Yesterday, Nick told you about BlackRock Inc.’s (BLK) move to open up an institutional Bitcoin trust for its biggest clients. This is big in every sense of the word. BlackRock, with $10 trillion in assets under management, is the King Kong of money managers – biggest in the world, absolutely massive.
And it’s making this move to invite other big-but-not-quite-as-big institutions to pick up some Bitcoin exposure for them and their big clients without necessarily owning the stuff. At the risk of overusing the word “big,” it’s a big step for crypto’s mass adoption and entry into the mainstream.
But what about the rest of us? The people who aren’t institutional money managers.
Well, you can always go my preferred route and own Bitcoin – using the resources we’ve given you to get started. That’s us covered.
But there are still going to be people out there who are gun-shy, or don’t want to deal with wallets and exchanges and security.
For them, there’s a spot Bitcoin ETF… except there isn’t, really. And that’s a shame, because an ETF like this will be a game-changer, even if you don’t buy ETFs. Here’s why…
Why Americans Still Can’t Buy and Sell a Spot Bitcoin ETF
There’s an indirect Bitcoin futures ETF, and if you jump through hoops you can trade some smaller Canadian and European spot BTC funds, but nothing here in the United States. The SEC infamously shot down Grayscale’s latest attempt to convert its own smaller Bitcoin trust into an ETF. Grayscale is suing the SEC right now to try and forcibly clear the water over its application. It’s that important.
So, many have tried, no one has succeeded just yet. Which is a shame because, even though it’s not for me, a spot Bitcoin ETF will do a lot to stimulate demand and boost prices. A Bitcoin spot ETF would be maybe the ultimate step for market acceptance of crypto; it’s an important piece of the puzzle.
Why? Because the ETF is the most user-friendly way to engage with the modern market; anyone can buy shares and the details are managed behind the scenes. If a true Bitcoin spot ETF existed, it would be the simplest way in the world for anyone to trade on the price of Bitcoin.
What a Bitcoin spot ETF can do is give people and institutions access to an asset that tracks the price of Bitcoin directly. No bothering with specialized crypto exchanges, creating extra accounts, worrying about custodianship, or anything like that.
They could buy it as easily as they could any other ETF or stock on the market.
Sounds great, so what’s the problem in America? So far, the SEC has been hesitant to approve a Bitcoin spot ETF, citing fears that the volatility of the crypto market could lead to inexperienced investors posting huge losses.
Sure, crypto is a place where investors who just blindly follow along without knowing what they’re doing can end up buying high and selling low, but there are ways to smooth out the volatility by “watering down” the ETF with other assets. In fact, that’s part of the whole point of ETFs.
The whole reason that they are such great choices for casual investors is that they are managed and diversified. And, as time goes on and crypto adoption accelerates and becomes normalized, I expect it’ll be harder and harder for the SEC to keep saying no to the Bitcoin spot ETF.
Does Grayscale have a strong enough case to force the SEC’s hand? I don’t know. Gemini? I don’t know. I’m following the lawsuit, which could take two more years to play out, because what I do expect to come out of it will be regulatory clarity.