Barry Silbert, the founder of Grayscale and the Digital Currency Group, has made a not so cryptic unequivocal statement: “Going to be a big week,” he said on Sunday.
He gave no further clarification, so it’s anyones guess whether that’s because he having a wedding or a baby, whether it’s because the marketing department at DCG is putting up a leaflet, or whether it’s because bitcoin spot ETF.
“Two congressman asking Genz to approve spot bitcoin ETF. Can’t understand why derivatives ok but spot isn’t. Fair question especially after seeing every other country on Earth except US be ok with it,” says Eric Balchunas of Bloomberg.
SEC is becoming a bit of a joke with its protectioning translating to contago that is losing fiat settled bitcoin future ETF investors some 30% a year.
In addition, Grayscale is being kept in limbo in an overall situation where not only there are grounds to sue for at least judicial review, but where you’d most probably win.
So a spot bitcoin ETF is coming. It’s here, in Europe. Americans can get it as well with a little bit of hoops. It’s awesome in as far as it tracks the price and you pay a management fee for custody as well as insurance. For accounting wizes you can then lego the taxes, but the ETF is not really a huge thing anymore.
It does open further access to a big market, and that translates to further integration in investment houses, and overall it’s a nice thing to have, but it’s incomparable to the gold ETF which opened up a new asset class to retail, an asset that was difficult to get as an investment.
Bitcoin has its own parallel investment world that has allowed the convenient buying and selling of it since at least 2013. An ETF thus isn’t revolutionary, more an incremental improvement.
That said, we won’t really know until the next cycle as we won’t know what second and third order effects the beginning of maturation for crypto stock traded products will have.
Does that translates to systems and processes for automatic allocation of some of the funds, like pension funds, to crypto? Will it bring in a whole new class from the traditional investment world?
The answer so far has been that we have seen a greater infrastructure building to the traditional world spurred more by academics, which following study after study concluded you should have some corn in your portfolio. 1% they said initially, now it’s 10%.
This may explain why it has been the US, and a little bit of UK, that has loudly tipped their toes where institutional or traditional investors are concerned, and it explains it because these studies are in English.
In Europe it does feel like the beginning of that institutional wave has not quite arrived yet. There’s no BMW holding corn on their balance sheet, or the more innovative Lilium grabbing some of that free marketing by adding a bit of crypto.
There are ETNs, and now there’s crypto mining ETFs, and there will be a lot more, maybe a defi index at some point. They are attracting decent capital, and there must be some institutional involvement.
But, our main point is that access has never been a problem in this space because making it more convenient is nice, but no SEC can stand in front of a market desire for something that is legal.
They haven’t slowed down a thing, and they won’t speed up a thing if they spot ETF. Instead, they have been overwhelmed to the point the situation is unpalatable and so the bureaucracy has done what it does best: make sure it gets ignored by the market.
Because what the market wants it gets, and now at least in US there appears to be a general understanding within old finance that a bit of corn is worth it at least as a hedge or for what if gains.
The rest will follow. Europe in about two years, the developing world in six where traditional finance involvement is concerned, and so we’re moving towards no longer the outsiders but the movers in the heart of finance.
That’s because we’ll shake it up. Helion, cool innovative company. We can’t buy it. Tokenizing that will do a lot more for access than any spot ETF which is more what in coding is called backwards compatibility.
We’re basically, or rather traditional investors, are bridging if you like the analogue 15th century developed stock market to the new 21st century digital market so that any transition can be smooth.
We need to build the other side of the bridge. Bring Helion, or traditional companies, to tokenization so that we can participate in 21st century capital formation.
That’s a far bigger story that has not quite yet even began, but we can conceptualize it and so perhaps it will one day be here because as it happens, we are the ETF, we are even the stock market, but in that grand scheme we are at the prototyping stage. So currently a spot ETF in US would indeed be big news in some corners.