{"id":356006,"date":"2021-10-21T17:49:12","date_gmt":"2021-10-21T14:49:12","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/bitcoin-futures-etfs-good-but-not-quite-there\/"},"modified":"2021-10-21T17:49:12","modified_gmt":"2021-10-21T14:49:12","slug":"bitcoin-futures-etfs-good-but-not-quite-there","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/bitcoin-futures-etfs-good-but-not-quite-there\/","title":{"rendered":"# Bitcoin futures ETFs: Good, but not quite there"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a242e52a8611\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a242e52a8611\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/bitcoin-futures-etfs-good-but-not-quite-there\/#A_complete_framework_%E2%80%94_but_with_incomplete_reasoning\" >A complete framework \u2014 but with incomplete reasoning?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/bitcoin-futures-etfs-good-but-not-quite-there\/#More_complexity_with_futures\" >More complexity with futures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/bitcoin-futures-etfs-good-but-not-quite-there\/#A_reasonable_step_in_the_right_direction\" >A reasonable step in the right direction<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Bitcoin futures ETFs: Good, but not quite there <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMTAvMjZmOTYxNWQtNzY4NC00MDk3LWIyOTktYWZiMjk2YTJiZGZmLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-128018ef>The odds of the United States Securities and Exchange Commission (SEC) <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roving a Bitcoin (BTC) exchange-traded fund (ETF) before a physical Bitcoin ETF are higher than ever, courtesy of Chairman Gary Gensler\u2019s now oft-repeated preference for the former.<\/p>\n<p>But here\u2019s the issue: an ETF built around crypto futures isn\u2019t the most efficient, economical or easiest route. Physically backed products are. They\u2019re likely to attract more assets and open the crypto market to more investors. And they are much easier for investors to understand.<\/p>\n<p>This is why fund issuers are better off pressing the SEC for clarity on what\u2019s needed to get the Bitcoin spot ETF approved instead of rushing to be the first to the finish line with the more complex and more expensive futures-backed product.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_complete_framework_%E2%80%94_but_with_incomplete_reasoning\"><\/span>A complete framework \u2014 but with incomplete reasoning?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>One of the primary arguments in favor of a crypto futures ETF is that, at this juncture, the regulatory framework for futures is clear-cut and well established, particularly compared to physical crypto assets.<\/p>\n<p>Futures fall under the Commodity Futures Trading Commission\u2019s purview. Contracts are standardized. In the case of Chicago Mercantile Exchange (CME) futures, there\u2019s no need for digital wallets, and the absence of a physical asset means fewer questions surrounding the crypto custody puzzle. Know Your Customer, or KYC, is less of a concern because there is no decentralized asset that can be moved from one address to another. <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">General<\/a>ly, futures markets are more highly regulated and monitored than the spot markets currently are.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>The new episode of crypto regulation: The Empire Strikes Back<\/em><\/strong><\/p>\n<p>These futures-backed ETFs would be registered under the 1940 Investment Company Act. That would make them \u201cliquid alternatives\u201d and allow them to invest with more complex instruments or strategies. Mutual funds, including those with hedge fund-like strategies, are registered as \u201940 Act funds.<\/p>\n<p>What\u2019s the benefit of Bitcoin futures ETFs registering as \u201940 Act funds? They avoid many regulatory hurdles, in part because of their mandate of investing primarily in futures listed on a regulated U.S. exchange such as the CME.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"More_complexity_with_futures\"><\/span>More complexity with futures <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Granted, simplicity is good, especially when the objective is to attract new money that has been waiting patiently on the sidelines. But futures introduce more complexity by nature, which goes against the spirit of ETFs in the first place.<\/p>\n<p>ETFs were designed to be a lower-cost, highly liquid alternative to actively managed funds. Futures, however, aren\u2019t particularly cost-efficient. They require margin as collateral, at disproportionately higher rates compared to other asset classes.<\/p>\n<p>Additionally, trade volumes at U.S.-regulated exchanges are relatively low, with most of the action happening offshore. This prompts the question: Will there be enough liquidity on SEC-approved exchanges such as the CME to meet demand, especially during periods of high volatility?<\/p>\n<p>In practice, this first generation of futures ETFs will likely be composed of a basket of different assets in addition to the Bitcoin futures contracts. And due to tax and asset diversification complexities, to hold these investments a subsidiary also needs to be set up, typically in a low-tax jurisdiction like the Cayman Islands. Complexity, of course, means higher costs for investors.<\/p>\n<p>There\u2019s also the issue of discrepancies between futures prices and spot prices. Futures contracts don\u2019t track the underlying assets perfectly. With Bitcoin specifically, there can be big discrepancies between the projected price of Bitcoin in 30 days (what a futures contract signifies) and the actual price when that date hits. For the year ending September 2, 2021, a rolling position in Bitcoin futures trailed the price of Bitcoin itself by 38 percentage points (295% to 333%, respectively).<\/p>\n<p>Finally, it\u2019s worth noting that investor demand historically is much lower for futures-based ETFs than their spot counterparts. One point of illustration: The largest spot ETF for gold currently holds more than $50 billion in assets, while the largest gold futures ETF holds roughly $40 million.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Mass appeal: Could a Bitcoin futures EFT electrify US investors?<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_reasonable_step_in_the_right_direction\"><\/span>A reasonable step in the right direction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>But does that mean a Bitcoin futures ETF does more harm than good?<\/p>\n<p>Absolutely not. Though it wouldn\u2019t be as simple or inexpensive as a spot ETF, a Bitcoin futures ETF still marks a step in the right direction to provide prospective investors access to crypto.<\/p>\n<p>It will open up crypto investing to a broader investment audience. The ETF structure will make it much easier for financial advisors and others to integrate Bitcoin into their portfolios and standard processes. It will also carry all of the investor protections of the 1940 Act. The rigorous SEC oversight that applies to \u201840 Act funds will allay many investors\u2019 concerns and impose governance checks on fund management.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Ethereum ETFs are here, building case for US approval of BTC and ETH funds<\/em><\/strong><\/p>\n<p>Considering the sharp rhetoric and critical stance the SEC has adopted in crypto discussions lately, the approval of a Bitcoin futures ETF would be a significant step forward. It would show the SEC\u2019s willingness to allow crypto asset products to enter the marketplace more fully with a regulatory oversight wrapper, potentially alleviating recent concerns of government overreach.<\/p>\n<p>But the success of these funds shouldn\u2019t take issuers\u2019 focus away from the primary goal: Working with the SEC and other regulators to establish the clarity needed to get a spot Bitcoin ETF approved.<\/p>\n<p>That process may be lengthy, but the outcome would most certainly be worthwhile. It would finally give investors the low-cost, highly liquid vehicle to track Bitcoin with precision \u2014 and thereby align their crypto investments better with their overall portfolio. This, we believe, will ultimately bring in a new, substantial wave of assets that has been long-awaited by industry proponents, investors and issuers alike.<\/p>\n<p class=\"post-content__disclaimer\"><em>This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.<\/em><\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Katherine Dowling<\/strong> is the general counsel and chief compliance officer at Bitwise Asset Management, which manages over $1 billion in its crypto funds. Previously, she was general counsel and chief compliance officer for True Capital Management as well as at Luminate Capital Partners. Katherine also spent over a decade as an Assistant U.S. Attorney, most recently in the Economic Crimes Unit of the U.S. Attorney&#8217;s Office for the Northern District of California.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/bitcoin-futures-etfs-good-but-not-quite-there\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Bitcoin futures ETFs: Good, but not quite there &#8221; The odds of the United States Securities and Exchange Commission (SEC) approving a Bitcoin (BTC) exchange-traded fund (ETF) before a physical Bitcoin ETF are higher than ever, courtesy of Chairman Gary Gensler\u2019s now oft-repeated preference for the former. But here\u2019s the issue: an ETF built&#8230;<\/p>\n","protected":false},"author":1,"featured_media":356007,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMTAvMjZmOTYxNWQtNzY4NC00MDk3LWIyOTktYWZiMjk2YTJiZGZmLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74972,74863,75849,75846,74898,75269,71511,70934,67874],"class_list":["post-356006","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-futures","tag-cryptocurrencies","tag-etf","tag-futures","tag-sec","tag-us-government","tag-government","tag-regulation","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/356006","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=356006"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/356006\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/356007"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=356006"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=356006"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=356006"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}