What is a Bitcoin ETF and why are so many people looking forward to it?

On August 10, 2023, the U.S. SEC will decide whether to approve the applications of Valkyrie Bitcoin ETF and VanEck Bitcoin ETF. If approved, it will become the first Bitcoin ETF approved by the U.S. SEC.

In fact, in the article "In 2019, at least 8 major events in the crypto world still have the opportunity to sweep away the haze brought by 2018", we talked about the US SEC passing the Bitcoin ETF as the most anticipated thing in 2019 One of the things, but it still has not been passed. Why is this?

01. What is a Bitcoin ETF?

The full English name of ETF is "Exchange-Traded Fund", also called "traded open-end index fund". As an investment category, it has a history of 25 years. As of August 2018, global ETF assets have reached US$4.8 trillion. It is a very mature financial derivative.

When you buy an ETF product, you are not buying an actual asset, but an index that tracks the prices of multiple assets.

Take gold ETF as an example. The gold ETF foundation invests most of its funds in gold assets, so the price of ETF is closely related to the price of gold. If you buy gold ETF, it is equivalent to After investing in gold, ETFs can be traded in the stock market. They have the characteristics of low investment threshold (you can trade with just a few hundred yuan), low commissions, good liquidity, and simple trading operations.

Bitcoin ETF refers to gold ETF, and the principle is similar.

02. What does it mean for Bitcoin ETF to pass the US SEC?

If the Bitcoin ETF can pass the review of the US SEC and be officially launched, on the one hand represents compliance, also means that existing investment institutions and individual investors can The direct purchase of Bitcoin ETFs from stock exchanges greatly reduces the investment threshold in the crypto market. You do not need to actually purchase and keep Bitcoin assets, nor do you need to bear the risk of key storage.

Simply put, If Bitcoin ETF can be officially launched, it may become one of the asset allocation options for institutions and individuals, absorbing considerable incremental funds for the cryptocurrency market;Enter Everyone can imagine what results the increase in market capital will bring.

Some big names also expressed similar optimism:

· Tim Draper, founder of DFJ Fund in the United States: Bitcoin ETF will be approved within one or two years;

·Fundstrat founder Thomas Lee: If the Bitcoin ETF may be approved, it will be possible to bring Bitcoin back to its all-time high.

Therefore, it is not difficult for us to understand why the market is full of expectations for the approval results of Bitcoin ETF.

But in a financial market with insufficient funds, the problem of insufficient liquidity is most likely to occur, resulting in the inability to quickly complete transactions. In addition, due to the small market capitalization, market prices are easily manipulated, coupled with risks such as incomplete supervision of cryptocurrency, which is enough to deter many traders and institutional funds from moving forward.

The U.S. SEC also issued an open letter for the above reasons and repeatedly rejected applications for Bitcoin ETFs.

03. Conclusion

However, hoping that the US SEC can pass the Bitcoin ETF may be the "wishful thinking" of many existing cryptocurrency investors.

Since 2014, when the Winklevoss brothers, owners of the Gemini exchange, first submitted an application to the US SEC, so far, the US SEC has rejected the Bitcoin ETF. I have applied for it more than ten times, and the reasons are the same as mentioned above: "There is manipulation and fraud in the market, and it is difficult to protect investors and public interests."

The U.S. SEC has passed the Bitcoin ETF. What impact do you think it will have?

The above is the detailed content of What is a Bitcoin ETF and why are so many people looking forward to it?. For more information, please follow other related articles on the PHP Chinese website!