In recent days, the investment company based in Boston, Fidelity, met with representatives of the SEC to ask for approval of its Bitcoin ETF.
Fidelity to the SEC: time is ripe for a Bitcoin ETF
The meeting, which took place virtually, was attended by the president of the company, Tom Jessop and other top managers of Fidelity. The financial company argues that the cryptocurrency market is mature enough to support such a financial instrument.
In March, the company had submitted a Bitcoin ETF to the regulator, called the Wise Origin Bitcoin Trust, which would replicate the price movements of Bitcoin on the market, tradable on the Cboe Global Markets. According to the company’s top executives, as mentioned to the SEC during their meeting, the product has already received a large number of requests from its principals.
To be specific, Fidelity would have cited its own recent study “The institutional investor digital assets study”, which would show how digital assets are gaining more and more appeal to institutional investors.
Some sources indicate that the response of the SEC would have been interlocutory, given the new approach of SEC chairman Gary Gensler, who is anything but favourable to digital currencies and the development of new financial instruments, although he would have made a timid opening towards the ETFs that bet on futures.
What are ETFs and how can they adapt to cryptocurrencies?
But Fidelity is not the only financial institution to have submitted its own ETF on digital currencies to the SEC. There are currently more than 20 ETFs under review by the Wall Street regulator, including Galaxy Digital, Van Eck and Valkyrie Investments.
At the beginning of September, Galaxy Digital presented an ETF on bitcoin futures, hoping to break the deadlock surrounding traditional ETFs that invest directly in the underlying asset, thereby reducing investor risk.
ETFs (Exchange-Traded Funds) are a relatively young financial instrument, which basically represent a share of an index fund that exactly replicates the performance of a given basket of assets, stocks and bonds or stock indices.
ETFs have quickly won the public’s favour because of their relative safety and ease of investing in any instrument, even without large amounts of money. It is precisely because of this characteristic that ETFs are very well suited to investing in cryptocurrencies, instruments that are still considered to be highly volatile and risky and whose purchase is not exactly simple for those who are not familiar with technology. According to many experts, this system would be the best way to broaden the interest and the market of cryptocurrencies, because it would definitely open to the general public of investors.
Approval of ETFs in the US could preclude a new Bitcoin rally
Many crypto traders and experts are confident that the arrival of new financial instruments such as ETFs on the cryptocurrency market could be a possible driver for a new robust rally for Bitcoin and all major cryptocurrencies.
One of these is certainly Matt Blom, Global Head of Sales Trading at Singapore-based, Nasdaq-listed exchange EQONEX, who welcomed the news of the meeting between Fidelity and the SEC.
“The news that Fidelity sat down for a private meeting with the SEC and asked “When are we getting an ETF?” When, indeed. The arrival of a US ETF is likely to kick-start another strong rally for BTC. The SEC’s reluctance to give an outright no seems to indicate that we may not have to wait too much longer for a new tide of capital to enter the space”.
Indeed, if cryptocurrency ETFs were approved by the SEC, many institutional investors, such as large US pension funds, which by their charter can only invest in certain asset classes, could enter the crypto market in this way. Many institutional investors in fixed income, due to low returns, could then move part of their funds to more profitable instruments, such as cryptocurrencies.
But some, such as JP Morgan, argue that an endorsement of Bitcoin ETFs in the short term would be detrimental to Bitcoin’s price, which could plummet. Many would exit the largest institutional fund investing in Bitcoin, the Grayscale Bitcoin Trust. But this would be a short-lived correction, because thereafter, according to the analysts of the American investment bank, Bitcoin prices could resume their upward race.