US investors have been given an additional way to play the bitcoin market: through futures contracts, which will see trading on two different exchanges. The first one, the Cboe Futures Exchange, was launched on Sunday evening to a veritable frenzy
. The other, announced by CME, will open this weekend.
The new futures market may also pave the way for yet another investment option: bitcoin ETFs. The US Securities and Exchange Commission (SEC) has not yet approved any applications for such funds
, but one ETF expert says regulators may be softening their stance.
“[I]f I had to guess, I’d say we’ll have a bitcoin ETF by next summer,” Eric Balchunas, senior ETF analyst at Bloomberg, told ETF.com
. “The SEC has been talking to issuers about this for four years, so they’re slowly going to break down.”
It’s still early days for the bitcoin futures market, but Balchunas believes it will do well given the hundreds of millions of dollars in trading seen by the over-the-counter Bitcoin Investment Trust (GBTC) and the Sweden-listed Bitcoin Tracker One ETN.
“If you can get those kinds of numbers in these far-out pockets of the market, you can imagine how liquid the futures in the US will be in no time,” he said, adding that such activity will persuade the SEC to approve a bitcoin ETF.
According to Balchunas, there are a total of five futures-based bitcoin ETFs, one physically backed bitcoin ETF, and five equity blockchain ETFs currently awaiting regulatory approval. He added that he first US-listed bitcoin ETF is virtually guaranteed to be a billion-dollar product, and may even gather that much in assets within record time.
“In six months, bitcoin may not be as front and centre as it is now,” he said. “But even then, it has a better shot of breaking the record than anything else I can think of, including a marijuana ETF.”
Balchunas said an ETF that actually holds bitcoins would be the “holy grail,” which would attract up to US$10 billion in assets if it were to launch today. But other types of ETFs are likely to get the thumbs-up first, which would erode potential interest in a direct bitcoin-holding fund.
“You could see a scenario like this where the blockchain ETF comes out first, because that’s just an equity product,” he said, estimating that it would gather US$200 million. “Then you could get the futures-based Evolve Bitcoin ETF in Canada
approved because Canada has liberal regulators.
“That could be followed by a futures-based ETF approval in the U.S., and then finally you get the holy grail, which is the physically backed coin-based ETF.”
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