Will 2022 be the Year of a Spot Bitcoin ETF?

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Will 2022 see the launch of the first Bitcoin spot exchange-traded fund? While 2021 saw the first launches of several Bitcoin-linked ETFs, a “Bitcoin only” one is what many investors and analysts are hoping for. However, early indicators point to continued stalling from regulators.

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Investors and investment managers have anxiously been awaiting a decision from the SEC on the approval of Bitcoin ETFs, which would have to be traded on the “exchange” — in other words, on the stock market (and therefore, only during the hours the stock market is open). Right now, cryptos don’t have any such limitations and can be traded anytime. While several companies have filed crypto ETFs with the SEC, the Commission has either rejected or delayed its decisions on many of them.

On Jan. 4, the SEC delayed, once again, the rejection or approval of the NYDIG Bitcoin ETF, a decision that was set to come by Jan. 15, according to a notice.

“The Commission is extending the time period for approving or disapproving the proposed rule change for an additional 60 days,” the SEC said in the notice.

The new deadline is March 16.

“The concept to have a crypto ETF has been a focus of the market for a long time — since 2017, or even earlier — and in 2021 ProShares was the first to launch a BTC ETF successfully with SEC approval,”  Rodrigo Vicuna, Chief Financial Officer at Prime Trust, told GOBankingRates. ” I don’t know if the SEC will approve NYDIG’s ETF in 2022, but there is no reason to not do so. The SEC has been generally indecisive about Bitcoin despite its growth of over 150% since 2017’s peaks in price.” 

He added that additional ETFs would help expand retail exposure as an investment, potentially increasing market adoption by orders of magnitude.

Market adoption has indeed grown at a very fast pace already:  in 2021, digital asset investment products saw inflows totaling $9.3 billion, a 36% increase from 2020, according to a CoinShares report released Jan. 4. In addition, the increase from 2019 to 2020 was significantly higher at 806%, representing a maturing industry, with total assets under management ending the year at $62.5 billion, according to CoinShares.

There were a total of 37 investment products launched in 2021 versus 24 in 2020 indicative of the demand and popularity of digital assets, CoinShares adds.

Asked whether a spot ETF will come to market in 2022, CoinShares Investment Strategist James Butterfill told GOBankingRates that  “this is very hard to tell, but I feel that it won’t happen in the near term.”

Butterfill added that in the SEC’s eyes, investors now have a way to invest in Bitcoin.

“Over time, once it is evident roll yields have a significant impact on performance, perhaps then the SEC will feel a spot-based ETF is better,” he said, adding that this happens when you roll from one futures contract to the next and typically has a negative impact on performance.

Jorge Pesok, General Counsel and Chief Compliance Officer for Tacen Inc., a software development company that builds open-source, blockchain-based software, echoed the sentiment, saying that “it’s difficult to predict when precisely a spot BTC ETF will be approved, but the odds of such an ETF being approved in 2022 are slim-to-none.”

Pesok told GOBankingRates that SEC Chairman Gary Gensler has repeatedly voiced his concerns with the lack of regulatory oversight in the global Bitcoin spot market, which he views as creating the potential for fraud and manipulation.

He explained that as Bitcoin is a global decentralized digital asset that can be transferred through exchanges or peer-to-peer, it is difficult, if not impossible, to bring it within a regulatory regime that will address Gensler’s concerns — and until Gensler’s concerns are addressed, it is unlikely that we will see a spot BTC ETF approved in the U.S.

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“The pent-up demand for a spot BTC ETF in the U.S. is huge!” Pesok shared.

“I expect a spot BTC ETF launch would dwarf the size of the recently launched BTC futures ETF which saw $550 million dollars of trading on the first day alone. Notwithstanding this demand from the industry and pressure from the Hill, Chairman Gensler has remained unwavering in his position and rationale for rejecting all applications for a spot BTC ETF to-date,” he added.

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About the Author

Yaël Bizouati-Kennedy is a former full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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