In the latest development legitimizing cryptocurrency, the New York Stock Exchange has filed with the Securities Exchange Commission to list a pair of funds tracking bitcoin futures.
The two products would be labelled the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF, respectively. These two ETFs would enable traders to bet on how the volatile cryptocurrency futures contracts will perform. ProShares, which has more than $29 billion in assets, filed for very similar products in September, the only difference being that the futures they intended to track had not yet been introduced.
The funds would track either the Cboe or CME bitcoin futures and would invest their assets in benchmark futures contracts, along with the option of investing in contracts outside the benchmark.
In its filing, NYSE writes that "the investment objective of the [ProShares Bitcoin ETF] Fund is to seek results (before fees and expenses) that, both for a single day and over time, correspond to the performance of lead month bitcoin futures contracts." According to the new filing, "the Fund will not be benchmarked to the current price of bitcoin and will not invest directly in bitcoin," which will endow investors with a sense of security, especially when the actual cryptocurrency market is so volatile.
With previous talk surrounding the lack of regulation and volatility in cryptocurrency markets, the ETFs arrive at an opportune moment in that they will help further validate cryptocurrencies at a time when people are losing faith in them. In light of events such as the LongFin fiasco and holdings of Litecoin abruptly being sold by its own developer, the ETFs might stabilize the market.
"It's very hard for us, as currency analysts, to follow this," said Win Thin, Brown Brothers' Global Head of Emerging Markets Strategy. "It represents further mainstreaming. Hopefully that what comes out of this: some more regulatory oversight. Beyond that, we don't have any calls on where it will go from here."
Regulation of bitcoin and cryptocurrency markets, while still fragmented and disjointed at best, is starting to be taken more seriously. With this move, NYSE Arca and the Intercontinental Exchange are attempting also to quell SEC's cryptocurrency concerns by associating the futures contracts with their own fund.
According to cointelegraph.com, "by being long Bitcoin Futures Contracts, the Fund seeks to benefit from daily increases in the price of the Bitcoin Futures Contracts. The Fund will not be benchmarked to the current price of Bitcoin and will not invest directly in Bitcoin. When the price of Bitcoin Futures Contracts held by the Fund declines, the Fund will lose value."
With the smooth launch of Bitcoin futures on the CME and Cboe exchanges, the SEC can no longer have any qualms about not having a regulated mechanism for price discovery. This was the main issue with earlier ETF proposals that were rejected. A Bitcoin ETF would open up Bitcoin trading to traditional investors, and therefore make it even more appealing to add to a conventional investor portfolio, but also legitimize it as an official currency, as in Zimbabwe.
- https://www.cnbc.com/2017/12/20/nyse-files-to-list-bitcoin-etfs-bringing-cryptocurrency-a-step-closer-to-mainstream.html
- http://fortune.com/2017/12/20/nyse-arca-bitcoin-etf-listing/
- https://cointelegraph.com/news/nyse-files-to-bring-bitcoin-etf-closer-to-reality
- https://qz.com/1153986/bitcoin-trading-booms-in-nigeria-like-in-zimbabwe/
