A spot Bitcoin (BTC) exchange-traded-funds (ETF) could mark a new phase of institutional investors entering the crypto market.
Justin Young, co-founder and president of Volatility Shares, has said that investors seeking exposure to Bitcoin are searching for the “easiest and most regulated way” to invest, adding that a spot ETF may be the most effective means of achieving this.
“In terms of ETF issuers putting in these applications, it’s like the creme de la creme for investors,” he said in a recent interview.
Since BlackRock’s filing for a spot Bitcoin ETF on June 15, the price of Bitcoin has soared to its highest levels in over a year.
The filing by the world’s largest asset manager also spurred a surge in ETF applications, with other firms, such as Fidelity, Valkyrie, and Invesco, submitting applications.
Still, the Securities and Exchange Commission (SEC), which has previously rejected ETF applicants due to concerns over risks associated with Bitcoin spot markets, remains skeptical of spot Bitcoin ETFs.
Despite this cautious stance, the SEC has shown openness towards ETFs dealing with Bitcoin futures.
On June 23, it granted regulatory approval to Volatility Shares, making it the first Bitcoin ETF focused on leveraged futures to receive permission to operate.
Young said this development may pave the way for spot ETF approvals. He said:
“I think it brings to a lot of people’s attention the thought that if the SEC has led a leveraged Bitcoin linked product through, why on Earth wouldn’t they allow spot Bitcoin through?”
A Regulated Spot Bitcoin ETF Could Address SEC’s Concerns
The SEC has consistently cited inadequate cross-exchange market surveillance, as well as concerns of fraud and market manipulation, as reasons why it has not yet approved a Bitcoin spot ETF.
Young said that the SEC’s concerns are valid, but a regulated spot ETF can solve these issues.
Firstly, an ETF operating in the spot market with regulatory approval would be considered a safer option, given the SEC’s reservations about unregistered entities and illegal practices on major cryptocurrency exchanges.
Secondly, the approval of a spot ETF could potentially bring more stability to Bitcoin markets.
The uncertain legal status of Bitcoin leads to price volatility, which the SEC has flagged as a concern for potential investors.
Young argued that approving a regulated spot ETF could reduce this volatility and attract a broader range of investors interested in transparent financial products.
“The biggest advantage of having a spot ETF and market is that you create more stability and less of the volatility that the SEC doesn’t like,” Young explained.
Likewise, brokerage firm Bernstein has recently said that there is a strong possibility that the SEC will soon approve a spot Bitcoin ETF.
The company said the absence of a Bitcoin spot ETF has led to the growth of over-the-counter (OTC) products like Grayscale’s Bitcoin Trust (GBTC).
It noted that these OTC products are more expensive, illiquid, and inefficient compared to ETFs.
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