdrawn from their futures-based products.

Invesco said it will focus on getting approval from ETFs that hold digital tokens. Just before Wall Street opens on Tuesday, digital asset manager Grayscale Investments transforms the world’s largest crypto investment fund, the $ 40 billion Bitcoin Trust, into an exchange-traded fund that fully owns digital tokens. Announced plans to do.

Dave Lavalle, Global Head of Grayscale ETFs, said: “The ultimate goal is to allow investors to choose between futures ETFs and physical Bitcoin-based ETFs.”

It may be a dream years in the future. Brett Harrison, president of the US cryptocurrency derivatives exchange FTX, said this week that the SEC’s decision not to interfere with the ProShares fund is unlikely to be the first drop in a series of regulated dominoes.

“The SEC wants to see spot crypto exchanges fall within some regulatory scope before agreeing to it,” he said.

SEC chairman of Gensler Called A US lawmaker with the authority to oversee crypto trading platforms, he wants companies to register with agencies.

The SEC is also in the middle of a legal debate about whether digital coins should be registered as securities. Many major crypto players disagree with that view.

Amy Lynch, Founder and President of Frontline Compliance, a regulatory consultancy, said: “For now, the question is exactly what type of format of these assets is considered security.”

Hot demand for Bitcoin ETFs as “Wild West” meets Wall Street

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