Bitcoin Spot ETF Race Heats Up: Valkyrie Joins BlackRock and Others in Pursuit of SEC Approval
Valkyrie Applies for a Bitcoin Spot ETF
Written by Van
Valkyrie, a prominent player in the cryptocurrency investment space, has recently filed an application for a Bitcoin spot ETF with the U.S. Securities and Exchange Commission (SEC). This move comes as several other financial firms have also submitted similar applications in the past week. The application, filed on June 21, indicates that Valkyrie plans to list its fund on the Nasdaq under the symbol BRRR.
Valkyrie has a history of involvement with Bitcoin ETFs, having launched the Valkyrie Bitcoin Strategy ETF (BTF) in October 2021, which was the second Bitcoin futures ETF to be introduced in the United States. In December of the same year, Valkyrie launched the Valkyrie Balance Sheet Opportunities (VBB) but later liquidated it in October 2022. Currently, Valkyrie operates the Valkyrie Bitcoin Miners ETF (WGMI), which tracks securities of companies involved in Bitcoin mining.
In addition to the spot ETF application, Valkyrie also submitted an application for a Bitcoin futures ETF called the Valkyrie Bitcoin Futures Leveraged Strategy ETF (BTFD) on May 16. Unlike the proposed spot ETF, the BTFD would be structured as a fund rather than a trust.
Major Financial Institutions Join Race for Bitcoin ETF Approval
Valkyrie's recent move to apply for a Bitcoin spot ETF follows similar applications made by other notable financial institutions. Invesco, an investment company with over $1.4 trillion of assets under management, submitted an application for the Invesco Galaxy Bitcoin ETF on June 20. Invesco had previously collaborated with Galaxy Digital in 2021 for an initial filing to launch a Bitcoin spot ETF, but later shifted focus to a Bitcoin futures ETF. Notably, Invesco has already introduced a product called "Invesco Physical Bitcoin" ETN in Europe, which provides secure access to Bitcoin's performance.
WisdomTree, another major finance giant, also submitted an application to the SEC on June 20 for a Bitcoin spot ETF called the WisdomTree Bitcoin Trust. However, the SEC previously rejected WisdomTree's attempt to launch a Bitcoin ETF due to concerns regarding consumer risks such as fraud and market manipulation. The recent filing by BlackRock on June 15 has sparked hope for approval, leading analysts to predict that other companies will either resubmit their applications or file new ones soon.
Bitwise, a cryptocurrency asset management firm, re-filed its proposal for a spot Bitcoin ETF on June 16, following BlackRock's similar bid. Despite efforts from various issuers, the SEC has never allowed a spot Bitcoin ETF to enter the U.S. market. The proposed products by BlackRock and Bitwise have slight differences between them. Bitwise's previous proposal for a spot Bitcoin ETF was rejected by the SEC in June 2022.
NYSE Arca has filed for the listing exchange of Bitwise's product, adding more legal analysis around the surveillance of Bitcoin via the CME futures markets. Bitwise's move can be seen as a direct response to BlackRock's filing. Both Nasdaq and NYSE filings reference the SEC's approval of a Bitcoin futures fund by Teucrium.
BlackRock, a frontrunner in the race to secure the first U.S. Bitcoin spot ETF, submitted its application on June 15. Coinbase Custody Trust Company will handle custody of BlackRock's Bitcoin holdings, while the Bank of New York Mellon will be responsible for fiat currency custody. BlackRock's structure differs from previous attempts, presenting a 30-day redeemable trust and a proposed rule change. Unconfirmed reports suggest that Fidelity may also file an application for a Bitcoin spot ETF.
BlackRock's Reputation Boosts Bitcoin as ETF Interest Surges
BlackRock's reputation as a reputable entity in the financial industry may give it a better chance of overcoming the legal challenges that other firms have faced. The impact of BlackRock's involvement can already be seen in the trading of the Grayscale Bitcoin Trust (GBTC), which has been trading at a significant discount to spot BTC. As of June 20, 2023, the discount for GBTC stands at around -33.45%, closer to zero than ever before this year.
The announcement of BlackRock's ETF filing has coincided with a surge in the price of Bitcoin, which has risen over 20% since the news and has surpassed the $30,000 mark. Furthermore, the renewed interest in Bitcoin ETFs by other financial institutions, including Invesco, WisdomTree, and Bitwise, has also played a significant role in the impressive gains witnessed in the price of Bitcoin recently.
Mixed Opinions on BlackRock's Initiative and Expectations for Other Companies
The initiative taken by BlackRock to launch a Bitcoin spot ETF has sparked a debate among market experts. Some argue that BlackRock's initiative is similar to the structure of the Grayscale Bitcoin Trust (GBTC), while others have a different perspective. However, there are positive comments from industry figures.
Cory Klippsten, the CEO of Swan, has expressed optimism about BlackRock's filing. Analyst Adam Cochran believes that BlackRock has a good chance of securing approval for their ETF. The filing has also generated renewed interest in Bitcoin ETFs, leading analysts to believe that other companies will resubmit their applications and new players will enter the race.
Dave Abner, a principal at Dabner Capital Partners, predicts that all companies with previous filings will resubmit their applications, and others considering Bitcoin ETFs will also want to file soon. Industry watchers expect more issuers to join the race for a spot Bitcoin ETF. Ark Invest and 21Shares have already re-filed for their spot Bitcoin ETFs in April.
Bob Diamond, former CEO of Barclays and current CEO of Atlas Merchant Capital, has commented on BlackRock's recent activities in the crypto space. Diamond believes that the digitization of various industries is a natural progression and that the crypto industry should embrace regulation. He emphasizes the importance of cooperation with regulators, as strong banks prefer robust regulation. Clarity in regulation is necessary for the crypto industry to have a positive impact.
The co-founder of the Gemini cryptocurrency exchange suggests that there is a race for Bitcoin accumulation between investors and firms. Anthony "Pomp" Pompliano and MicroStrategy CEO Michael Saylor believe that the approval of a Bitcoin spot ETF will be a tipping point that attracts both retail and institutional investors. Pompliano highlights the scramble to acquire a share of Bitcoin due to its finite cap of 21 million.
However, there are suspicions within the crypto community regarding BlackRock's interest in Bitcoin, especially as other crypto assets come under scrutiny. Some community members are wary of BlackRock's involvement. Author and podcaster Preston Pysh has alleged that unnamed "Wall Street parasites & government regulators" deliberately advocated for legacy Bitcoin interests following recent regulatory actions. Ben Cowen considers the recent events to be a “crazy coincidence.”
Self-described “Crypto OG” RamenPanda has drawn attention to the wording in BlackRock's ETF filing, which suggests that the asset manager could use its discretion to determine the appropriate network for the trust's purposes. This has sparked a debate on whether BlackRock intends to fork Bitcoin. Author Saifedean Ammous raises concerns about potential rehypothecation and the risk of overleveraging, which could impact transparency and default risk.
Matt Walsh, a General Partner at Castle Island Ventures, presents three potential scenarios for BlackRock's inclusion of surveillance-sharing agreements. These scenarios include sending a broader message, testing the waters, or hoping for a different approach from SEC commissioners.
Previous dissents from Commissioner Hester Peirce suggest a disagreement with ETF rejections and the SEC's focus on spot market functionality and surveillance-sharing agreements. In 2023, Peirce and Commissioner Mark Uyeda contended in their dissent on the VanEck proposal that the SEC was applying a "different set of goalposts" for commodity-based ETPs.
According to QCP Capital, the chances of a spot Bitcoin ETF being approved in the United States are unlikely due to the current makeup of the Securities and Exchange Commission (SEC) and its Chair, Gary Gensler. Despite BlackRock's application and its favorable track record with the SEC, QCP doubts the approval will happen in the near-term under Gensler's leadership. However, QCP believes there is still significant room for institutional Bitcoin and Ethereum adoption in the asset management world in the coming months and years.
FAQ about Bitcoin ETF
Q: What is a Bitcoin ETF?
A: A Bitcoin ETF, or Exchange-Traded Fund, is an investment fund that tracks the price of Bitcoin. It allows investors to gain exposure to Bitcoin without directly owning the cryptocurrency. ETFs are traded on stock exchanges, making them easily accessible to traditional investors.
Q: How does a Bitcoin ETF work?
A: A Bitcoin ETF works by holding Bitcoin as an underlying asset and issuing shares that represent ownership in the fund. These shares can be bought and sold on stock exchanges, providing investors with a convenient way to invest in Bitcoin without dealing with the complexities of buying and storing the cryptocurrency directly.
Q: What are the advantages of investing in a Bitcoin ETF?
A: Investing in a Bitcoin ETF offers several advantages. First, it provides exposure to Bitcoin's price movements without the need for a digital wallet or dealing with cryptocurrency exchanges. Second, it allows for easy buying and selling of shares on stock exchanges during market hours. Finally, it provides a regulated and transparent investment vehicle that is accessible to both retail and institutional investors.
Q: Are Bitcoin ETFs available for investment right now?
A: As of now, Bitcoin ETFs have not been approved by the U.S. Securities and Exchange Commission (SEC). However, several financial institutions have submitted applications for Bitcoin ETFs, and the industry is closely watching for potential approval. It's important to stay updated on regulatory developments to know when Bitcoin ETFs become available for investment.
Q: What are the potential benefits of a Bitcoin ETF approval?
A: The approval of a Bitcoin ETF could have significant benefits for the cryptocurrency market. It could bring increased liquidity and trading volume to Bitcoin, as more investors would have access to the asset through traditional brokerage accounts. It could also help to legitimize Bitcoin in the eyes of regulators and institutional investors, potentially leading to further mainstream adoption and price appreciation.
Last week, Bloomberg Intelligence analysts predicted that VanEck, Valkyrie, WisdomTree, Global X, and Invesco could re-file for their spot Bitcoin ETFs. It remains to be seen if VanEck and Global X will follow in the footsteps of their competitors. The race for approval of a spot Bitcoin ETF continues to evolve, with various players vying for a position in the market. Will VanEck and Global X follow their competitors?
This article has been refined and enhanced by ChatGPT.